UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities

Secur
ities Exchange Act of 1934 (Amendment No.     )

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Rule14a-6(e)(2))
☒ Definitive Proxy Statement
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Soliciting Material under§240.14a-12Pursuant
to §240.14a-12

Yum China Holdings, Inc.

(Name of Registrant as Specified in its Charter)

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

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Rules 14a-6(i)(1) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
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This document shall also serve as a circular to holders of the common stock of Yum China Holdings, Inc. for the purposes of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Hong Kong Stock Exchange”) (the “Hong Kong Listing Rules”).

Warning: The contents of this document have not been reviewed by any regulatory authority in Hong Kong. You are advised to exercise caution when dealing in the securities of Yum China Holdings, Inc. If you are in doubt about any of the contents of this document, you should obtain independent professional advice.

Hong Kong Exchanges and Clearing Limited and the Hong Kong Stock Exchange take no responsibility for the contents of this document, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this document.

 

LOGOLOGO

Yum China Holdings, Inc.

 

7100 Corporate Drive101 East Park Boulevard, Suite 805

 

Plano, Texas 7502475074

 

United States of America

 

Yum China Building

 

20 Tian Yao Qiao Road

 

Shanghai 200030

 

People’s Republic of China

March 30, 2018April 12, 2023

Dear Fellow Stockholders:

We are pleased to invite you to attend the 20182023 Annual Meeting of Stockholders of Yum China Holdings, Inc. (the “Annual Meeting”). The Annual Meeting will be held Friday,on Thursday, May 11, 2018,25, 2023, at 8:3000 a.m. local time, at Mandarin Oriental Hong Kong, 5 Connaught Road, Central, Hong Kong.

The attached notice of Annual Meeting and proxy statement contain details of the business to be conducted at the Annual Meeting. In addition, the Company’s 20172022 annual report, which is being made available to you along with the proxy statement, contains information about the Company and its performance.

Your vote is important. We encourage you to vote promptly, whether or not you plan to attend the Annual Meeting. You may vote your shares over the Internet or via telephone. If you received a paper copy of the proxy materials, you may complete, sign, date and mail the proxy card in the postage-paid envelope provided.

If you plan to attend the meeting, you may also vote in person. If you hold your shares through a bank, broker or other nominee, you will be required to show the notice or voting instructions form you received from your bank, broker or other nominee or a copy of a statement (such as a brokerage statement)statement or legal proxy) from your bank, broker or other nominee reflecting your stock ownership as of March 13, 201827, 2023 in order to be admitted to the meeting. All attendees must bring valid photo identification to gain admission to the meeting. 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,

LOGO

LOGO

Joey Wat

Chief Executive Officer

Yum China Holdings, Inc.

Notice Of Annual Meeting

Of Stockholders

 

Time and Date:

  

8:3000 a.m. (local time) on Friday,Thursday, May 11, 2018.25, 2023

Place:Location:

  

Mandarin Oriental Hong Kong, 5 Connaught Road, Central, Hong Kong.Kong

Items of Business:

  

(1) To elect the four Class IInine director nominees named in the accompanying proxy statement to serve untilfor a one-year term expiring at the 20192024 annual meeting of the Company’s stockholders.

  

(2) To approve and ratify the appointment of KPMG Huazhen LLP and KPMG as the Company’s independent auditorauditors for 2018.2023.

  

(3) To approve, on an advisory basis, the Company’s named executive officer compensation.

  

(4) To approve, on an advisory basis, the frequency of the advisory vote to approve the Company’s named executive officer compensation.

(5) To approve, pursuant to the rules of the Hong Kong Stock Exchange, the Board’s continuing authority to approve the Company’s issuance of shares of its common stock or securities convertible into common stock in an amount not to exceed 20% of the total number of outstanding shares of common stock of the Company as of the date of the Annual Meeting, effective from date of the Annual Meeting until the earlier of the date the next annual meeting is held or June 25, 2024.

(6) To approve, pursuant to the rules of the Hong Kong Stock Exchange, the Board’s continuing authority to approve the Company’s repurchase of shares of its common stock in an amount not to exceed 10% of the total number of outstanding shares of common stock of the Company as of the date of the Annual Meeting, effective from date of the Annual Meeting until the earlier of the date the next annual meeting is held or June 25, 2024.

(7) To transact such other business as may properly come before the meeting or any adjournment or postponement thereof.

Who Can Vote:

  

You can vote if you were a stockholder of record as of the close of business on March 13, 2018.27, 2023.

How to Vote:

  

You may vote over the Internet or via telephone by following the instructions set forth in the accompanying proxy statement. If you received a paper copy of the proxy materials, you may also vote by completing, signing, dating and returning the proxy card. If you attend the Annual Meeting, you may vote in person. Your vote is important. Whether or not you plan to attend the Annual Meeting, please vote promptly.

Date of Mailing:

  

This notice of Annual Meeting, the accompanying proxy statement and the form of proxy are first being mailed to stockholders on or about March 30, 2018.April 12, 2023.

By Order of the Board of Directors,

 

LOGOLOGO

Shella NgJoseph Chan

Chief Legal Officer and Corporate Secretary

 

 PROXY STATEMENT –TABLE– TABLE OF CONTENTS

 

 

PROXY STATEMENT SUMMARY  1
QUESTIONS AND ANSWERS ABOUT THE MEETING AND VOTING  56
GOVERNANCE OF THE COMPANY  1011

Governance Highlights

10

Board Composition and Director Elections

   11 

Board MeetingsComposition and Director AttendanceElections

11

Selection of Director Nominees

11

Director Qualifications and Skills

   12 

Stockholder Nominations for DirectorsBoard Meetings and Director Attendance

   12 

Board Leadership StructureSelection of Director Nominees

   12 

Governance PoliciesDirector Qualifications and Risk OversightSkills

   13 

Management Development and Succession PlanningDiversity of the Board

   1513 

Director IndependenceStockholder Nominations for Directors

14

Board Leadership Structure

14

Governance Policies

14

Risk Oversight

   16 

Management Development and Succession Planning

19

Director Independence

19

Stockholder Communications and Engagement

16

Policies Regarding Accounting and Auditing Matters

17

Committees of the Board

18

Related Person Transactions Policies and Procedures

   20 

DirectorPolicies Regarding Accounting and Executive Officer Stock Ownership PoliciesAuditing Matters

   21 

Policy Regarding Hedging and Speculative TradingCommittees of the Board

   21 

Related Person Transactions Policies and Procedures

23

Director and Executive Officer Stock Ownership Policies

24

Policy Regarding Hedging and Speculative Trading

24
MATTERS REQUIRING STOCKHOLDER ACTION  2225

ITEM 1

  

Election of Directors

   2225 

ITEM 2

  

Approval and Ratification of Independent AuditorAuditors

29

ITEM 3

Advisory Vote on Named Executive Officer Compensation   31 

ITEM 3

STOCK OWNERSHIP INFORMATIONAdvisory Vote on Named Executive Officer Compensation   3233 

ITEM 4

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCEAdvisory Vote on the Frequency of the Advisory Vote on Named Executive Officer Compensation   34 
EXECUTIVE COMPENSATION

ITEM 5

  35

Named Executive OfficersAuthorization to Issue Shares up to 20% of Outstanding Shares

   35 

2017 PerformanceITEM 6

  35

Recent ChangesAuthorization to the Compensation ProgramRepurchase Shares up to 10% of Outstanding Shares

36

2017 “Say on Pay” Vote

36

Compensation Philosophy

   37 
STOCK OWNERSHIP INFORMATION40

EXECUTIVE COMPENSATION42

Elements of theNamed Executive Compensation ProgramOfficers

   3842 

2017 NamedContext for Determining Executive Officer Compensation and Performance SummaryDecisions

   4043 

Retirement and Other Benefits

45

How Compensation Decisions Are MadeBusiness Overview and Performance Highlights

   46 

Recent Compensation Policies and PracticesHighlights

   48 

Alignment of Executive Compensation Committee ReportProgram with Business Performance

   4951 

Executive Compensation TablesPay Components

   4952 

Pay Ratio DisclosureExecutive Compensation Practices

   5953 

2017 DIRECTOR COMPENSATIONStockholder Engagement

   6053 

Elements of the Executive Compensation Program

55

2022 Named Executive Officer Compensation and Performance Summary

66

How Compensation Decisions Are Made

70

Compensation Policies

72

Compensation Committee Report

73

Executive Compensation Tables

74

Pay Ratio Disclosure

87

Pay versus Performance

89
2022 DIRECTOR COMPENSATION94
EQUITY COMPENSATION PLAN INFORMATION  6296
AUDIT COMMITTEE REPORT  6397
ADDITIONAL INFORMATION  65100

 

  PROXY STATEMENT SUMMARY

 

This summary highlights information contained elsewhere in this proxy statement. This summary does not contain all of the information that you should consider, and you should read the entire proxy statement carefully before voting.

MEETING INFORMATION

 

 

 

Time and Date:     8:00 a.m. (local time) on Thursday, May 11, 201825, 2023

 

Time:                 8:30 a.m. (local time)Location:              Mandarin Oriental Hong Kong, 5 Connaught Road, Central, Hong Kong

 

Record Date:        March 13, 2018

Location:    Mandarin Oriental Hong Kong

5 Connaught Road, Central

Hong Kong27, 2023

HOW TO VOTE

 

 

 

Whether or not you plan to attendStockholders of record as of the Annual Meeting, pleaseclose of business on March 27, 2023 may vote as promptly as possibleby using oneany of the following methods:

Before the Annual Meeting:

 

 • 

Via Internetby following the instructions onwww.proxyvote.com;

 

 • 

Via telephoneby calling 1 (800)690-6903 (toll-free in the U.S.)and following the instructions provided by the recorded message; or

 

•

Via mail,if you received your proxy materials by mail, by completing, signing, dating and mailing the proxy card in the postage-paid envelope provided.

Proxies submitted through the Internet or by telephone as described above must be received by 11:59 a.m. Beijing/Hong Kong time on May 24, 2023 / 11:59 p.m. U.S.

ViaEastern time on May 23, 2023. Proxies submitted by mail, must be received prior to the meeting.

At the Annual Meeting:

If you attend the Annual Meeting, you may vote in person.

Even if you receivedplan to attend the Annual Meeting, we encourage you to vote your proxy materialsshares by mail,proxy. You may still vote your shares at the Annual Meeting even if you have previously voted by completing, signing, dating and mailing the proxy card in the postage-paid envelope provided.proxy.

If you hold your shares in the name of a bank, broker or other nominee, your ability to vote by telephone or the Internet depends on their voting processes. Please follow the directions of your bank, broker or other nominee carefully.

 

 

YUM CHINA – 2023 Proxy Statement

  1

PROXY STATEMENT SUMMARY   

ITEMS OF BUSINESS

 

 

 

Proposal  Board Voting

Recommendation		  Page

Reference		 

1.Election1. Election of Four Class IIthe 9 Director Nominees Named in this Proxy Statement to Serve for a One-Year Term

  FOR each nominee  2225

2.Ratification2. Approval and Ratification of the Appointment of KPMG Huazhen LLP and KPMG as the Company’s Independent AuditorAuditors for 20182023

  FOR  2931

3.Advisory3. Advisory Vote on Named Executive Officer Compensation

  FOR  3133


YUM CHINA– 2018 Proxy Statement

  1

PROXY STATEMENT SUMMARY   

4. Advisory Vote on the Frequency of the Advisory Vote on Named Executive Officer Compensation

  for 1 YEAR  34

5. Authorization to Issue Shares up to 20% of Outstanding Shares

FOR35

6. Authorization to Repurchase Shares up to 10% of Outstanding Shares

FOR37

COMPANY OVERVIEW

 

 

 

On October 31, 2016, Yum China Holdings, Inc., a Delaware corporation (the “Company,” “we,” “us” or “our”), wasspun-off from Yum! Brands, Inc. (“YUM”), becoming an independent publicly traded is the largest restaurant company in China in terms of 2022 system sales. We had $9.6 billion of revenues in 2022 and nearly 13,000 restaurants as a result of a pro rata distributionDecember 31, 2022. Our growing restaurant network consists of the Company’s common stock to shareholders of YUM. In this proxy statement, we refer to this transactionour flagship KFC and Pizza Hut brands, as the “spin-off.”well as emerging brands such as Taco Bell, Lavazza, Little Sheep and Huang Ji Huang. We have the exclusive right to operate andsub-license in mainland sublicense the KFC, Pizza Hut and, subject to achieving certain

China the KFC concept, the leading quick-service restaurant brandagreed-upon milestones, Taco Bell brands in China in terms(excluding Hong Kong, Macau and Taiwan). We own the intellectual property of system sales and number of restaurants, the Pizza Hut concept, the leading casual dining restaurant brand in China as measured by system sales and number of restaurants, and the Taco Bell concept, a Mexican-inspired quick-service restaurant brand. We also own the Little Sheep and East DawningHuang Ji Huang concepts outright.

The Company’s common stock is dual-primary listed on the New York Stock Exchange (the “NYSE”) and on the Main Board of The Stock Exchange of Hong Kong Limited (the “HKEX” or “Hong Kong Stock Exchange”).

 

 

2  

  YUM CHINA– 2023 Proxy Statement

   PROXY STATEMENT SUMMARY

SUMMARY INFORMATION REGARDING DIRECTORSNOMINEES

 

 

The following table provides summary information about each of the composition ofnominees to our board of directors (the “Board of Directors” or the “Board”).

 

Name Age Director
Since		 

Class;

Year Term
Expires

 Primary Occupation Independent Board Committee
Membership as of
March 30, 2018		 Age Director
Since		 Primary Occupation Independent Board Committee
Membership as of
April 12, 2023
 A C G F A C G F

Fred Hu (Chairman)

 54 2016 III – 2019 Chairman and founder of Primavera Capital Group ✓   CC 

Joey Wat

 46 2017 I – 2019 Chief Executive Officer of the Company     

Muktesh “Micky” Pant

 63 2016 II – 2018 Vice Chairman and Senior Advisor to the Company     

Joey Wat

Peter A. Bassi

 68 2016 I – 2019 Former Chairman of Yum! Restaurants International ✓ X   X

Christian L. Campbell

 67 2016 III – 2019 Owner of Christian L. Campbell Consulting LLC     X

EdYiu-Cheong Chan

 55 2016 I – 2019 Former Vice Chairman of Charoen Pokphand Group Company Limited ✓ X   

Peter A. Bassi

 73 2016 Former Chairman of Yum! Restaurants International ✓ CC  X

Edouard Ettedgui

 66 2016 I – 2019 Non-Executive Chairman of Alliance Française, Hong Kong ✓  CC  

Edouard Ettedgui

 71 2016 Non-Executive Chairman of Alliance Française, Hong Kong ✓  X X X

Louis T. Hsieh

 53 2016 II – 2018 Chief Financial Officer of NIO Inc. ✓ CC   

Jonathan S. Linen

 74 2016 II – 2018 Former Vice Chairman of American Express Company ✓  X X 

Ruby Lu

Ruby Lu

 47 2016 III – 2019 Independent venture capitalist ✓ X  X 

Zili Shao

 58 2016 III – 2019 Non-executive Chairman of Fangda Partners ✓    CC

Zili Shao

 63 2016 Non-executive Chairman of Fangda Partners ✓ X  CC

William Wang

 43 2017 II – 2018 Partner of Primavera Capital Group ✓   X    

William Wang

Min (Jenny) Zhang

Min (Jenny) Zhang

Christina Xiaojing Zhu

Christina Xiaojing Zhu

 50 — President and Chief Executive Officer of Walmart China ✓        

A – Audit Committee; C – Compensation Committee; G – Nominating and Governance Committee; F – Food Safety and Sustainability Committee;

CC – Committee Chair



* Cyril Han is a member of the Audit Committee. Louis T. Hsieh is a member of the Audit Committee and Food Safety and Sustainability Committee. Messrs. Han and Hsieh will not stand for re-election to the Board at the Annual Meeting.

The following charts summarize the diversity of our director nominees.

 

2  LOGOLOGOLOGO

YUM CHINA – 2023 Proxy Statement 

  YUM CHINA– 2018 Proxy Statement  3

 

 

 

PROXY STATEMENT SUMMARY

 

    

 

GOVERNANCE HIGHLIGHTS

 

 

The Board believes that good corporate governance is a critical factor in achieving business success and in fulfilling the Board’s responsibilities to stockholders. The Board believes that its principles and practices align management and stockholder interests. Highlights include:

 

Director Independence

  

•  Independent Board Chairman

 

•  8 of 9 of 12 directorsdirector nominees are independent

Director Elections and Attendance  

•  Declassified Board to be effective as  Annual election of the 2019 annual meeting of the Company’s stockholdersall directors

 

•  Majority voting policy for elections of directors in uncontested elections

 

•  Proxy access for director nominees by stockholders

 

•  100%  97% director attendance at Board and committee meetings in 2017

•  100% director attendance at the 2017 annual meeting of the Company’s stockholders2022

Board Refreshment and Diversity  

•  Board Diversity Policy

•  Directors with experience, qualifications and skills across a wide range of public and private companies

 

•  Directors reflect diversity of age, gender, race and nationality

•  Average director nominee age of 5857 as of April 12, 2023

 

•  Independent andnon-management directors may generally not stand forre-election after age 75

Other Governance
Practices		  

•  Shareholder  Stockholders holding at least 25% of the Company’s outstanding shares have the right to call special meetings

•  Active stockholder engagement

•  No shareholder rights plan expired in 2017 and was not renewed(also known as a poison pill)

 

•  Director and executive officer stock ownership policies

 

•  Policy prohibiting hedging or other speculative trading of Company stock

 

•  Policy regarding resignation if any director experiences a significant change in professional roles and responsibilities

 

•  Board access to senior management and independent advisors



 

YUM CHINA– 2018 Proxy Statement4   

  3  YUM CHINA– 2023 Proxy Statement

 

 

 

PROXY STATEMENT SUMMARY

 

  

 

WHERE YOU CAN FIND ADDITIONAL INFORMATION

 

 

 

Our Investor Relations website is located atwww.yumchina.com/Enir.yumchina.com. Although the information contained on or connected to our website is not part of this proxy statement, you can view additional information on our website, such as our 20172022 annual report, the charters of our Board committees, our Corporate Governance Principles, our Code of Conduct and reports that we file with the Securities and

Securities and Exchange Commission (the “SEC”). and the HKEX. Copies of these documents may also be obtained free of charge by writing to Yum China Holdings, Inc., 7100 Corporate Drive,101 East Park Boulevard, Suite 805, Plano, Texas 75024,75074, or Yum China Holdings, Inc., Yum China Building, 20 Tian Yao Qiao Road, Shanghai 200030 People’s Republic of China, Attention: Corporate Secretary.

 


 

4  YUM CHINA – 2023 Proxy Statement 

  YUM CHINA– 2018 Proxy Statement  5

 

 QUESTIONS AND ANSWERS ABOUT THE MEETING

 AND VOTING

 

 

The Board of Directors of Yum China Holdings, Inc. solicits the enclosed proxy for use at the 2018 annual meeting of the Company’s stockholders (the “Annual Meeting”) to be held at 8:3000 a.m. (local time), local time, on Friday,Thursday, May 11, 2018,25, 2023 at Mandarin Oriental Hong Kong, 5 Con-

naughtConnaught Road, Central, Hong Kong. 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.

 

 

What is the purpose of the Annual Meeting?

 

 

 

At the Annual Meeting, stockholders 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 stockholders.

 

 

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 stockholder of record as of the

close of business on March 13, 2018,27, 2023, 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 instead of a full set of proxy materials?

 

 

 

As permitted by SEC rules, we are making this proxy statement and our 20172022 annual report available to our stockholders electronically via the Internet. On or about March 30, 2018,April 12, 2023, we mailed to our stockholders athe Notice of Internet Availability of Proxy Materials (the “Notice”) containing instructions on how to access this proxy statement and our 20172022 annual report and vote online. If you received a Notice by mail, you will not receive a printed copy of the proxy materials unless you request a copy. The Notice contains instructions on how to access and review all of the important information contained in the

proxy statement and the 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 CHINA– 2018 Proxy Statement6   

  5  YUM CHINA– 2023 Proxy Statement

 

 

 

QUESTIONS AND ANSWERS ABOUT THE MEETING AND VOTING

 

  

 

Who may attend the Annual Meeting?

 

 

 

The Annual Meeting is open to all stockholders of record as of the close of business on March 13, 2018, or their duly appointed proxies.27, 2023. If you would like to attend the Annual Meeting, you will need to bring a valid picture identification. Ifhold your shares are held in the name ofthrough a bank, broker or other nominee, you will needbe required to bring a legal proxyshow the notice or voting instructions form you received from your bank, broker or other nominee or a copy of a statement (such as a brokerage statement or legal proxy) from your bank, broker or other proof of

nominee reflecting your stock ownership as of the record dateMarch 27, 2023 in order to be admitted to the

Annual Meeting. A recent brokerage statement or letter from a bank, broker or other nominee is an example of proof of ownership. meeting.

All attendees must bring valid photo identification to gain admission to the meeting. Please note that computers, cameras, sound or video recording equipment, large bags, briefcases and packages will not be allowed in the meeting room.

 

 

May stockholders ask questions?

Yes. Representatives of the Company will answer stockholders’ questions of general interest following the Annual Meeting.

Who may vote?

 

 

 

You may vote if you owned any shares of Company common stock as of the close of business on the record date, March 13, 2018.27, 2023. Each share of Company common stock

is entitled to one vote. As of March 13, 2018,27, 2023, there were 385,926,528418,247,486 shares of Company common stock outstanding.

 

 

What am I voting on?

 

 

 

You will be voting on the following threesix items of business at the Annual Meeting:

 

The election of the four Class II director nominees named in this proxy statement to serve until the 2019 annual meeting of the Company’s stockholders;

•

The election of the nine director nominees named in this proxy statement to serve for a one-year term;

 

•

The approval and ratification of the appointment of KPMG Huazhen LLP and KPMG as the Company’s independent auditors for 2023;

The ratification of the appointment of KPMG Huazhen LLP as the Company’s independent auditor for 2018; and

•

The approval, on an advisory basis, of the Company’s named executive officer compensation;

•

The approval, on an advisory basis, of the frequency of the advisory vote to approve the Company’s named executive officer compensation;

The approval, on an advisory basis, of the Company’s named executive officer compensation.

•

The authorization to issue shares up to 20% of the total number of outstanding shares of common stock of the Company; and

•

The authorization to repurchase up to 10% of the total number of outstanding shares of common stock of the Company.

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

 

 

How does the Board of Directors recommend that I vote?

 

 

 

Our Board of Directors recommends that you vote your shares:

 

FOR each of the four nominees named in this proxy statement for election to the Board;

•

FOR each of the nine nominees named in this proxy statement for election to the Board;

 

FOR the ratification of the appointment of KPMG Huazhen LLP as our independent auditor for 2018; and

•

FOR the approval and ratification of the appointment of KPMG Huazhen LLP and KPMG as our independent auditors for 2023;

 

•

FOR the proposal on named executive officer compensation;

•

for 1 YEAR as the frequency of the proposal on named executive officer compensation;

FOR the proposal on named executive officer compensation.

•

FOR the authorization to issue shares up to 20% of the total number of outstanding shares of common stock of the Company; and

•

FOR the authorization to repurchase up to 10% of the total number of outstanding shares of common stock of the Company.

 

 

6  YUM CHINA – 2023 Proxy Statement 

  YUM CHINA– 2018 Proxy Statement  7

 

 

 

QUESTIONS AND ANSWERS ABOUT THE MEETING AND VOTING

 

    

 

How do I vote before the Annual Meeting?

 

 

 

There are three ways to vote before the meeting:

 

 • 

ByInternet—we encourage you to vote online atwww.proxyvote.com by following instructions on the Notice or proxy card;

 

Bytelephone—you may vote by making a telephone call to 1 (800)690-6903 (toll-free in the U.S.); or

•

By telephone—you may vote by making a telephone call to 1 (800) 690-6903 (toll-free in the U.S.); or

 

Bymail—if you received your proxy materials by mail, you may vote by completing, signing, dating and mailing the proxy card in the postage-paid envelope provided.

•

By mail—if you received your proxy materials by mail, you may vote by completing, signing, dating and mailing the proxy card in the postage-paid envelope provided.

Proxies submitted through the Internet or by telephone as described above must be received by 11:59 p.m., locala.m. Beijing/Hong Kong time on May 10, 2018.24, 2023 / 11:59 p.m. U.S. Eastern time on May 23, 2023. Proxies submitted by mail must be received prior to the meeting.

If you hold your shares in the name of a bank, broker or other nominee, your ability to vote throughbefore the Internet or by telephoneAnnual Meeting depends on their voting processes. Please follow the directions of your bank, broker or other nominee carefully.

 

 

Can I vote at the Annual Meeting?

 

 

 

Shares registered directly in your name as the stockholder of record may be voted in person at the Annual Meeting. Shares held through a bank, broker or other nominee may be voted in person only if you obtain a legal proxy from the bank, broker or other 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 meetingAnnual Meeting even if you have previously voted by proxy.

If you hold your shares in the name of a bank, broker or other nominee, your ability to vote at the Annual Meeting depends on their voting processes. Please follow the directions of your bank, broker or other nominee carefully.

 

 

Can I change my mind after I vote?

 

 

 

YouIf you are a stockholder of record, you may change youror revoke any previously cast vote, at any timeso long as the new vote or revocation is received 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 for receipt prior to the Annual Meeting;

•

signing another proxy card with a later date and returning it to us for receipt prior to the Annual Meeting;

 

voting again through the Internet or by telephone prior to 11:59 p.m., local time, on May 10, 2018;

giving written notice to the Corporate Secretary of the Company prior to the Annual Meeting; or

•

voting again through the Internet or by telephone prior to 11:59 a.m. Beijing/Hong Kong time on May 24, 2023 / 11:59 p.m. U.S. Eastern time on May 23, 2023;

 

•

giving written notice to the Corporate Secretary of the Company prior to the Annual Meeting; or

voting again at the Annual Meeting.

•

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.

If you hold your shares in the name of a bank, broker or other nominee, your ability change your vote depends on their voting processes. Please follow the directions of your bank, broker or other nominee carefully.

 

 

Who will count the votes?

 

 

Representatives of American Stock Transfer and Trust Company, LLCBroadridge Financial Solutions will count the votes and will serve as the independent inspector of election.

 

YUM CHINA– 2018 Proxy Statement8   

  7  YUM CHINA– 2023 Proxy Statement

 

 

 

QUESTIONS AND ANSWERS ABOUT THE MEETING AND VOTING

 

  

 

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 set forth on page 1.2.

 

 

What does it mean if I receive more than one Notice or proxy card?

 

 

 

If you received more than one Notice or 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 U.S. transfer agent

is American Stock Transfer andComputershare Trust Company, LLC,N.A., which may be reached at 1 (888)439-4986.(877) 854-0865 (U.S.) and 1 (781) 575-3102 (International). Computershare Investor Services Limited, which can be reached at 852-2862-8500 (Hong Kong), acts as our co-transfer agent to maintain the Hong Kong share register.

 

 

Will my shares be voted if I do not provide my proxy?

 

 

 

Your shares may be voted on certain matters 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 (“NYSE”) rules to vote shares for which their customers do not provide voting instructions on certain “routine” matters.

The proposal to approve and ratify the appointment of KPMG Huazhen LLP and KPMG as our independent auditor

auditors for 20182023 is considered a routine matter for which brokerage firms may vote

shares for which they have not received voting instructions. The other matters to be voted on at our Annual Meeting are not considered “routine” under applicable rules. When a matter 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 matter, the brokerage firm cannot vote the shares on that proposal. This is called a “brokernon-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 if you properly submit a proxy by Internet, telephone or mail. In order for us to conduct our Annual Meeting, a majority of the shares of Company common stock outstanding as of

March 13, 201827, 2023 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.

 

 

8  

  YUM CHINA– 2018 Proxy Statement

   QUESTIONS AND ANSWERS ABOUT THE MEETING AND VOTING

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

YUM CHINA – 2023 Proxy Statement

  9

QUESTIONS AND ANSWERS ABOUT THE MEETING AND VOTING   

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 50% of the number of votes cast with respect to that director’s election. Abstentions will be counted as

present but not voted. Abstentions and brokernon-votes will not affect the outcome of the election of directors. Full details of the Company’s majority voting policy are set out in our Corporate Governance Principles and are described under “Governance of the Company—Majority Voting Policy.”

 

 

How many votes are needed to approve the other proposals?

 

 

 

Proposals 2, 3, 5 and 36 must receive the “FOR” vote of a majority of the shares of our common stock, present in person or represented by proxy, and entitled to vote at the Annual Meeting. For each of these proposals, 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” Proposals 2, 3, 5 and 3.6. 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 eitherany of these proposals.

For Proposal 4, you may vote for the option of “1 YEAR,” “2 YEARS,” “3 YEARS” or “ABSTAIN.” The frequency that receives the highest number of votes cast will be the stockholders’ recommendation as to the frequency of future advisory votes to approve named executive officer compensation. Abstentions will be counted as present but not voted. Abstentions and broker non-votes will not affect the outcome of Proposal 4.

 

 

May stockholders ask questions?

Yes. Representatives of the Company will answer stockholders’ questions of general interest following the Annual Meeting.

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 with the SEC within four business days of the Annual

Meeting. The voting results will also be filed with HKEX simultaneously.

What if other matters are presented for consideration at the Annual Meeting?

 

 

 

The Company knows of no other matters to be submitted to the stockholders at the Annual Meeting, other than the proposals referred to in this proxy statement. If any other matters properly come before the stockholders 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 CHINA– 2018 Proxy Statement10   

  9  YUM CHINA– 2023 Proxy Statement

 

 GOVERNANCE OF THE COMPANY

 

 

The business and affairs of the Company 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 stockholders. The Board believes that its practices align management and stockholder interests.

The corporate governance section of our website makes available certain of the Company’s corporate governance materials, including our Corporate Governance Principles, the charters for each Board committee and our Code of Conduct. To access these documents on our Investor Relations website,ir.yumchina.com, click on “Governance”“About Yum China” and then “Corporate Governance Documents.Governance.”

 

 

Highlights of our corporate governance policies and practices are described below.

 

Director Independence

  

•  Independent Board Chairman

 

•  8 of 9 of 12 directorsdirector nominees are independent

Director Elections and Attendance

  

•  Declassified Board to be effective as  Annual election of the 2019 annual meeting of the
Company’s stockholdersall directors

 

•  Majority voting policy for elections of directors in uncontested elections

 

•  Proxy access for director nominees by stockholders

 

•  100%  97% director attendance at Board and committee meetings in 2017

•  100% director attendance at the 2017 annual meeting of the Company’s
stockholders2022

Board Refreshment and Diversity

  

•  Board Diversity Policy

•  Directors with experience, qualifications and skills across a wide range of
public and private companies

 

•  Directors reflect diversity of age, gender, race and nationality

•  Average director nominee age of 5857 as of April 12, 2023

 

•  Independent andnon-management directors may generally not stand forre-election after age 75

Other Governance Practices

  

•  Shareholder  Stockholders holding at least 25% of the Company’s outstanding shares have the right to call special meetings

•  Active stockholder engagement

•  No shareholder rights plan expired in 2017 and was not renewed(also known as a poison pill)

 

•  Director and executive officer stock ownership policies

 

•  Policy prohibiting hedging or other speculative trading of Company stock

 

•  Policy regarding resignation if any director experiences a significant change in professional roles and responsibilities

 

•  Board access to senior management and independent advisors

 

10  YUM CHINA – 2023 Proxy Statement 

  YUM CHINA– 2018 Proxy Statement  11

 

 

 

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 12 directors. As discussed in more detail later in this section,10 directors, eight of whom are standing for re-election at the Annual Meeting. Each director is elected for a one-year term. Two of our current directors, Cyril Han and Louis T. Hsieh, will not stand for re-election at the Annual Meeting. The Company thanks Messrs. Han and Hsieh for their service

as members of our Board. Christina Xiaojing Zhu is standing for election for the first time at the Annual Meeting. The Board has determined thatto reduce the number of directors constituting the Board from 10 to nine of those directors, including three of the directors standing for election atfollowing the Annual Meeting, are independent underMeeting. Proxies may not be voted for more than nine persons in the ruleselection of the NYSE.

The Board is currently divided into three classes of equal size. The directors designated as Class I and Class III directors have terms expiring at the 2019 annual meeting

of the Company’s stockholders. The directors designated as Class II directors have terms expiring at the Annual Meeting and, if elected, will serve for aone-year term. Beginning at the 2019 annual meeting of the Company’s stockholders, each of our directors will stand for election each year for aone-year term, and our Board will therefore no longer be divided into three classes.directors.

 

 

How often did the Board meet in 2017?2022?

 

 

 

Directors are expected, absent extraordinary circumstances, to attend all Board meetings and meetings of committees on which they serve. Our Board met seven7 times and the committees collectively met 25 times during 2017. Each director2022. In 2022, overall attendance at Board and committee meetings was 97% and all directors attended all at least 75%

of the aggregate total of meetings of the Board and committees on which such director served that were held during 2017 while the director was a member.served. Our independent direc-

torsdirectors meet privately in executive session without management present at each regularly scheduled Board meeting and held six such executive sessions in 2017.meeting. Our independent Chairman leads these Board executive sessions.

 

 

What is the Board’s policy regarding director attendance at the Annual Meeting?

 

 

All directors are encouraged to attend the Annual Meeting. All of theincumbent directors then serving on our Board attended the 20172022 annual meeting of the Company’s stockholders.

How are director nominees selected?

 

 

 

The Nominating and Governance Committee is responsible for recommending director candidates to the full Board for nomination and election at the annual meetings of stockholders. The Nominating and Governance Committee’s charter provides that it may retain third-party search firms to identify candidates from time to time. When the Nominating and Governance Committee will interviewengages a directorsearch firm, it provides the firm with guidance as to the skills, experience and qualifications that it is seeking in potential candidates, which may include, among other things, new directors who would contribute to the collective diversity of the Board. After conducting skills mapping and interviewing candidates, the search firm then provides a candidate

list to the Nominating and Governance Committee. The Nominating and Governance Committee then interviews the candidates before theany candidate is submitted to the full Board for approval. The

After considering and evaluating a number of highly qualified candidates, the Nominating and Governance Committee’s charter providesCommittee recommended to the Board that it may retain a third-party search firmChristina Xiaojing Zhu be nominated to identify candidates from time to time. stand for election by our stockholders at the Annual Meeting.

The Nominating and Governance Committee will also consider director candidates recommended by stockholders or other sources in the same manner as nominees identified

12  

  YUM CHINA– 2023 Proxy Statement

   GOVERNANCE OF THE COMPANY

by the Committee.

For a stockholder to submit a candidate for consideration by the Nominating and Governance Committee, a stockholder must notify the Company’s Corporate Secretary by mail at Yum China Holdings, Inc., 7100 Corporate Drive,101 East Park Boulevard, Suite 805, Plano, Texas 7502475074 or at Yum China Holdings, Inc., Yum China Building, 20 Tian Yao Qiao Road, Shanghai 200030, People’s Republic of China.

In accordance with the Corporate Governance Principles, our Board seeks members from diverse professional backgrounds who combine a broad spectrum of experience and expertise with a reputation for integrity.

YUM CHINA– 2018 Proxy Statement

  11

GOVERNANCE OF THE COMPANY   

Directors should have experience in positions with a high degree of responsibility and be leaders in the companies or institutions with which they are affiliated, and are selected based upon contributions they can make to the Board and management. The NominatingNominat-

ing and Governance Committee seeks to complete customary vetting procedures and background checks with respect to individuals suggested for potential Board membership by stockholders of the Company or other sources.

Ten of our current directors joined the Board in connection with thespin-off from YUM in 2016. In 2017, the Board expanded its size from ten directors to 12 directors and appointed Ms. Joey Wat and Mr. William Wang as directors. Ms. Wat serves as the Chief Executive Officer of the Company and Mr. Wang was identified to the Company by Primavera pursuant to the shareholders agreement discussed below. We believe that each of our directors and director nominees has met the guidelines set forth in the Corporate Governance Principles.

The Company is party to a shareholders agreement with Primavera Capital Group (“Primavera”), and API (Hong Kong) Investment Limited, an affiliate of Zhejiang Ant Small and Micro Financial Services Group Co., Ltd. (currently known as Ant Group Co., Ltd., “Ant Group”) pursuant to which Primavera has identified two director designees, Dr. Fred Hu and Mr. William Wang.

 

 

What are the directors’director nominees’ qualifications and skills?

 

 

 

As noted in thelisted below, our director biographies that follow this section, our directorsnominees have experience, qualifications and skills across a wide range of public and private companies spanning many different industries,

possessing a broad

spectrum of experience both individually and collectively. They bringpossess a diverse mix of regional, industry and professional expertiseexpertise.

Executive
Leadership		IndustryInformation
Technology		Regional
(China/Asia Pacific)		Public
Company Board
Fred Hu✓✓✓✓
Joey Wat✓✓✓✓✓
Peter A. Bassi✓✓✓
Edouard Ettedgui✓✓✓✓
Ruby Lu✓✓✓✓
Zili Shao✓✓✓
William Wang✓✓✓✓
Min (Jenny) Zhang✓✓✓✓✓
Christina Xiaojing Zhu✓✓✓✓✓

How does the composition of our Board reflect diversity?

The Nominating and Governance Committee seeks to recommend nominees that bring a unique perspective to the Company.Board in order to contribute to the collective diversity of the Board. The Board believes that having directors of diverse backgrounds helps the Board better oversee the Company’s management and operations and assess risk

and opportunities for the Company’s business model from a variety of perspectives. Under our Board Diversity Policy, diversity is broadly construed to mean a variety of perspectives, skills, personal and professional experiences and backgrounds, and other characteristics represented in both visible and non-visible ways that include, but are not

YUM CHINA – 2023 Proxy Statement

  13

GOVERNANCE OF THE COMPANY   

limited to, age, gender, race and nationality. As a part of the director nominating process, the Nominating and Governance Committee considers several factors to ensure the entire Board collectively embraces a wide variety of characteristics. Each director nominee will generally exhibit different and varying degrees of these

characteristics. With respect to the Company’s current slate of director nominees, the Company also benefits from the diversity inherent from differences in Board member age, gender, race and nationality. Forty-four percent of director nominees are women.

 

 

Can stockholders nominate directors for election to the Board?

 

 

Yes, under our amendedAmended and restated bylaws,Restated Bylaws (the “Bylaws”), stockholders may nominate persons for election as directors at an annual meeting by following the procedures described under “Additional Information.”

In addition, our amended and restated bylaws include provisions permitting, subject to certain terms and conditions, stockholders owning at least 3% of the outstanding shares of Company common stock for at least three consecutive years to use our annual meeting proxy statement to nominate a number of director candidates not to exceed 20% of the number of directors in office, subject to reduc-

tion in certain circumstances. Because we have been an independent publicly traded company for less than three years, stockholders will not be able to nominate directors for election using these proxy access procedures until the 2020 annual meeting of the Company’s stockholders.

What is the Board’s leadership structure?

 

 

 

Our Board is currently led by an independent Chairman, Dr. Fred Hu. Our Board believes that Board independence and oversight of management are effectively maintained through a strong independent Chairman and through the Board’s composition, committee system and policy of having regular executive sessions ofnon-management directors, all of which are discussed below this section.

Further, separating the Chairman and Chief Executive Officer roles enables the Chairman to focus on corporate governance matters and the Chief Executive Officer to

focus on the Company’s business. We find that this structure works well to foster an open dialogue and constructive feedback among the independent directors and

12  

  YUM CHINA– 2018 Proxy Statement

   GOVERNANCE OF THE COMPANY

management. It further allows the Board to effectively represent the best interests of all stockholders and contribute to the Company’s long-term success.

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

 

 

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

 

 

 

 • 

Board Committee Charters. The Audit Committee, Compensation Committee, Nominating and Governance Committee and Food Safety and Sustainability Committee of the Board of Directors operate pursuant to their respective written charters. These charters were approved by the Board of Directors and are reviewed annually by the respective committees. Each charter is available on the Company’s website atir.yumchina.com.

 

 • 

Governance Principles. The Board of Directors has adopted Corporate Governance Principles, which are

intended to embody the governance principles and procedures by which the Board functions. These principles are available on the Company’s website atir.yumchina.com.

 

Ethical Guidelines. YUMC’s Code of Conduct was adopted to emphasize the Company’s commitment to the highest standards of business conduct. The Code of

 • 

Ethical Guidelines. Yum China’s 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 ethical or accounting concerns, misconduct or violations of the Code of Conduct in a confidential manner. The Code of Conduct applies to all

14  

  YUM CHINA– 2023 Proxy Statement

   GOVERNANCE OF THE COMPANY

directors and employees of the Company, including the principal executive officer, the principal financial officer and the principal accounting officer. All employees of the Company are required, on an annual basis, to complete the Yum China Code of Conduct Questionnaire and certify in writing that they have read and understand the Code of Conduct. The Code of Conduct is available on the Company’s website atir.yumchina.com. The Company intends to post amendments to or waivers from the Code of Conduct (to the extent applicable to directors or executive officers)officers and required by the rules of the SEC, NYSE or HKEX) on this website.

•

Conflicts of Interest Policy Applicable to Directors. As set out in Yum China’s Code of Conduct, Yum China’s conflicts of interest policy with respect to directors is designed to ensure adequate disclosure and consideration of the types of conflict of interest situations that are reasonably likely to be of concern to the Company.

Accordingly, directors are required to disclose to the Company all potential conflict of interest situations that could reasonably be expected to impact the independence and judgment of directors in performing their duties as members of the Board of Directors of the Company. Such disclosures are required to be made by the director at such time and in such manner as to provide adequate notice and sufficient information to the Company to enable the Company to fully and adequately consider the relevant facts and circumstances related to the potential conflict of interest and to determine the actions, if any, that should be taken to resolve such potential conflict of interest.

The Company’s governance policies are compliant with applicable rules and regulations of both the NYSE and the HKEX.

 

 

What other significant Board governance practices does the Company have?

 

 

 

•

Annual Election of Directors. In accordance with our Amended and Restated Certificate of Incorporation, our directors are elected to serve a one-year term and until their successors are elected and qualified or until their earlier death, resignation or removal.

Role of Lead Director. Our Corporate Governance Principles require the independent directors to appoint a Lead Director when the Chairman does not qualify as independent in accordance with the applicable rules of the NYSE. The Company currently does not have a Lead Director because the Chairman of the Board is independent.

•

Role of Lead Director. Our Corporate Governance Principles require the independent directors to appoint a Lead Director when the Chairman does not qualify as independent in accordance with the applicable rules of the NYSE. The Company currently does not have a Lead Director because the Chairman of the Board is independent.

•

Executive Sessions. Our independent and non-management directors meet regularly in executive session. The executive sessions are attended only by the independent and non-management directors and are presided over by the independent Chairman. Our independent directors also meet in executive session at least once per year.

Executive Sessions. Our independent andnon-management directors meet regularly in executive session. The executive sessions are attended only by the independent andnon-management directors and are presided over by the independent Chairman. Our independent directors also meet in executive session at least once per year.

•

Board and Committee Evaluations. The Board recognizes that a thorough, constructive evaluation process enhances our Board’s effectiveness and is an essential element of good corporate governance. Each year, the Nominating and Governance Committee oversees the design and implementation of the evaluation process, focused on the Board’s contribution to the Company and on areas in which the Board believes a better contribution could be made. In addition, each of the Audit Committee, the Compensation Committee, the Nominating and Governance Committee and the Food Safety and Sustainability Committee also conducts a similar annual self-evaluation pursuant to their respective charters. Written questionnaires completed by each director, as well as discussions with selected directors, solicit feedback on a wide range of issues, including Board/committee composition and leadership, meetings, responsibilities and overall effectiveness. A summary of the Board and committee evaluation results is discussed with the Board and with the respective committees, and policies and practices are updated in response

 

 

YUM CHINA– 20182023 Proxy Statement 

  13  15

 

 

 

GOVERNANCE OF THE COMPANY   

 

    

 

Board and Committee Evaluations. The Board conducts 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. In addition, each of the Audit Committee, the Compensation Committee and the Nominating and Governance Committees also conducts a similar annual self-evaluation pursuant to their respective charters.

Retirement Policy. Pursuant to our Corporate Governance Principles, independent ornon-management directors may not stand forre-election to the Board after they have reached the age of 75, unless the Board unanimously elects to have the director stand forre-election.

Limits on Director Service on Other Public Company Boards.Our Corporate Governance Principles provide that directors may serve on no more than four other public company boards. The Company’s Chief Executive Officer, if a director, may serve on no more than two other public company boards. All directors are expected to advise the Chairman and the Chair of the Nominating and Governance Committee prior to accepting any other public company directorship or any assignment to the audit committee or compensation committee of other public company boards.

Majority Voting Policy. Our amended and restated bylaws 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” their election in excess of 50% of the number of votes cast with respect to that director’s election. The Corporate Governance

  

to the evaluation results. Director suggestions for improvements to evaluation questionnaires and processes are considered for incorporation for the following year.

•

Retirement Policy. Pursuant to our Corporate Governance Principles, independent or non-management directors may not stand for re-election to the Board after they have reached the age of 75, unless the Board unanimously elects to have the director stand for re-election.

•

Limits on Director Service on Other Public Company Boards. Our Corporate Governance Principles provide that directors may serve on no more than four other public company boards. The Company’s Chief Executive Officer, if a director, may serve on no more than one other public company board. All directors are expected to advise the Chairman and the Chair of the Nominating and Governance Committee prior to accepting any other public company directorship or any assignment to the audit committee or compensation committee of other public company boards.

•

Majority Voting Policy. Our Bylaws 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” their election in excess of 50% of the number of votes cast with respect to that director’s election. The Corporate 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 and publicly disclose the Board’s decision regarding the resignation and the rationale behind the decision within 90 days from the date of the certification of the election results.

 

Access to Management and Employees. Our directors have complete and open access to senior members of management. Our Chief Executive Officer invites key employees of the Company to attend Board sessions at which the Chief Executive Officer believes they can meaningfully contribute to Board discussion.

•

Access to Management and Employees. Our directors have complete and open access to senior members of management. Our Chief Executive Officer invites key employees of the Company to attend Board sessions at which the Chief Executive Officer believes they can meaningfully contribute to Board discussion.

 

Access to Outside Advisors. The Board and Board committees have the right to consult and retain independent legal and other advisors at the expense of the Company. The Audit Committee has the sole authority to appoint, determine funding for and replace the independent auditor. The Compensation Committee has the sole authority to retain any advisor to assist it in the performance of its duties, after taking into consideration all factors relevant to the advisor’s independence from management. The Nominating and Governance Committee has the sole authority to retain search firms to be used to identify director candidates. The Food Safety Committee has the authority to consult and retain any advisor to assist it in connection with the exercise of its responsibilities and authority.

•

Access to Outside Advisors. The Board and Board committees have the right to consult and retain independent legal and other advisors at the expense of the Company. The Audit Committee has the sole authority to appoint and replace the independent auditors, subject to stockholder approval. The Compensation Committee has the sole authority to retain any advisor to assist it in the performance of its duties, after taking into consideration all factors relevant to the advisor’s independence from management. The Nominating and Governance Committee has the sole authority to retain search firms to be used to identify director candidates. The Food Safety and Sustainability Committee has the authority to consult and retain any advisor to assist it in connection with the exercise of its responsibilities and authority.

 

 

What is the Board’s role in risk oversight?

 

 

 

The Board maintains overall responsibility for overseeing the Company’s risk management framework. The Board regularly reviews risks that may be material to the Company. In furtherance of its responsibility, the Board has delegated specific

risk-related responsibilities to the Audit Committee, the Compensation Committee and the Food Safety and Sustainability Committee.

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  YUM CHINA– 2018 Proxy Statement

The Board and its committees consult with external advisors and internal experts regarding anticipated future threats, trends and risks that may be applicable to our Company, our industry and our operations.

   GOVERNANCE OF THE COMPANY

Audit Committee

The Audit Committee engages in substantive discussions with management regarding the Company’s major risk

16  

  YUM CHINA– 2023 Proxy Statement

   GOVERNANCE OF THE COMPANY

exposures and the steps management has taken to monitor and control such exposures, including the Company’s risk assessment and risk management policies. Our Head of Corporate Audit reports directly to the Audit Committee, as well as our Chief Financial Officer. The Audit Committee also receives reports at each committee meetingmeetings regarding legal and regulatory risks from management and meets periodically in separate executive sessions with

our independent auditorauditors and our Head of Corporate Audit. The Chief Legal Officer reports regularly to the Audit Committee on the Company’s key risk areas and compliance programs. The Audit Committee periodically provides a summary to the full Board of the risk areas reviewed together with any other risk-related subjects discussed at the Audit Committee meeting. Alternatively, the Board may review and discuss directly with management the major risks arising from the Company’s business and operations.

The Company also maintains the Compliance Oversight Committee, a management-level committee, which is co-chaired by the Chief Legal Officer and the Chief Financial Officer of the Company and comprised of leaders from multiple functions. The Compliance Oversight Committee meets regularly to monitor and review the implementation of the Company’s compliance programs. The Chief Legal Officer reports regularly to the Audit Committee on the Company’s key risk areas and compliance programs.

Compensation Committee

The Compensation 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. This oversight helps ensure the Company’s compensation programs

align with the Company’s goals and compensation philosophies and, along with other factors, operate to mitigate against the risk that such programs would encourage excessive or inappropriate risk-taking.

Food Safety and Sustainability Committee

In December 2017, the Board established theThe Food Safety and Sustainability Committee to assistassists the Board in its oversight of the Company’s practices, programs,policies, procedures, strategies and initiatives relating to the protection of food safety. The Food Safety Committee also

monitors trends, issues and concerns affecting the Company’s food safety practices, and the risks arising therefrom, in light of the Company’s overall efforts related to food safety.

The Food Safety and Sustainability Committee also assists the Board in its oversight of the Company’s practices, policies, procedures, strategies and initiatives relating to sustainability, including environmental, supply chain and food nutrition and health. The Committee monitors trends, issues and concerns affecting the Company’s sustainability practices, policies, procedures, strategies and initiatives.

 

How does the Board oversee food safety risk?

The Board and the Food Safety and Sustainability Committee are involved in oversight of the Company’s food safety risk. The Food Safety and Sustainability Committee assists the Board in the oversight of food safety risk and regularly receives reports from management in connection with the Company’s practices, procedures, strategies and initiatives relating to food safety and the risks arising therefrom. The Board and the Food Safety and

Sustainability Committee also monitor and evaluate significant changes in regulatory requirements on food safety, material food safety incidents that could potentially affect the Company, as well as any severe public health situations, including the COVID-19 pandemic, that could adversely affect the Company’s business and operations.

YUM CHINA – 2023 Proxy Statement

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GOVERNANCE OF THE COMPANY   

How does the Board oversee cybersecurity risk?

The Board and the Audit Committee are involved in oversight of the Company’s cybersecurity risk. The Audit Committee assists the Board in the oversight of cybersecurity and other technology risks, discusses with management cybersecurity risk mitigation and incident management, and reviews management reports regarding the Company’s cybersecurity governance processes, incident response system and applicable cybersecurity laws, regulations and standards, status of projects to strengthen internal cybersecurity, the evolving threat environment, vulnerability assessments, specific cybersecurity incidents and management’s efforts to monitor, detect and prevent cybersecurity threats.

The Company’s cybersecurity programs are regularly reviewed, internally or externally by independent third parties, against established regulatory and industry standards. The Company has maintained ISO/IEC 27001:2013 certification since 2018 for certain online business. We incorporate regular information security training as part of our employee education and development program. To its knowledge, the Company has not experienced a significant cybersecurity breach within the last three years. The Company maintains cybersecurity insurance as part of its overall insurance portfolio.

How does the Board oversee sustainability risk?

The Company strives to establish a responsible ecosystem by building sustainable restaurants, creating a sustainable supply chain with partners, and building sustainable communities with all stakeholders. The Company has established sustainability management mechanisms all the way from the Board to the frontline restaurant teams. At the Board level, the Food Safety and Sustainability Committee assists the Board in its oversight of the Company’s practices, policies, procedures, strategies and initiatives relating to sustainability, including environmental, supply chain and food nutrition and health. The Food Safety and Sustainability Committee monitors trends, issues and concerns affecting the Company’s sustainability prac-

tices, policies, procedures, strategies and initiatives. The Food Safety and Sustainability Committee obtains reports from management as the Committee deems necessary or desirable. The Company has also established a Sustainability Committee comprised of selected leadership team members, the sustainability officer, and cross-functional teams. The Sustainability Committee members meet quarterly to track the implementation of material topics, evaluate sustainability risks, and develop risk management strategies and measures. The Board considers these sustainability matters at least annually in connection with the strategic plan.

How has the Board overseen the Company’s response to COVID-19?

Starting in the first quarter of 2020 and throughout 2021 and 2022, the COVID-19 pandemic significantly impacted the restaurant industry in China. 2022 was in many ways the most volatile year among the past three years, during which the restaurant sector in China operated in a fast-changing operating environment, facing challenges from sporadic COVID-19 outbreaks, entire

city lockdowns and, in December 2022, nationwide infections.

The Board and its committees took additional actions to ensure effective oversight of the Company’s response plans to mitigate the risks related to the pandemic. In addition to a COVID-19 crisis management team com-

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   GOVERNANCE OF THE COMPANY

prised of cross-brand and cross-functional executives at the management level, the Board reviewed the immediate actions taken by the Company to address the challenges and volatility caused by the COVID-19 pandemic. Through regular updates and additional communications with management, the Board has actively participated in overseeing the Company’s management of the COVID-19 crisis, including protecting the health and safety of our employees and customers, evaluating the impact of the pandemic on the Company’s operations and

strategies, monitoring continued compliance with applicable regulatory requirements, managing human capital and assessing the impact of the pandemic on the Company’s liquidity and financial position.

With support from the Board, management led the successful implementation of immediate emergency actions to protect employees, sustain operations, drive sales, protect profitability, drive stockholder value-creation and give back to the community.

What is the Board’s role in management development and succession planning?

 

 

 

The Board considers management development and succession planning to be a critical part of our Company’s long-term strategy. In accordance with our Corporate Governance Principles, the Board reviews the Company’s succession planning, including succession planning in the case of retirement of the Chief Executive Officer of the Company. The Chief Executive Officer periodically reports to the Board with regard to his or her recommendationsrecommen-

dations for potential successors to senior executive positions and development plans for such individuals. In addition, the Board reviews recommendations from the Compensation Committeean independent committee with regard to the performance evaluation of the Chief Executive Officer, which the

Compensation Committee committee conducts annually, in accordance with its charter.

In September 2017, Mr. Micky Pant notified the Board that he would be stepping down from the office of Chief Executive Officer of the Company, effective March 1, 2018. Pursuant to the Company’s succession plan and after careful deliberations, the Board appointed Ms. Joey Wat as the Company’s Chief Executive Officer, effective March 1, 2018. Mr. Pant continues to serve the Company as Senior Advisor to the Company and also assumed the role of Vice Chairman of the Board.

 

 

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GOVERNANCE OF THE COMPANY   

How does the Board determine which directors are considered independent?

 

 

 

The Company’s Corporate Governance Principles, adopted by the Board, require that a majority of the directors qualify as independent in accordance with the applicable rules of the NYSE. The Board also considers independence requirements of the Rules Governing the Listing of Securities on Hong Kong Listing Rules. The Board determines on an annual basis whether each director qualifies as independent pursuant to the applicable rules of the NYSE.NYSE and the Hong Kong Listing Rules.

Pursuant to the Corporate 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 Corporate 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 the review, the Board affirmatively determined that all of the directors and director nominees are independent of the Company and its management under NYSE rules and the Hong Kong Listing Rules, with the exception of Christian Campbell, Micky Pant and Joey Wat. Mr. Campbell is not considered an independent director because he served as an executive officer of

YUM until his retirement in February 2016. Mr. Pant is not considered an independent director because he formerly served as Chief Executive Officer of the Company. Ms. Wat is not considered an independent director because she is the current Chief Executive Officer of the Company.

In reaching this conclusion, the Board determined that Dr. Hu, Messrs. Bassi, Chan, Ettedgui, Han, Hsieh, Linen, Shao and Wang and Ms.Mess. Lu, Zhang and Zhu had no material relationship with the Company other than their relationship as a director. As part of its assessment, the Board considered the fact that Mr. Shao served asCo-Chairman and Partner of King & Wood Mallesons China until May 2017, and that the Company paid fees to King & Wood Mallesons China for legal services that accounted for less than 1% of King & Wood Mallesons China’s revenue in 2017. Based on the amount of fees the Company paid to King & Wood Mallesons China, and based on the fact that Mr. Shao did not directly participate in rendering legal services to the Company, the Board determined that this relationship was not material to Mr. Shao or King & Wood Mallesons China, and therefore the Board determined Mr. Shao was independent.

 

 

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GOVERNANCE OF THE COMPANY   

How do stockholders communicate with the Board?

 

 

 

Stockholders or other parties who wish to communicate directly with thenon-management directors, individually or as a group, or the entire Board may do so by writing to the Nominating and Governance Committee, c/o the Corporate Secretary, Yum China Holdings, Inc., 7100 Corporate Drive,101 East Park Boulevard, Suite 805, Plano, Texas, 75024.75074. The Nominating and Governance Committee of the Board has approved a process for handling correspondence received by the Company and addressed tonon-management members of the Board or the entire Board. Under that process,pro

cess, the Corporate Secretary of the Company reviews all such correspondence and regularly forwards to a designated member of the Nominating and Governance Committee copies of all such correspondence (except commercial

correspondence and correspondence that is

duplicative in nature) and a summary of all such correspondence. 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 stockholders relating to accounting, internal controls or auditing matters are brought to the attention of the Chairperson of the Audit Committee and to the internal audit department and are handled in accordance with procedures established by the Audit Committee with respect to such matters (described below). Correspondence from stockholders relating to Compensation Committee matters are referred to the Chairperson of the Compensation Committee.

 

 

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  YUM CHINA– 2018 Proxy Statement

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How do the Board and management engage with stockholders?

 

 

 

Our Board and management are committed to regular engagement with our stockholders. We reached out to our top 75 stockholders, representing over 66% of the outstanding shares of Company common stock, in summer 2022 in connection with the voluntary conversion of our secondary listing status to a primary listing status on the HKEX. In 2017,winter 2022, we contactedagain approached our top 10 stockholders, as well as top 25 stockholders that had not engaged with us in 2021 or the summer of 2022, which comprisecomprised holders of nearly 50% of the outstanding shares of Company common stock, in order to solicit their input on important governance, executive compensation, sustainability and other matters. Additionally, our directors directly engage with stockholders from time to time upon stockholders’ request. Our senior management team, including our Chief Executive Officer and Chief Financial Officer, regularly engage in meaningful dialogue with our stockholders, including through our quarterly earnings calls and

investor conferences and meetings. Our senior management team regularly reports to our Board and, as applicable, committees of our Board, regarding stockholder views.

We regularly evaluate and respond to the views voiced by our stockholders. As a resultIn response to the continuous stockholder focus on environmental, social and governance (“ESG”) matters, we discussed with our stockholders our commitment to environmental sustainability and our enhanced sustainability performance. In 2022, we set near-term science-based targets (SBTs) for 2035. We identified and assessed climate-related risks and opportunities in our operations and value chain in line with the recommendations of the Task Force on Climate-Related Financial Disclosure (“TCFD”), and released our stockholder engagement processfirst TCFD report in 2017,2022. In 2022, we also participated in the CDP Questionnaire for the second year.

In addition, beginning with the 2021 annual incentive program, ESG measures have been incorporated into the key performance indicators that are used to determine the individual performance factor for each leadership team member and we have expanded our disclosures on risk oversightthe ESG measures. See “Recent Compensation Highlights” and succession planning in this proxy statement.“2022 NEO Compensation and Performance Summary” under “Executive Compensation” for more information.

 

 

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What are the Company’s policies on reporting of concerns regarding accounting and auditing matters?

 

 

 

The Audit Committee has established policies on reporting concerns regarding accounting and auditing matters in addition to our policy on communicating with ournon-management directors. Any employee may, on a confidential or anonymous basis, submit complaints or concerns regarding accounting or auditing matters to the Chief Legal Officer of the Company through the Company’s Employee Hotline or bye-mail or regular mail. If an

employee is uncomfortable for any reason contacting the Chief Legal Officer, the employee may contact the Chairperson of the Audit Committee. The Chief Legal Officer maintains a log of all complaints or concerns, tracking their receipt, investigation and resolution and prepares a periodic summary report thereof for the Audit Committee.

 

 

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GOVERNANCE OF THE COMPANY   

What are the Committees of the Board?

 

 

The Board of Directors has standing Audit, Compensation, Nominating and Governance and Food Safety and Sustainability Committees. Set forth below is a summary of the functions of each committee, the members of each committee as of April 12, 2023 and the number of meetings each committee held in 2017.2022.

 

Audit Committee

 

Louis T. Hsieh,Chair

Peter A. Bassi, Chair

EdYiu-Cheong ChanCyril Han*

Ruby LuLouis T. Hsieh*

Zili Shao

Min (Jenny) Zhang

 

Number of meetings held in 2017: 82022: 11

  

•  Possesses sole authority regarding the selection and retention of the independent auditorauditors, subject to stockholder approval

•  Reviews and has oversight over the Company’s internal audit function

•  Reviews and approves all auditing services, internal control-related services and permittednon-audit services to be performed for the Company by the independent auditorauditors

•  Reviews the independence, qualification and performance of the independent auditorauditors

•  Reviews and discusses with management and the independent auditorauditors any major issues as to the adequacy of the Company’s internal controls, any special steps adopted in light of material control deficiencies and the adequacy of disclosures about changes in internal control over financial reporting

•  Reviews and discusses with management and the independent auditorauditors the annual audited financial statements, results of the review of the Company’s quarterly financial statements and significant financial reporting issues and judgments made in connection with the preparation of the Company’s financial statements

•  Reviews and discusses with the independent auditors any critical audit matter (“CAM”) addressed in the audit of the Company’s financial statements and the relevant financial statement accounts and disclosures that relate to each CAM

•  Reviews the Company’s accounting and financial reporting principles and practices, including any significant changes thereto

•  Advises the Board with respect to Company policies and procedures regarding compliance with applicable laws and regulations and with the Company’s Code of Conduct

•  Discusses with management the Company’s major risk exposures and the steps management has taken to monitor and control such exposures, includingexposures; and assists the Company’s risk assessmentBoard in the oversight of cybersecurity and risk management policies.other technology risks. 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?”. and “How does the Board oversee cybersecurity risk?”

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GOVERNANCE OF THE COMPANY   

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 listing standards of the NYSE. The Board has also determined that each member of the Audit Committee is financially literate within the meaning of the listing standards of the NYSE and that Mr.each of Messrs. Bassi, Han and Hsieh the Chairperson of the Committee,and Ms. Zhang is qualified as an audit committee financial expert within the meaning of SEC regulations. The Board has also determined that Mr. Hsieh 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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  YUM CHINA– 2018 Proxy StatementCompensation

Committee

 

   GOVERNANCE OF THE COMPANY

Compensation Committee

Ruby Lu, Chair

Edouard EttedguiChairJonathan S. Linen

William Wang

Min (Jenny) Zhang

 

Number of meetings

held in 2017: 72022: 8

  

•  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 corporate goals and objectives relevant to the Chief Executive Officer’s and other senior executives’ compensation and evaluates their performance in light of those goals and objectives

•  Determines and approves, either as a committee or together with the other independent Board members, the compensation level of the Chief Executive Officer and other senior executive officers based on this evaluation

•  Reviews the Company’s compensation plans, policies and programs to assess the extent to which they encourage excessive or inappropriate risk-taking or earnings manipulation

•  Reviews management succession planning and makes recommendations to the Board

The Board has determined that all of the members of the Compensation Committee are independent within the meaning of the listing standards of the NYSE.

 

Nominating and

Governance
Committee

 

Fred Hu,Chair

Jonathan S. LinenEdouard Ettedgui

Ruby Lu

Min (Jenny) Zhang

 

Number of meetings

held in 2017: 42022: 3

  

•  Identifies and proposes to the Board individuals qualified to become Board members and recommends to the Board director nominees for each committee

•  Advises the Board on matters of corporate governance

•  Reviews and reassesses from time to time the adequacy of the Company’s Corporate Governance Principles and recommends any proposed changes to the Board for approval

•  Receives comments from all directors and reports annually to the Board with assessment of the Board’s performance

•  Reviews annually and makes recommendations to the Board with respect to the compensation and benefits of directors

•  Reviews management succession planning and makes recommendations to the Board

•  Review emerging corporate governance issues and best practices

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   GOVERNANCE OF THE COMPANY

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.

 

Food Safety and

Sustainability

Committee

 

Zili Shao,Chair

Peter A. Bassi

Christian L. CampbellEdouard Ettedgui

Louis T. Hsieh*

Number of meetings

held in 2022: 3

  

•  Reviews, evaluates and advises the Board regarding the practices, procedures, strategies and initiatives to protect food safety

•  Reviews, evaluates and advises the Board regarding trends, issues and concerns which affect or could affect the Company’s food safety practices, and the risks arising therefrom, in light of the Company’s overall efforts related to food safety

•  Reviews and evaluates any corrective action taken by management to address any food safety related risks or incident, if any, and advises the Board regarding any proposed action in relation thereto

•  Reviews, evaluates and advises the Board regarding the Company’s practices, policies, procedures, strategies and initiatives relating to sustainability, including environmental, supply chain and food nutrition and health

•  Reviews and evaluates the trends, issues and concerns which affect or could affect the Company’s sustainability practices, policies, procedures, strategies and initiatives

•  Reviews and oversees the development and implementation of the goals the Company may establish from time to time with respect to its sustainability initiatives

•  Oversees the reporting and communication with stakeholders with respect to sustainability

The Food Safety Committee was established in December 2017* At the Annual Meeting, Messrs. Han and didHsieh are stepping down from the Board and its committees and are not hold any meetings in 2017.standing for re-election.

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GOVERNANCE OF THE COMPANY   

What are the Company’s policies and procedures with respect to related person transactions?

 

 

 

Under the Company’s Related Person Transaction Policies and Procedures, the Audit Committee reviews the material facts of all related person transactions that require the Audit Committee’s approval and either approves or disapproves of the entry into the related person transaction. In determining whether to approve or ratify a related person transaction, the Audit Committee will determine whether such transaction is in, or not opposed to, the best interest of the Company and will take into account, among other factors it deems appropriate, whether such transaction is on terms no less favorable to the Company than terms generally available to an unaffiliated third party under the same or similar circumstances and the extent of the related person’s interest in the transaction. Transactions, arrangements or relationships or any series of similar transactions, arrangements or relationships in which (i) a related person has or will have a direct or indirect material interest, (ii) the Company is a participant and (iii) that exceed $120,000 in any calendar year are subject

to the Audit Committee’s review. Any director who is a related person with respect to a transaction under review may not participate in any discussion or approval of the transaction, except that the director will provide all material information concerning the transaction to the Audit Committee.

Related persons are directors, director nominees, executive officers, beneficial owners of 5% or more of the outstanding shares of Company common stock and their immediate family members. An immediate family member includes a person’s children, stepchildren, parents, stepparents, spouse, siblings, mothers- andfathers-in-law, sons- anddaughters-in-law, and brothers- andsisters-in-law and anyone sharing such person’s household (other than a tenant or employee).

After its review, the Audit Committee may approve or ratify the transaction. The policies and procedures provide

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GOVERNANCE OF THE COMPANY   

that certain transactions are deemed to bepre-approved even if they will exceed $120,000. 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 consolidatedcon-

solidated gross revenues and the related person is not an executive officer of the other company.

Other than as described below, thereThere were no transactions considered to be a related person transaction from January 1, 20172022 through the date of this proxy statement.

In connection with thespin-off, on September 1, 2016, YUM and the Company entered into investment agreements with each of Pollos Investment L.P., an affiliate of Primavera Capital Group (“Primavera”), and API (Hong Kong) Investment Limited, an affiliate of Zhejiang Ant Small and Micro Financial Services Group Co., Ltd. (“Ant Financial” and, together with Primavera, the “Investors”). Pursuant to the investment agreements, on November 1, 2016, Primavera and Ant Financial collectively invested $460 million (the “Investment”) in the Company in exchange for: (i) shares of the Company’s common stock representing in the aggregate 4.8% of the Company’s common stock issued and outstanding immediately following thespin-off, after giving effect to the post-closing adjustment as discussed below and (ii) two tranches of warrants (the “Warrants”), exercisable by the Investors for an approximate additional 3.9% ownership, in the aggregate, of the Company’s common stock issued and outstanding after thespin-off, taking into account the shares previously issued to the Investors. In connection with and at the closing of the Investment, on November 1, 2016, the Company and the Investors entered into a shareholders agreement, relating to rights and obligations of the Investors as holders of Company common stock and Warrants. Pursuant to the terms of the shareholders agreement, Primavera identified two director designees, Dr. Hu and Mr. Wang. In addition, Ant Financial designated onenon-voting Board observer.

On January 9, 2017, following the expiration of the post-closing measurement period specified in the investment agreements, the Company repurchased from the Investors a portion of the previously-issued shares of Company

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  YUM CHINA– 2018 Proxy Statement

   GOVERNANCE OF THE COMPANY

common stock at par value. In addition, the Company issued the Warrants to the Investors. These transactions were completed pursuant to the terms of the investment

agreements entered into prior to thespin-off and were, accordingly, approved by the board of directors of YUM.

 

 

Does the Company require stock ownership by directors?

 

 

 

The Board believes that the number of shares of Company common stock owned by each director is a personal decision. However, the Board strongly supports the position that directors should own a meaningful number of shares of Company common stock and expects that a director will not sell any shares received as director compensation until at least 12 months following the director’s retirement or departure from the Board.

The Company’snon-employee directors receive a significant portion of their annual compensation in shares of Company common 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 stockholders.

 

 

Does the Company require stock ownership by executive officers?

 

 

 

The Board has adopted Stock Ownership Guidelines, which require executive officers to own a substantial amount of Company common stock in order to promote

an ownership mentality among management and align

their interests with those of stockholders. See “Executive Compensation—Compensation Policies—Stock Ownership Guidelines”Guidelines and Retention Policy” for more information.

 

 

How many shares of Company common stock do the directors and executive officers own?

 

 

Stock ownership information for our directors and executive officers is shown under “Stock Ownership Information.”

Does the Company have a policy on hedging or other speculative trading in Company common stock?

 

 

Directors, and executive officers and certain other designated employees are prohibited from speculative trading in Company common stock, including trading in puts, calls or other hedging or monetization transactions.

How are directors compensated?

 

 

Employee directors do not receive additional compensation for serving on the Board of Directors. The annual compensation for each director who is not an employee of

the Company is discussed under “2017“2022 Director Compensation.”

 

YUM CHINA– 2018 Proxy Statement24   

  21  YUM CHINA– 2023 Proxy Statement

 

 MATTERS REQUIRING STOCKHOLDER ACTION

 

ITEM 1.    Election of Directors

 

 

 

Our Board currently consists of 12 directors divided into three classes of equal size. The directors designated as Class I and Class III directors have terms expiring atWho are the 2019 annual meetingdirector nominees?

Each of the Company’s stockholders. The directors designateddirector nominees, other than Christina Xiaojing Zhu, currently serves as Class II directors have terms expiringa director of the Company. Christina Xiaojing Zhu is being nominated as a director for election at the Annual Meeting following a search process undertaken by the Nominating and if elected, will serveGovernance Committee, as described above under “Governance of the Company—How are director nominees selected?”

Each nominee has been nominated by the Board for election at the Annual Meeting to hold office for aone-year term. Beginning at the 2019 annual meeting of the Company’s stockholders, each of our directors will stand for election each year for aone-year term, and our Board will therefore no longer be divided into three classes.

Who are the Class II director nominees?

The Board has selected Louis T. Hsieh, Jonathan S. Linen, Muktesh “Micky” Pant and William Wang for election as Class II director nominees. None of the Class II nominees has been elected by our public stockholders. If elected, the nominees will serve as directors and hold office until the 20192024 annual meeting of the Company’s stockholders and until their respective successors have been duly elected and qualified or until their earlier death, resignation or removal.

The biographies of each of the nominees for Class II directors and the continuing Class I and Class III directors below contain information regarding the person’s service as a director, business experience, 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 Nomi-

natingNominating 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 below 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 the Company and our Board.

There are no family relationships among any of the directors, director nominees and executive officers of the Company. Director agesAges are as of March 13, 2018.April 12, 2023.

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.

The Board of Directors recommends that you vote FOR the election of the four Class IInine director nominees.

 

 

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  YUM CHINA– 2018 Proxy Statement  25

 

 

 

MATTERS REQUIRING STOCKHOLDER ACTION

 

    

 

Director Nominees for Class II Directors Whose Terms, if Elected, Will Expire in 2019

 

LOGOLOGO

 

 

Louis T. HsiehFred Hu

Age 5359

Director Since 2016

 

Louis T. HsiehFred Huhas served as the Chief Financial Officerchairman and founder of NextEV (NIO Inc.),Primavera, a developer of electric, autonomous vehicles,China-based global investment firm, since May 2017. Mr. Hsieh also has served as a Senior Adviser to the Chief Executive Officer since 2016 and as a director since 2007 of New Oriental Education & Technology Group, a provider of private educational servicesits inception in China.2011. Prior to his current role, Mr. HsiehPrimavera, Dr. Hu served in various roles at Goldman Sachs from 1997 to 2010, including as that company’s Chief Financial Officer from 2005partner and chairman of Greater China at Goldman Sachs Group, Inc. From 1991 to 2015 and President from 2009 to 2016. In addition, Mr. Hsieh serves as an independent director, member of the corporate governance committee and Chairman of the audit committee for JD.com, Inc. Previously, Mr. Hsieh1996, he served as an independent director and Chairman ofeconomist at the audit committee for Nord Anglia Education, Inc. He also served as an independent director, member of the corporate governance committee and Chairman of the audit committee for Perfect World Co., Ltd. and China Digital TV Holding Co., Ltd. Mr. Hsieh brings to our Board corporate leadership and public company board experience as well as his extensive financial and international business experience.

LOGO

Jonathan S. Linen

Age 74

Director Since 2016

Jonathan S. Linenhas beenInternational Monetary Fund (IMF) in Washington D.C. Dr. Hu currently is a member of the board of directors of ModernIndustrial and Commercial Bank N.A. since 2005. Mr. Linenof China Limited, a company listed on both the Hong Kong Stock Exchange (stock code: 1398) and the Shanghai Stock Exchange (SHA: 601398), and UBS Group AG, a company listed on both the SIX Swiss Stock Exchange (SIX: UBSG) and the New York Stock Exchange (NYSE: UBS). From May 2011 to May 2018, Dr. Hu served as advisoran independent non-executive director of Hang Seng Bank Limited, a company listed on the Hong Kong Stock Exchange (stock code: 0011). From November 2014 to the Chairman of American Express Company, a financial services company, from January 2006 to July 2016. Prior to his role as advisor to the Chairman, Mr. LinenApril 2021, he served as the Vice Chairmanan independent non-executive director of American Express Company since August 1993. Mr. Linen servedHong Kong Exchanges and Clearing Limited, a company listed on the boardHong Kong Stock Exchange (stock code: 0388). From August 2020 to March 2022, he served as an independent non-executive director for Ant Group. Dr. Hu serves as a co-director of directors of YUMthe National Center for Economic Research and a professor at Tsinghua University. Dr. Hu obtained his doctoral degree in economics from 2005 to 2016 and of The Intercontinental Hotels Group from 2005 to 2015. In addition, Mr. Linen is a former director of Bausch & Lomb. Mr. LinenHarvard University. Dr. Hu brings to our Board operating and management experience,extensive expertise in finance, marketinginternational affairs and internationalthe Chinese economy. In addition, Dr. Hu brings valuable business, strategic development and public company boardcorporate leadership experience as well as expertise in economics, finance and committee experience.global capital markets.

 

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MATTERS REQUIRING STOCKHOLDER ACTION   

LOGOLOGO

 

 

Micky PantJoey Wat

Age 63

Director Since 2016

Micky Panthas served as the Vice Chairman of the Board and Senior Advisor to the Company since March 2018. Mr. Pant served as the Chief Executive Officer of the Company from October 2016 to February 2018. He also served as the Chief Executive Officer of the YUM China Division of YUM from August 2015 to October 2016. Commencing in 2006, Mr. Pant held a number of leadership positions at YUM, including the Chief Executive Officer of the KFC Division, CEO of YRI, President of Global Branding for YUM, President of YRI, Chief Marketing Officer of YUM, Global Chief Concept Officer for YUM and President of Taco Bell International. Before joining YUM, Mr. Pant built a foundation in marketing and international business with 15 years at Unilever in India and the U.K. and worked at PepsiCo, Inc. and Reebok International Limited. Since December 2014, Mr. Pant has served as an independent director on the board of Pinnacle Foods, Inc., where he also serves on the audit committee and the nominating and governance committee. Mr. Pant brings to our Board his vast knowledge of KFC and Pizza Hut best practices from around the globe and strategic, brand building expertise. In addition, Mr. Pant brings to our Board his corporate leadership knowledge and public company board experience.

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William Wang

Age 4351

Director Since 2017

 

William Wang is one of the founding partners of Primavera Capital Group, a China-based global investment firm (“Primavera”). Prior to Primavera, Mr. WangJoey Wat has served as a Managing Director of Goldman Sachs Merchant Banking/Principal Investment Area (“GS”), where he led significant successful investments in China for the group. Prior to GS, Mr. Wang worked in Investment Banking Division and Private Equity Group of China International Capital Corporation Limited (CICC). Mr. Wang currently serves as a director on the board of Geely Automobile Holdings Limited, a Hong Kong listed company, in addition to directorships at Primavera’s portfolio companies. Mr. Wang brings to our Board deep knowledge and investment insights of the Chinese market.

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Continuing Class I Directors Whose Terms Will Expire in 2019

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Peter A. Bassi

Age 68

Director Since 2016

Peter A. Bassiserved as Chairman of Yum! Restaurants International (“YRI”) from 2003 to 2005 and as its President from 1997 to 2003. Prior to that position, Mr. Bassi spent 25 years in a wide range of financial and general management positions at PepsiCo, Inc., Pepsi-Cola International, Pizza Hut (U.S. and International), Frito-Lay and Taco Bell. Mr. Bassi currently serves as lead director and Chairman of the nominating and governance committee of BJ’s Restaurant, where he also serves on the audit committee and compensation committee, and as the Chairman of the board and the Chairman of the nominating and governance committee of Potbelly Sandwich Works. He has been a member of each board of directors since 2004 and 2009, respectively. In addition, Mr. Bassi serves on the Value Optimization Board for the private equity firm Mekong Capital, based in Vietnam. Mr. Bassi served on the board of The Pep Boys—Manny, Moe & Jack from 2002 to 2009, and served on the board of Amrest Holdings (Poland) from 2012 to 2015. Mr. Bassi brings to our Board knowledge of the quick-service restaurant industry and global franchising. In addition, he brings to our Board extensive public company board and corporate governance experience.

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Ed Yiu-Cheong Chan

Age 55

Director Since 2016

Ed Yiu-Cheong Chanserved as Vice Chairman of Charoen Pokphand Group Company Limited and as an Executive Director and Vice Chairman of C.P. Lotus Corporation from 2012 to February 2018. Mr. Chan was Regional Director of North Asia of the Dairy Farm Group and a director of Dairy Farm Management Services Limited from November 2001 to November 2006. Mr. Chan was the Presidentour Company since July 2017 and Chief Executive Officer of Walmart China from November 2006 to October 2011. Mr. Chan is a non-executive director of Treasury Wine Estates Limited, a company listed on the Australian Securities Exchange, and an independent non-executive director of Link Real Estate Investment Trust, which is listed on the Stock Exchange of Hong Kong Limited. Mr. Chan brings to our Board knowledge of the food and beverage industry in Asia and extensive public company board and corporate governance experience.

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Edouard Ettedgui

Age 66

Director Since 2016

Edouard Ettedguihas served as the non-executive Chairman of Alliance Française, Hong Kong since 2016. He also serves as a non-executive director of Mandarin Oriental International Limited, the company for which he was the Group Chief Executive from 1998 to 2016. Prior to his time at Mandarin Oriental International, Mr. Ettedgui was the Chief Financial Officer for Dairy Farm International Holdings, and he served in various roles for British American Tobacco, including Business Development Director, Group Finance Controller and Group Head of Finance. Mr. Ettedgui has also held senior finance positions in seven countries at Philips International. Mr. Ettedgui brings to our Board senior management experience in various international consumer-product industries, extensive financial expertise and public company board experience.

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Joey Wat

Age 46

Director Since 2017

Joey Wat has served as the Chief Executive Officer of theour Company since March 2018. Ms. WatShe served as our President and Chief Operating Officer of Yum China from February 2017 to February 2018 and the Chief Executive Officer, KFC from October 2016 to February 2017, a position she held at Yum! Restaurants China, from August 2015 to October 2016. Ms. Wat joined Yum! Restaurants China in September 2014 as President of KFC China and was promoted to Chief Executive Officer for KFC China in August 2015. Before joining YUM, Ms. Wat served in both management and strategy positions at ASA.S. Watson of Hutchison Group (“Watson”), an international health, beauty and lifestyle retailer, in the U.K. from 2004 to 2014. Her last position at Watson was Managing Directormanaging director of Watson Health & Beauty U.K., which operates Superdrug and Savers, two retail chains specializing in the sale of pharmacy and health and beauty products, from 2012 to 2014. She made the transition from Headhead of Strategystrategy of Watson in Europe to Managing Directormanaging director of Savers in 2007. Before joining Watson, Ms. Wat spent seven years in management consulting including with McKinsey & Company’s Hong Kong office from 2000 to 2003. Ms. Wat obtained a master of management degree from Kellogg School of Management at Northwestern University in 2000. Ms. Wat brings to our Board extensive knowledge of the Company’s business and her industry acumen acquired in the course of a career that included several leadership roles in retail companies.

 

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Christian L. CampbellPeter A. Bassi

Age 6773

Director Since 2016

 

Christian L. Campbellowns Christian L. Campbell Consulting LLC, which specializesPeter A. Bassi served as Chairman of Yum! Restaurants International from 2003 to 2005 and as its President from 1997 to 2003. Prior to that position, Mr. Bassi spent 25 years in global corporatea wide range of financial and general management positions at PepsiCo, Inc., Pepsi-Cola International, Pizza Hut (U.S. and International), Frito-Lay and Taco Bell. Mr. Bassi currently serves as lead independent director and chairman of the governance and compliance,nominating committee of BJ’s Restaurant, Inc. (NASDAQ: BJRI), where he also serves on the audit committee and hecompensation committee. He has served asbeen a member of the ownerboard of that entityBJ’s Restaurant, Inc. since February 2016.2004. From January 2009 to May 2019, Mr. Campbell previously served as Senior Vice President, General Counsel and SecretaryBassi held various positions on the board of YUM from its formation in 1997 until his retirement in February 2016. In 2001,Potbelly Corporation (NASDAQ: PBPB). From June 2015 to December 2018, Mr. Campbell’s role was expanded to include Chief Franchise Policy Officer. In these positions, Mr. Campbell oversaw all legal matters at YUM and was responsible for the oversight of YUM purchasing as a director of YUM’s purchasing cooperative with its franchisees. Prior to joining YUM, Mr. Campbell was a Senior Vice President and General Counsel at Owens Corning, a leading global producer of fiberglass insulation and composite building materials. Prior to Owens Corning, he was Vice President and General Counsel for Nalco Chemical Company. In addition, Mr. Campbell was a founding director of Restaurant Supply Chain Solutions, Inc. (“RSCS”), a purchasing cooperative for YUM’s U.S. franchising partners, and heBassi served on RSCS’sthe value optimization board for Mekong Capital Partners, a private equity firm based in Vietnam. He also served on the board of directorssupervisors of AmRest Holdings SE (WSE: EAT) from its formation2013 to 2015, and served on the board of the Pep Boys—Manny, Moe & Jack from 2002 to 2009. Mr. Bassi received his master’s degree of business administration (MBA) from the University of Rhode Island in 2001 until 2015. Mr. Campbell1972. He brings to our Board expertise in corporate governance and corporate compliance of publicly traded companies. In addition, Mr. Campbell brings to our Board extensive knowledge of the quick-service restaurant industry and global franchising, as well as financial expertise and extensive public company board and corporate leadership.governance experience.

 

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Fred HuEdouard Ettedgui

Age 5471

Director Since 2016

 

Fred Huis Chairman and founder of Primavera. Dr. HuEdouard Ettedgui has served as Chairmanthe non-executive chairman of PrimaveraAlliance Française, Hong Kong since its inception in 2010.2016. He also served as a non-executive director of Mandarin Oriental International Limited from April 2016 to May 2020, the company for which he was the group chief executive from 1998 to 2016. Prior to Primavera, Dr. Huhis time at Mandarin Oriental International, Mr. Ettedgui was the chief financial officer for Dairy Farm International Holdings, and he served in various roles at Goldman Sachs from 1997 to 2010,for British American Tobacco (“BAT”), including serving as Chairmanthe business development director, group finance controller and group head of Greater China at Goldman Sachs Group, Inc.finance. From 19911990 to 1996, Dr. Hu servedhe spent around six years with BAT Industries PLC in London, initially as an economist at the International Monetary Fund (IMF) in Washington D.C., where he engaged in macroeconomic research, policy consultations and technical assistance for member country governments including China. Dr. Hu also served as directorhead of the National Center for Economic Research and professor at Tsinghua University. He is the author of several books and other publications in the areas of economics and finance and on Chinalater as the group finance controller and Asian economies. Dr. Hu has advised the Chinese government on financial and pension reform, state-owned enterprise (SOE) restructuring and macroeconomic policies. Dr. Hu is a trustee of China Medical Board and the Co-Chairman of the Nature Conservatory’s Asia Pacific Council. Dr. Hudirector for new business development. Mr. Ettedgui graduated from ESSEC Business School (France) in 1975. He brings to our Board senior management experience in various international consumer-product industries, extensive financial expertise in international affairs and the Chinese economy. In addition, Dr. Hu brings valuable business, strategic development and corporate leadership experience as well as expertise in economics, finance and global capital markets.public company board experience.

 

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Ruby Lu

Age 4752

Director Since 2016

 

Ruby Luis an independenta venture capitalist investing in technology start-ups in the U.S. and China. Ms. Lu founded Atypical Ventures, an early-stage technology venture investment firm, in 2019. In 2006, sheco-founded DCM China, an early-stagea venture capital firm. During her more than 12-year tenure at DCM, she invested in, and served as a board member for, many leading technology companies, including BitAuto Holdings Limited,E-Commerce Ecommerce China Dangdang Inc. and Pactera Technology International Ltd. Prior to joining DCM in 2003, Ms. Lu was a vice president in the investment banking group of technology, media and telecommunications at Goldman Sachs & Co. in Menlo Park, California. She is currently an independent director on the boards of Unilever (NYSE: UL) and Uxin Limited (NASDAQ: UXIN). She also served as an independent director and on the audit committee of iKang Healthcare Group, Inc. and as an independent director and Chairman of the special committee for iDreamSky Technologies Limited before it wasthese two companies were taken private. She is currentlyprivate, as well as an independent director on the board of iKang Healthcare Group, Inc., where she also serves on the audit committee. Prior to joining DCM in 2003,Blue City Holdings Limited (NASDAQ: BLCT). Ms. Lu was a Vice Presidentobtained her master of arts from Johns Hopkins University in the technology, media and telecommunications investment banking group of Goldman Sachs & Co. in Menlo Park, California. Ms. Lu1996. She brings to our Board public company board experience as well as extensive financial and global market experience.

 

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Zili Shao

Age 5863

Director Since 2016

 

Zili Shaohas is the founder and chairman of MountVue Capital Management Co. Ltd. Mr. Shao also serves as an independent non-executive director of Bank of Montreal (China) Co., Ltd. and an independent member of the general and supervisory board of EDP – Energias de Portugal, S.A., a multinational energy company listed on the Euronext Lisbon Stock Exchange (stock code: EDP).Mr. Shao also served as the non-executive Chairman of Fangda Partners, a leading PRC law firm, since June 2017. Mr. Shao served as Co-Chairmanco-chairman and Partnerpartner at King & Wood Mallesons China a law firm, from April 2015 to May 2017. From 20092010 to 2015, Mr. Shao held various positions with JPMorganat JP Morgan Chase & Co. (“JP Morgan”), a financial services company, including Chairmanroles such as chairman and Chief Executive Officerchief executive officer of JPMorganJP Morgan China Vice Chairmanand vice chairman of JPMorganJP Morgan Asia Pacific and Chairman of JPMorgan Chase Bank (China) Company Limited.Pacific. Prior to JPMorgan,JP Morgan, he was a partner withat Linklaters LLP, a globalleading international law firm.firm, for 12 years. He held positionsacted as Greater China managing partner and managing partner of Linklaters of Greater China and subsequently was appointed managing partner of the Asia Pacific.Pacific region. Mr. Shao is currently a director onobtained his master’s degree in law from the boardUniversity of Elife Holdings Limited, a Hong Kong listed company, and a member of the audit committee of Bank of Montreal (China) Co., Ltd.Melbourne in 1994. Mr. Shao brings to our Board extensive professional experience in Asia and public company board and corporate governance experience.

 

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William Wang

Age 48

Director Since 2017

William Wang is one of the founding partners of Primavera. Prior to Primavera, Mr. Wang served as a managing director of Goldman Sachs Merchant Banking/Principal Investment Area, where he led significant successful investments in China for the group. Prior to that, Mr. Wang worked in the investment banking division and private equity group of China International Capital Corporation Limited. Mr. Wang currently serves as a director on the board of Geely Automobile Holdings Limited, a company listed on the Hong Kong Stock Exchange (stock code: 0175), and Sunlands Technology Group, a company listed on the New York Stock Exchange (NYSE: STG), in addition to directorships at Primavera’s portfolio companies. Mr. Wang obtained a master of management degree in management science and engineering from Shanghai Jiao Tong University in 2000. He brings to our Board deep knowledge and investment insights of the Chinese market.

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Min (Jenny) Zhang

Age 49

Director Since 2021

Min (Jenny) Zhang held various leadership positions in Huazhu Group Limited, a multi-brand hotel group listed on both the Nasdaq Stock Market (NASDAQ: HTHT) and the Hong Kong Stock Exchange (stock code: 1179) from September 2007 to August 2021, including as vice-chairlady from July 2020 to August 2021, executive vice-chairlady from November 2019 to July 2020, chief executive officer from May 2015 to November 2019, president from January 2015 to May 2015, chief financial officer from March 2008 to May 2015, chief strategic officer from November 2013 to January 2015 and senior vice president of finance from September 2007 to February 2008. Ms. Zhang served as an independent director of LAIX Inc., an artificial intelligence company listed on the New York Stock Exchange (NYSE: LAIX), from May 2020 to October 2022. She served as an independent non-executive director of Genscript Biotech Corporation, a company listed on the Hong Kong Stock Exchange (stock code: 1548), from August 2015 to November 2018, and an independent director of OneSmart Education Group Limited, a company listed on the New York Stock Exchange (NYSE: ONE), from March 2018 to February 2020. Ms. Zhang received a master of business administration degree from Harvard Business School in 2003. Ms. Zhang brings to our Board leadership experience in a consumer-focused industry in China, extensive financial expertise and public company board experience.

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Christina Xiaojing Zhu

Age 50

Christina Xiaojing Zhu is the president and chief executive officer of Walmart China. Prior to joining Walmart Group in May 2020, Ms. Zhu served as the president of Fonterra Greater China, a global dairy exporter and milk processor, where she led Fonterra group’s businesses in mainland China, Hong Kong and Taiwan region, from August 2016 to December 2019, and served as a managing director and vice president from September 2011 to July 2016. Prior to joining Fonterra, Ms. Zhu served as a vice president of Honeywell International Inc., a NYSE-listed technology company, where she was responsible for strategy and development, from January 2005 to May 2008, and served as director for strategy and business development from February 2003 to January 2005. Prior to that, Ms. Zhu worked as an engagement manager of McKinsey & Company with a focus on serving financial institutions from 1999 to 2003. Ms. Zhu currently serves as a director of Dada Nexus Limited (NASDAQ: DADA), a platform of local on-demand retail and delivery in China listed on the Nasdaq Global Select Market. Ms. Zhu also serves as a non-voting observer of JD.com, Inc., an e-commerce company that is listed on the Nasdaq Stock Market (NASDAQ: JD) and the Hong Kong Stock Exchange (stock code: 9618). Ms. Zhu received a bachelor’s degree in western studies from Beijing Foreign Studies University and an MBA from Columbia Business School. Ms. Zhu will bring to our Board leadership, operational and digital experience in a customer-centric industry in China.

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ITEM 2.    Approval and Ratification of Independent AuditorAuditors

 

 

 

What am I voting on?

We are asking stockholders to approve a proposal toand ratify the appointment of KPMG Huazhen LLP (“and KPMG”) as our independent auditors for U.S. financial reporting and Hong Kong financial reporting purposes, respectively, for the year 2023. KPMG Huazhen LLP has served as our independent auditor for 2018.since 2016. KPMG has served as our independent auditor since 2016.2020 after our listing on the Hong Kong Stock Exchange (KPMG Huazhen LLP and KPMG shall hereafter collectively referred as “KPMG”).

As part of its audit engagement process, the Audit Committee considers on at least an annual basis the engagement of the independent auditor.auditors. In deciding to engage KPMG as the independent auditorauditors for 2018,2023, the Audit Committee considered:

 

KPMG’s performance in 2017;

•

KPMG’s performance in 2022;

 

KPMG’s independence;

•

KPMG’s independence;

 

The depth and expertise of the KPMG’s audit team, including its understanding of the Company’s industry, business, operations and systems, as well as accounting policies and processes;

•

The depth and expertise of the KPMG’s audit teams, including their understanding of the Company’s industry, business, operations and systems, as well as accounting policies and processes;

 

The appropriateness of KPMG’s fees;

•

The appropriateness of KPMG’s fees;

 

•

A consideration of KPMG’s known legal risks and significant proceedings that may impair its ability to perform the audit; and

A consideration of KPMG’s known legal risks and significant proceedings that may impair its ability to perform the audit; and

KPMG’s tenure as the Company’s independent auditor.

•

KPMG’s tenure as the Company’s independent auditors.

KPMG rotates its lead audit engagement partner every five years. The Audit Committee is directly involved in the evaluation of the lead audit engagement partner to ensure that the he or she is appropriately qualified to lead the Company’s audit. After considering the criteria set forth above, the Audit Committee believes that retaining KPMG as the Company’s independent auditorauditors is in the best interests of the Company and its stockholders.

Will a representative of KPMG be present atattend the Annual Meeting?

Representatives of KPMG will be present atattend the Annual Meeting, will have the opportunity to make a statement if

they desire and will be available to respond to appropriate questions from stockholders.

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. In the event this proposal is not approved, the Audit Committee will reconsider the selection of KPMG as the Company’s independent auditors.

The Audit Committee and the Board of Directors recommend that you vote FOR approval of this proposal.

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What were KPMG’s fees for audit and other services for 20172022 and 2016?2021?

The following table presents fees for professional services rendered by KPMG for the audit of the Company’s annual financial statements, and fees billed for audit-related services, tax services and all other services rendered by KPMG for 20172022 and 2016.2021. All KPMG services for 20172022 and 20162021 were approved in advance by the Audit Committee (or, prior to thespin-off, YUM’s audit committee) specifically or pursuant to procedures similar to those outlined below.

 

   2017    2016  2022    2021 

Audit fees(1)

  $    3,039,981   $    3,922,978   $    2,856,814   $    3,085,148 

Audit-related fees(2)

   25,434    23,532    39,858    10,741 

Tax fees(3)

   16,547    16,157    30,603    37,766 

All other fees

   —    —    —    — 
  

 

 

 

 

 

 

TOTAL FEES

TOTAL FEES

TOTAL FEES

TOTAL FEES

  $3,081,962   $3,962,667   $2,927,275   $3,133,655 
  

 

 

 

 

 

 

 

(1)

Audit fees include fees for the audit of the annual consolidated financial statements, included in the Company’s annual reports, reviews of the interim condensed consolidated financial statements, included in the Company’s quarterly reports, and services related to statutory filings or engagements. Audit fees in 2016 also includes fees for the audits of the combined financial statements of the Company for the three years ended December 31, 2015 and the interim review services rendered in connection with the Form 10 filed with the SEC and

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other services rendered in connection with thespin-off, which were paid by YUM.

 

(2)

Audit-related fees include auditsconsist principally of financial statements offees for the attestation services related to certain employee benefit plans agreed upon procedures and other attestations.key data as defined in the sustainability report of the Company.

 

(3)

Tax fees consist principally of fees for tax filling assistance and tax advisory 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 auditor.auditors. Under the policy, the Audit Committee may approve engagements on acase-by-case basis orpre-approve engagements on a categorical basis 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 Chairperson.

In consideringpre-approvals, the Audit Committee considers the nature, scope and fees of the service to be provided to the Company as well as the principles and guidance established by the SEC and the Public Company Accounting Oversight Board (“PCAOB”) with respect to auditor independence. Services as to which a generalpre-approval has been granted on an annual basis are effective for the applicable year. Any proposed service for which the estimated fees would cause the total fees for that class of service to exceed the applicable estimated fee threshold requires specific approval by the Audit Committee or its delegate.

The Principal Accounting Officer monitors the performance of all services provided by the independent auditorauditors and determines whether such services are in compliance with this policy. The Principal Accounting Officer reports periodically to the Audit Committee with respect to compliance with this policy and the status of outstanding engagements, including actual services provided by the independent auditorauditors and associated fees, and must promptly report to the Chairperson of the Audit Committee anynon-compliance (or attemptednon-compliance) with this policy of which the Corporate ControllerPrincipal Accounting Officer becomes aware.

 

 

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ITEM 3.    Advisory Vote on Named Executive Officer Compensation

 

 

 

What am I voting on?

In accordance with SEC rules, we are asking stockholders to approve, on anon-binding basis, the compensation of the Company’s named executive officers as disclosed in this proxy statement. Thisnon-binding advisory vote is also known as the “Say on Pay” vote. This is not a vote on the Company’s general compensation policies or the compensation of the Board. At the 20172022 annual meeting of the Company’s stockholders, approximately 96%89% of the votes cast by our stockholders were voted in approval of the compensation of our named executive officers as disclosed in the 20172022 proxy statement.

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 stockholder returns. This approach has made our management team a key driver in the Company’s strong performance over both the long and short term. We believe that our compensation program has attracted and retained strong leaders, and is closely aligned with the interests of our stockholders.

In deciding how to vote on this proposal, we urge you to read the Compensation Discussion and Analysis section of this proxy statement, which discusses in detail how our

compensation policies and procedures operate and are

designed to meet our compensation goals and how our Compensation Committee makes compensation decisions under our programs.

Accordingly, we ask our stockholders to vote in favor of the following resolution at the Annual Meeting:

“RESOLVED, that the compensation paid to the named executive officers, as disclosed in the Compensation Discussion and Analysis, the compensation tables and related materials included in the proxy statement, is hereby approved.”

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 Compensation Committee will review the voting results and consider stockholder concerns in theirits continuing evaluation of the Company’s compensation program.

What is the recommendation of the Board of Directors?

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

 

 

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ITEM 4.    Advisory Vote on the Frequency of the Advisory Vote on Named Executive Officer Compensation

What am I voting on?

In accordance with SEC rules, we are asking stockholders to determine, on a non-binding basis, whether the Say on Pay vote should occur every year, every two years or every three years. This non-binding advisory vote is also known as the “Say When on Pay” vote.

The Board believes that continuing to conduct an advisory Say on Pay vote every year is the best approach for the Company. This frequency will enable our stockholders to provide timely feedback on our executive compensation program based on the most recent information presented in our proxy statement.

What vote is required to approve this proposal?

Stockholders are not voting to approve or disapprove of the Board’s recommendation to hold the Say on Pay Vote

every year. Instead, stockholders may cast their vote in one of four manners with respect to this proposal: (1) one year; (2) two years; (3) three years; or (4) abstaining from voting on the proposal. The frequency with the most votes cast shall be the desired frequency of the stockholders of the Company. Although the vote is non-binding, we value continuing and constructive feedback from our stockholders on compensation and other important matters. The Board of Directors and the Compensation Committee will take into consideration the voting results when determining how often the Say on Pay vote should occur.

The Board of Directors recommends that you vote for “1 YEAR” as the frequency which the non-binding advisory vote to approve named executive officer compensation should be held.

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ITEM 5.    Authorization to Issue Shares up to 20% of Outstanding Shares

Prior to the voluntary conversion of our secondary listing status to a primary listing status on the HKEX, the Board’s authority included the ability to issue shares. Such authority is generally on par with other NYSE-listed U.S. companies. However, under the Hong Kong Listing Rules, a primary-listed company must have authority from its stockholders to issue any shares, including shares that are part of the company’s authorized but unissued share capital, unless they are offered to existing stockholders pro-rata to their existing holdings. Approval of this proposal will permit the Board the authority to authorize the Company to issue shares in compliance with the Hong Kong Listing Rules to the same extent already authorized under our Amended and Restated Certificate of Incorporation and the rules of the NYSE. We are not asking stockholders to approve an increase in our authorized share capital.

In light of the dynamics of the China market in which it operates, the Company has always believed in maintaining a strong balance sheet and maximum financial flexibility. This authority will enable the Company to address business contingencies and capture growth opportunities, in accordance with its long-term strategic goals, in a timely manner. Consistent with its past practice, the Board will authorize future issuances of securities only if it determines that such issuances are in the best interests of the Company and its stockholders. The Board has no immediate plans to issue any shares pursuant to this authorization and we are not asking stockholders to approve a specific issuance of shares.

Furthermore, the Company does not intend to issue any shares under this authority at a discount of more than 10% to the “benchmarked price” (as described in Rule 13.36(5) of the Hong Kong Listing Rules), which is more restrictive than the maximum discount of 20% permitted under the Hong Kong Listing Rules.

Granting the Board this authority is an annual, routine matter for primary-listed companies on the Hong Kong Stock Exchange. In accordance with the Hong Kong List-

ing Rules, it is a customary practice for primary-listed companies on the Hong Kong Stock Exchange to seek stockholder authority to issue up to 20% of a company’s outstanding shares and for such authority to be effective until the next annual meeting of stockholders, unless otherwise earlier revoked or modified by a duly adopted resolution of the stockholders. June 25, 2024 is the 13-month anniversary of the Annual Meeting and reflects the end date of the authorization, after which the authorization cannot extend. Therefore, consistent with this market practice, and as allowed under the Hong Kong Listing Rules, we are seeking approval for continuing authority for the Board to authorize the Company to issue common stock or securities convertible into common stock up to a maximum of 20% of our outstanding shares as of the date of the Annual Meeting, for a period from the Annual Meeting until the earlier of the 2024 annual meeting of stockholders or June 25, 2024. We expect to propose a renewal of this authorization annually. Pursuant to this proposal, assuming for illustrative purposes that our outstanding shares remain unchanged from March 27, 2023 to the date of the Annual Meeting, the Company will be allowed to issue a maximum of 83,649,497 shares of common stock.

Accordingly, we ask our stockholders to vote in favor of the following resolution at the Annual Meeting:

“RESOLVED, to approve the Board’s continuing authority to approve the Company’s issuance of shares of its common stock or securities convertible into common stock in an amount not to exceed 20% of the total number of outstanding shares of common stock of the Company as of the date of the Annual Meeting, effective from date of the Annual Meeting until the earlier of the date the next annual meeting is held or June 25, 2024.”

For clarity, this authority will include the authority to issue securities convertible into shares of common stock, or options, warrants or similar rights to subscribe for shares of common stock or such convertible securities of the Company and to make or grant offers, agreements

YUM CHINA – 2023 Proxy Statement

  35

MATTERS REQUIRING STOCKHOLDER ACTION   

and/or options (including bonds, warrants and debentures convertible into shares of common stock), subject to the limitations described in the resolution set forth above.

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.

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

36  

  YUM CHINA– 2023 Proxy Statement

   MATTERS REQUIRING STOCKHOLDER ACTION

ITEM 6.    Authorization to Repurchase Shares up to 10% of Outstanding Shares

This section serves as the explanatory statement pursuant to Rule 10.06(1)(b) of the Hong Kong Listing Rules to provide information for our stockholders to make a reasonably informed decision on whether to vote for or against the resolution with respect to the authorization to repurchase shares to be proposed at the Annual Meeting.

We have historically used share repurchases as a means of returning cash to stockholders. The Board believes that, after we became a primary-listed company on the Hong Kong Stock Exchange, it is in the best interests of the Company and our stockholders to continue have a general authority from our stockholders to enable our Company to purchase shares of common stock in the markets. Further, the Company prioritizes the equality of our stockholders, regardless of the exchange on which the shares they hold trade. After we became a primary-listed company on the Hong Kong Stock Exchange, our goal is to maintain that priority and ensure that our stockholders holding our shares that trade on the Hong Kong Stock Exchange are also allowed the benefit of our share repurchase program.

The Company first adopted a share repurchase program in the U.S. in 2017 (the “U.S. Repurchase Program”) and has increased the authorization thereunder from time to time. The Company has also adopted plans in compliance with Rule 10b5-1 and/or Rule 10b-18 of the Securities Exchange Act of 1934 to effect repurchases under the U.S. Repurchase Program. After we became a primary-listed company on the Hong Kong Stock Exchange, we carried on the U.S. Repurchase Program, and we also adopted a share repurchase program in Hong Kong which is analogous to the U.S. Repurchase Program.

Under the Hong Kong Listing Rules, a primary-listed company must obtain authority from its stockholders to repurchase its shares on the Hong Kong Stock Exchange if it wishes to conduct share repurchases on the Hong Kong Stock Exchange. Granting the Company this authority is a routine matter for primary-listed companies on the Hong Kong Stock Exchange and is consistent with market practice. Without this authority, the Company’s

ability to repurchase shares would be limited to the repurchase of shares that trade on the NYSE and would not include repurchases on the Hong Kong Stock Exchange. Granting the Company this authority will ensure continuous parity between investors who hold our shares that trade on the NYSE and investors that hold our shares that trade on the Hong Kong Stock Exchange. Any repurchases made in Hong Kong or the United States will reduce the available authority under the repurchase mandate and the repurchase authorization.

In connection with the authorizations established by the Board regarding our share repurchase programs, these repurchases would be made only at price levels that the Company would consider to be in the best interests of the stockholders generally, after taking into account the Company’s overall financial position. Our Board of Directors has authorized an aggregate of $2.4 billion for our share repurchase program, including its most recent increase in authorization in March 2022. As of December 31, 2022, approximately $1.2 billion remained available under that program. As a Delaware corporation, we are bound by the requirements the Delaware General Corporation Law, which prohibits a corporation from purchasing its shares of capital stock when the purchase would cause any impairment of our capital, as well as applicable SEC and NYSE requirements.

Share Capital

As of March 27, 2023, the total number of outstanding shares of common stock of the Company was 418,247,486. Pursuant to this proposal, and assuming for illustrative purposes that our outstanding shares remain unchanged from March 27, 2023 to the date of the Annual Meeting, we are seeking continuing authority to repurchase up to a maximum of 41,824,748 shares of common stock, representing 10% of our outstanding shares as of the date of the Annual Meeting. The authority will be effective for a period from the Annual Meeting until the earlier of the 2024 annual meeting of stockholders or June 25, 2024, unless earlier revoked or modified by a

YUM CHINA – 2023 Proxy Statement

  37

MATTERS REQUIRING STOCKHOLDER ACTION   

duly adopted resolution of the stockholders. As noted above, June 25, 2024 is the 13-month anniversary of the Annual Meeting and reflects the end date of the authorization, after which the authorization cannot extend.

Funding of Repurchase

The repurchases may depend on market conditions and funding arrangements at the time and will be made only when the Company believes that such repurchases will benefit the Company and our stockholders. Repurchases of shares of common stock will be funded out of funds legally available for such purposes in accordance with the Company’s Amended and Restated Bylaws, the Hong Kong Listing Rules, applicable U.S. federal law, Delaware law, the NYSE listing standards, and other applicable laws and regulations in U.S. and Hong Kong.

Impact of Repurchases

The repurchase of common stock pursuant to this proposal may have a material adverse impact on the working capital or leverage of the Company as compared with the position as at December 31, 2022 in the event that the proposed repurchases were to be carried out in full at any time during proposed repurchase period. However, our directors are subject to fiduciary duties to the Company and are bound by the requirements the State of Delaware General Corporation Law, which prohibits a corporation from purchasing its shares of capital stock when the purchase would cause any impairment of our capital.

The Code on Takeovers and Mergers (the “Takeovers Code”)

If, as a result of a repurchase pursuant to the authorization to repurchase shares, a stockholder’s proportionate interest in the voting rights of our Company increases, such increase will be treated as an acquisition of voting rights for the purposes of the Takeovers Code. Accordingly, a stockholder, or a group of stockholders acting in concert (within the meaning under the Takeovers Code), depending on the level of increase in the stockholder’s interest, could obtain or consolidate control of our Company and thereby become obliged to make a mandatory offer in accordance with Rule 26 of the Takeovers Code.

As of March 27, 2023, to the best knowledge and belief of our Board of Directors, our largest stockholder beneficially owned 39,956,938 shares of common stock, representing approximately 9.6% of our outstanding shares, based on Amendment No. 4 to the Schedule 13G filed on February 10, 2023 with the SEC by the stockholder. In the event that our Board of Directors should exercise in full the authorization to repurchase shares, and the shareholding of our largest stockholder remains the same, the beneficial ownership of our largest stockholder will be increased to approximately 10.6% of our outstanding shares.

To the best knowledge and belief of our Board of Directors, such increase would not give rise to an obligation to make a mandatory offer under the Takeovers Code. Our Board of Directors has no present intention to repurchase shares of common stock to the extent that will trigger the obligations under the Takeovers Code for our largest stockholder to make a mandatory offer. Our Board of Directors is not aware of any other consequences which may arise under the Takeovers Code as a result of a repurchase pursuant to the authorization to repurchase shares. The Hong Kong Listing Rules prohibit a company from buying back shares on the Hong Kong Stock Exchange if the result of the repurchases would be that less than 25% (or such other prescribed minimum percentage as determined by the Hong Kong Stock Exchange) of our outstanding shares would be in public hands. Our Board of Directors does not propose to repurchase shares which would result in less than the prescribed minimum percentage of shares of common stock in public hands.

Market Prices of Shares

This section includes information required to be provided pursuant to Rule 10.06(1)(b) of the Hong Kong Listing Rules. While our shares are dual-primary listed on the NYSE and HKEX, the information set forth below relates exclusively to our listing on the Hong Kong Stock Exchange and is therefore provided in Hong Kong dollars. The below values do not represent trading prices of our shares on the NYSE.

38  

  YUM CHINA– 2023 Proxy Statement

   MATTERS REQUIRING STOCKHOLDER ACTION

Our common stock was listed on the Hong Kong Stock Exchange on September 10, 2020. The following table sets forth the highest and lowest closing prices at which the shares of common stock traded on the Hong Kong Stock Exchange during each month of the previous 12 months and until March 2023:

Yum China’s Highest and Lowest Monthly Close Price (March 2022 – March 2023)

   Share price 
   Highest   Lowest 
   (HK$)   (HK$) 

2022

    

March

   416.4    290.0 

April

   355.4    313.2 

May

   360.2    292.8 

June

   385.2    320.4 

July

   392.2    358.2 

August

   401.4    365.6 

September

   417    367 

October

   395    312.8 

November

   431.4    342.6 

December

   456.6    421 

2023

    

January

   494    433.6 

February

   491.6    454.8 

March

   500    452.2 

Undertaking

None of our directors, nor, to the best of our directors’ knowledge after having made all reasonable inquiries, any of their close associates (as defined in the Hong Kong Listing Rules), have any present intention, in the event that the authorization to repurchase shares is approved, to sell any shares of common stock to our Company.

No core connected person (as defined in the Hong Kong Listing Rules) has notified our Company that he/she/it has a present intention to sell shares of common stock to our Company pursuant to the authority being sought in this proposal, if the authorization to repurchase shares is exercised.

Our directors have undertaken to the Hong Kong Stock Exchange that, so far as the same may be applicable, they will exercise the authorization to repurchase shares in accordance with the Hong Kong Listing Rules and the applicable laws of the Delaware (being the jurisdiction of the Company’s incorporation).

Repurchases of Shares

For the year ended December 31, 2022, we repurchased approximately 10.5 million shares of our common stock in open market transactions on the New York Stock Exchange for a total cost of approximately $466 million.

Details of shares repurchased on the New York Stock Exchange in the previous six months are as follows:

   Number of Shares   Price paid per share 
   Repurchased   Highest   Lowest 
   (thousands)   (US$)   (US$) 

2022

      

October

   964    50.00    38.76 

November

   223    50.00    42.48 

December

   Nil    –    – 

2023

      

January

   337    62.43    55.81 

February

   316    63.01    56.97 

March

   376    64.56    57.78 

Accordingly, we ask our stockholders to vote in favor of the following resolution at the Annual Meeting:

“RESOLVED, to approve the Board’s continuing authority to approve the Company’s repurchase of shares of its common stock in an amount not to exceed 10% of the total number of outstanding shares of common stock of the Company as of the date of the Annual Meeting, effective from date of the Annual Meeting until the earlier of the date the next annual meeting is held or June 25, 2024.”

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.

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

YUM CHINA – 2023 Proxy Statement

  39

 

STOCK OWNERSHIP INFORMATION

 

Who are our largest stockholders?

 

 

 

The following table sets forth the number of shares of Company common stock beneficially owned as of March 13, 201827, 2023, except as otherwise noted, by (i) beneficial owners of more than 5% of the outstanding shares of Company common stock, (ii) each of the Company’s named executive officers, (iii) each of the Company’s directors and director nominees and (iv) all of the Company’s directors and executive officers as a group.

In accordance with SEC rules, beneficial ownership includes all shares the stockholder actually owns beneficially or of record, all shares over which the stockholder has or shares voting or dispositive control and all shares the stockholder has the right to acquire within 60 days of March 13, 2018.27, 2023. Except as indicated in the footnotes to the table, the Company believes that the persons named in the table have sole voting and investment power with respect to all shares owned beneficially by them.

 

 

Name of Beneficial Owner  Number of Shares
Beneficially Owned		  

    Percent of    

Shares(1)    

 

More Than 5% Owners

   

Invesco Ltd.

   39,956,938(2)   9.6% 

1555 Peachtree Street NE, Suite 1800

   

Atlanta, GA 30309

   

BlackRock, Inc.

   28,737,537(3)   6.9% 

55 East 52nd Street

   

New York, NY 10055

   

 

 

Named Executive Officers

   

Joey Wat

   581,567(4)   * 

Andy Yeung

   37,891(5)   * 

Joseph Chan

   23,036(6)   * 

Johnson Huang

   136,756(7)   * 

Aiken Yuen

   48,160(8)   * 

 

 

Non-Employee Directors

   

Peter A. Bassi

   63,764   * 

Edouard Ettedgui

   38,223   * 

Cyril Han

   22,526   * 

Louis T. Hsieh

   64,739   * 

Fred Hu

   43,737   * 

Ruby Lu

   42,776   * 

Zili Shao

   38,674   * 

William Wang

   34,828   * 

Min (Jenny) Zhang

   5,070   * 

 

 

Ownership of all directors and executive officers as a group (19 total)

   1,383,666(9)   * 

 

 

Name of Beneficial Owner40   Number of Shares
Beneficially Owned

  YUM CHINA– 2023 Proxy Statement

  Percent  of
Shares(1)

More than 5% owners

Standard Life Aberdeen plc

31,105,955(2)8.1% 

30 Lothian Rd   STOCK OWNERSHIP INFORMATION

Edinburgh, UK EH1 2DH

Primavera Capital Management Ltd.

30,982,892(3)7.7% 

28 Hennessy Road, 28th Floor

Hong Kong

BlackRock, Inc.

26,705,056(4)6.9% 

55 East 52nd Street

New York, NY 10055

 

  

Named Executive Officers

Micky Pant

765,135(5)*

Jacky Lo

2,259(6)*

Joey Wat

51,802(7)*

Shella Ng

49,586(8)*

Johnson Huang

36,256(9)*

Ted Stedem

77,908(10)*

Non-Employee Directors

Peter A. Bassi

49,093*

Christian L. Campbell

127,604(11)*

EdYiu-Cheong Chan

13,979*

Edouard Ettedgui

10,741*

Louis T. Hsieh

45,221*

Fred Hu

14,601*

Jonathan S. Linen

69,242(12)*

Ruby Lu

13,979*

Zili Shao

9,912*

William Wang

7,695*

Ownership of all directors and executive officers as a group (23 total)

1,438,896(13)*

 

 

*

Represents less than one percent

 

(1)

Percentage ownership is determined based on a total of 385,926,528418,247,486 shares of Company common stock outstanding as of March 13, 2018.

32  

  YUM CHINA– 2018 Proxy Statement27, 2023.

   STOCK OWNERSHIP INFORMATION

 

(2)

Based on Amendment No. 14 to the Schedule 13G filed by Standard Life Aberdeen plcInvesco Ltd. on February 6, 2018,10, 2023, which indicated that, as of December 29, 2017, Standard Life Aberdeen plc had shared voting power over 23,644,417 shares of Company common stock and shared dispositive power over 31,105,955 shares of Company common stock.

3)

Based on Amendment No. 2 to the Schedule 13D filed by Primavera Capital Management30, 2022, Invesco Ltd. on July 6, 2017, which indicated that, as of June 30, 2017, Primavera Capital Management Ltd. had sole voting and dispositive power over 30,982,892 shares of Company common stock, Pollos Investment GP Ltd. shared voting and dispositive control over 16,364,778 shares of Company common stock and Pollos L.L.C. shared voting and dispositive control over 14,618,114 shares of Company common stock. Such amounts include 14,618,114 shares underlying outstanding Warrants.

(4)

Based on Amendment No. 1 to the Schedule 13G filed by BlackRock, Inc. on January 23, 2018, which indicated that, as of December 31, 2017, BlackRock, Inc. had sole voting power over 23,791,88339,956,938 shares of Company common stock and sole dispositive power over 26,705,05639,956,938 shares of Company common stock.

 

(5)(3)

Based on Amendment No. 7 to the Schedule 13G filed by BlackRock, Inc. on February 1, 2023, which indicated that, as of December 31, 2022, BlackRock, Inc. had sole voting power over 26,054,315 shares of Company common stock and sole dispositive power over 28,737,537 shares of Company common stock.

(4)

Includes 589,993326,423 shares issuable upon the exercise of vested stock appreciation rights (“SARs”).

(5)

Includes 14,143 shares issuable upon the exercise of vested SARs.

 

(6)

Includes 1,8259,769 shares issuable upon the exercise of vested SARs.

 

(7)

Includes 43,80585,824 shares issuable upon the exercise of vested SARs.

 

(8)

Includes 35,53535,747 shares issuable upon the exercise of vested SARs.

 

(9)

Includes 30,144635,794 shares issuable upon the exercise of vested SARs.

 

(10)
YUM CHINA – 2023 Proxy Statement

Reflects the amount of vested SARs held by Mr. Stedem as of June 1, 2017, the date on which he resigned from the Company.  41

 EXECUTIVE COMPENSATION

COMPENSATION DISCUSSION AND ANALYSIS

This Compensation Discussion and Analysis (our “CD&A”) provides an overview of our executive compensation programs for 2022, the context under which our executive compensation decisions were determined, and how we performed within that environment.

Our named executive officers (“NEOs”) consist of our Chief Executive Officer, our Chief Financial Officer, and our three other most highly compensated executive officers for 2022.

For 2022, our NEOs were:

NameTitle

Joey Wat

Chief Executive Officer (“CEO”)

Andy Yeung

Chief Financial Officer (“CFO”)

Joseph Chan

Chief Legal Officer

Johnson Huang*

Chief Customer Officer

Aiken Yuen

Chief People Officer

 

(11)*

Includes 86,028 shares issuable uponHaving served as General Manager, KFC through April 30, 2022, Mr. Huang was appointed as the exerciseCompany’s Chief Customer Officer, effective May 1, 2022.

This CD&A is divided into four sections:

Executive Summary

•  Context for Determining Executive Compensation Decisions

•  Business Overview and Performance Highlights

•  Recent Compensation Highlights

•  Alignment of vested SARs. Also includes 80 shares held by Mr. Campbell’s spouse.Executive Compensation Program with Business Performance

•  Pay Components

•  Executive Compensation Practices

•  Stockholder Engagement

Elements of the Executive

Compensation Program

•  Base Salary

•  Annual Performance-Based Cash Bonuses

•  Long-Term Equity Incentives

•  Other Elements of Executive Compensation Program

•  2022 NEO Compensation and Performance Summary

 

(12)

Includes 14,006 shares issuable upon the exercise of vested SARs. Also includes 10,000 shares held in a trust for which Mr. Linen is a trustee and 4,000 shares held by Mr. Linen’s spouse.

(13)

Includes 956,820 shares issuable upon the exercise of vested SARs.

YUM CHINA– 2018 Proxy Statement42   

  33  YUM CHINA– 2023 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 Company common stock to file with the SEC reports of their ownership and changes in their ownership of Company common stock. Directors, executive officers andgreater-than-ten percent stockholders are also required to furnish to us copies of all ownership reports

they file with the SEC. To our knowledge, based solely on a review of the copies of such reports and representations by our directors and executive officers that no other reports were required, all of the reports required to be filed by such persons during 2017 were timely filed, except that a Form 4 filed on October 20, 2017 by Mr. Jacky Lo reported one late transaction.

34  

  YUM CHINA– 2018 Proxy Statement

 EXECUTIVE COMPENSATION

COMPENSATION DISCUSSION AND ANALYSIS

Introduction

2017 was a transformative year for the Company, as we completed our first full calendar year as an independent, public company. Following our successful separation from YUM in October 2016 (the “spin-off”), the Compensation Committee of the Company’s Board (the “Compensation Committee”) approved an executive compensation program designed to reflect the Company’s business strategy, performance and evolving corporate governance best practices. As a newly independent company, we expect the Company’s executive compensation program to continue to evolve in support of our ongoing business strategy and to further align the interests of our executives with those of our stockholders. This Compensation Discussion and Analysis (“CD&A”) describes the compensation for each of our named executive officers (“NEOs”).

Named Executive Officers. For 2017, the NEOs, whose compensation will be discussed in detail in this CD&A, were:

•

Micky Pant – Chief Executive Officer (“CEO”) (through February 28, 2018)

•

Jacky Lo – Chief Financial Officer (“CFO”) and Treasurer

Joey Wat – President and Chief Operating Officer (through February 28, 2018 and CEO, effective March 1, 2018)

Shella Ng – Chief Legal Officer and Corporate Secretary

Johnson Huang – General Manager, KFC

Ted Stedem – Former CFO (through May 31, 2017)

During 2017 and early 2018, we experienced transitions in the CEO and CFO roles of the Company, which resulted in various NEO compensation adjustments as described in this CD&A. In September 2017, the Company promoted Ms. Wat to the position of CEO of the Company, to succeed to the role upon Mr. Pant stepping down as CEO on March 1, 2018. In connection with CEO transition, Mr. Pant entered into a transition agreement pursuant to which he will remain an employee of the Company, serving as Senior Advisor for atwo-year period. In February 2017, Ms. Wat was promoted from the position of Chief Executive Officer of KFC to the position of President and Chief Operating Officer of the Company. In addition, in June 2017, Mr. Stedem stepped down from the position of CFO and Mr. Lo succeeded him in an interim capacity until he was appointed as the CFO of the Company, effective in September 2017.

2017 Performance. 2017 was a year of significant financial and operational accomplishments for the Company. As of the end of 2017, the Company was the largest restaurant company in China, with over 7,900 restaurants. Our restaurant base consists of KFC, the leading quick-service restaurant brand in China in terms of system sales and number of restaurants, Pizza Hut, the leading casual dining restaurant concept in China as measured by system sales and number of restaurants, Taco Bell, East Dawning and Little Sheep. We maintain the exclusive right to operate and sub-license the KFC, Pizza Hut and Taco Bell brands in China (excluding Hong Kong, Taiwan and Macau), and own the East Dawning and Little Sheep concepts outright.

YUM CHINA– 2018 Proxy Statement

  35

EXECUTIVE COMPENSATION   

Our 2017 performance highlights include the following:

•

Total system sales for the year grew 8%, including growth of 9% at KFC and 7% at Pizza Hut Casual Dining, excluding foreign currency translation (“F/X”);

We opened 691 new restaurants for the full year, surpassing 7,900 restaurants in China; and

Reported operating profit for the year grew23%.

Recent Changes to the Compensation Program. The Compensation Committee evaluated the Company’s executive compensation program after thespin-off and took the following key actions:

Stock Ownership Guidelines: Reviewed and recommended and the Board approved the YUMC Stock Ownership Guidelines, which require executives to own a substantial amount of Company stock in order to promote an ownership mentality among management and align their interests with those of stockholders.

Phasing Out Certain Tax Equalization Benefits: In connection with Ms. Wat’s appointment to the position of CEO, we entered into a letter agreement with Ms. Wat that provides, among other items, the elimination of tax equalization benefits other than certain grandfathered tax equalization benefits. In addition, tax equalization benefits for Messrs. Lo and Huang were also eliminated, other than certain grandfathered tax equalization benefits.

•

Performance Share Unit Program: In early 2018, adopted a performance share unit program with awards vesting based on our total shareholder return performance relative to a peer group consisting of 149 peer companies included in the MSCI International China Index, measured over a three-year performance period. By economic value, approximately 50% of Ms. Wat’s 2018 target long-term incentive opportunity will be delivered as Performance Share Units (“PSUs”). While Ms. Wat is currently the only participant in the PSU program, the Compensation Committee continues to evaluate the use of PSUs on a broader basis and intends

to review, enhance and extend the PSU program to the Company’s other executive officers in the future.

Compensation Recovery Policy: Reviewed and approved the Compensation Recovery Policy, which requires an executive officer to return compensation paid or the Company to cancel performance awards previously granted to the executive officer, under certain circumstances as described in the policy.

Peer Group Selection Criteria: Adopted an approach to peer company selection that we believe better aligns with the executive selection and retention strategies of the Company and provides clearer comparability between the Company and the peer companies with regard to industry, geographic coverage and size.

Review of Performance Measures: Reviewed the performance measures used in the annual incentive plan and revised financial performance ranges to better align incentive payouts with Company performance while maintaining a focus on key performance measures of the Company’s overall business and operating segments for 2017.

Equity-Based Awards Grant Policy: Reviewed and approved the Equity-Based Awards Grant Policy, which establishes procedures for granting equity awards, including specifyingpre-determined dates for annual andoff-cycle grants and specifying that the Company will not purposely accelerate or delay the public release of material information in consideration of pending equity grants.

2017 “Say on Pay” Vote. As part of its ongoing review of the Company’s executive compensation program, the Compensation Committee considered the approval by approximately 96% of the votes cast for the Company’s “say on pay” vote at the Company’s 2017 Annual Meeting of Stockholders. After considering the 2017 “say on pay” results, the Compensation Committee determined that the Company’s executive compensation philosophy, compensation objectives, and compensation elements continued to be appropriate and did not make any specific changes to the Company’s executive compensation program in response to the 2017 “say on pay” vote.

36  

  YUM CHINA– 2018 Proxy Statement

  

 

 

   EXECUTIVE COMPENSATION

 

   

 

How Compensation
Decisions Are Made

•  Executive Compensation Philosophy

•  Role of the Compensation Committee

•  Role of the Independent Consultant

•  Executive Compensation Peer Group

•  Competitive Positioning and Setting Compensation

Compensation Policies

•  Compensation Recovery Policy

•  Equity-Based Awards Grant Policy

•  Stock Ownership Guidelines and Retention Policy

•  Hedging and Pledging of Company Stock

Compensation PhilosophyExecutive Summary

 

Context for Determining Executive Compensation Decisions

A unique feature of the Company is that while the Company operates largely in China, it is registeredincorporated in the U.S.Delaware and listed on the NYSE.NYSE and Hong Kong Stock Exchange, substantially all of its operations are located in China, with nearly 13,000 restaurants across over 1,800 cities in China at the end of 2022. Our operating environment and regulatory requirements are complex, and our leadership must be capable of adapting our businesses, and supporting our growth goals, amid these complexities. As a result, the operating environment and competitive market in China are significant factors in the Compensation Committee’s decision-making process and the design of our compensation program. In making compensation decisions, the Compensation Committee considers our performance in the context of the Chinese operating environment, the restaurant industry in China and our China-based peers, as well as our performance against our U.S. peers. Importantly, because our operating environment and the restaurant industry in China may be uniquely, or more significantly, impacted by certain factors than on our U.S. peers, the Compensation Committee seeks to maintain flexibility to design, refine and adjust the Company’s executive compensation program to be responsive to, and reward performance within, our operating environment even if that results in a compensation program that differs from our U.S. peers.

In addition, as a Delaware-incorporated company with dual-primary listing on both the NYSE and Hong Kong Stock Exchange, our leadership team must also possess, in addition to deep knowledge of the U.S. and Hong Kong governance requirements, the global perspectives and

expertise required to resolve many novel and complex issues amid the evolving global regulatory landscape, including geo-political challenges. Because the Company is designing an executive compensation program that attracts, retains and incentivizes global talent, but with specific knowledge of the evolving Chinese regulatory and operating environment, including the challenges and complexities of managing the extensive supply chain, store and digital operations, the Company’s executive compensation program may differ from our U.S. peers to reflect the competitive market in China, the need to attract a global skillset with deep knowledge of both U.S. and ChinaChinese regulatory regimes and the Company’s desire to incentivize an entrepreneurial mindset to encourage actions that support our long-term growth and strategy. For these reasons, the Compensation Committee looks at the totality of factors the Company faces when it considers and determines executive compensation.

•

Operating Environment: Starting in the first quarter of 2020 and throughout 2021 and 2022, the COVID-19 pandemic significantly impacted the restaurant industry in China. Strict public health measures were implemented across the country, including mass testing, regional lockdowns and travel restrictions. These measures led to reduced traveling, fewer social activities, and softened consumption demand. During peak outbreak periods, hundreds of millions of people were under some type of lockdown. As a result, at the peak of the COVID-19 outbreak in China in 2020, approximately 35% of our restaurants were closed. Our operations and financial results for the second half of 2021 were also significantly affected by multiple waves of outbreaks, which spread to nearly all provinces in

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EXECUTIVE COMPENSATION   

China. The COVID-19 pandemic and strict public health measures persisted throughout 2022. In March 2022, over 1,700 of our stores in China, on average, were either temporarily closed or offered only takeaway and delivery services. During April and May 2022, that number increased to over 2,500 and our same-store sales declined by more than 20% year-over-year. In October and November 2022, sporadic occurrences of COVID infections quickly evolved into major regional outbreaks, leading to tightened COVID-related health measures and lockdowns. The number of our stores that were either temporarily closed or offered only takeaway and delivery services increased in October and November 2022, peaking at over 4,300 in late November 2022. In December 2022, the government significantly changed its COVID policies, including

removing mass testing and central quarantine requirements as well as lifting travel restrictions. The temporary closures, combined with a massive wave of infections leading to substantial decline in dine-in traffic in December 2022, caused our same store sales to decrease 4% year-over-year in the fourth quarter of 2022.

According to government statistics, total revenue of the restaurant industry in China in 2022 declined by 6%, both compared to 2021 and 2019, respectively. Notably, many restaurants in China exited the business over the 2020 to 2022 period. The graph below showing the China restaurant industry’s monthly revenue growth for the periods indicated illustrates the volatility:

LOGO

Source: National Bureau of Statistics of China

2022 was in many ways the most volatile year among the past three years, during which the restaurant sector in China operated in a fast-changing operating environment, facing challenges from sporadic COVID outbreaks, entire city lockdowns and, in December 2022, nationwide infections. The fast-changing operating environment

required decisive emergency measures to sustain operations, drive sales and cut costs, which in turn put immense pressure on staff from top to bottom of the company. Some of these emergency measures required management to refocus its efforts on performance results that were not measured under our incentive programs, and

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management executed on emergency operating plans swiftly and effectively in order to allow the Company to sustain profitability since the onset of the COVID-19 pandemic and emerge stronger and better positioned post-pandemic. The resulting challenges and actions taken by management in response made it imperative to consider the total body of work during the past three years of the pandemic in evaluating and rewarding performance in an appropriate manner to attract and retain leaders with the unique mix of skills and to recognize their strong performance during this time.

•

TSR Performance*: Our total shareholder return (“TSR”) outperformed the MSCI China Index, MSCI China Consumer Discretionary Index and S&P 500 Consumer Discretionary Index from 2020 to 2022 and in 2022.

○

The Company’s TSR ranked at the 68.91 percentile and 93.65 percentile, as compared to the TSR performance of the constituents of the MSCI China Index over the three-year period from 2020 to 2022, and in 2022, respectively.

○

The Company’s TSR ranked at the 98.50 percentile and 86.60 percentile, as compared to the TSR performance of the constituents of the MSCI China Consumer Discretionary Index over the three-year period from 2020 to 2022, and in 2022, respectively.

○

The Company’s TSR outperformed the S&P 500 Consumer Discretionary Index by 11.61 and

49.03percentage points over the three-year period from 2020 to 2022, and in 2022, respectively.

*

TSR is based on the average closing price over the 20 trading days up to and including the start and end of the period and assumes reinvestment of dividends.

•

Peer Company Performance Comparisons: In assessing the performance of the Company and our executive team, the Compensation Committee considers performance against both U.S. and China peers, which allows the Compensation Committee to assess performance in the context of the operating market in China which can vary significantly as compared to the U.S. operating market. During the pandemic, these differences were pronounced and the Compensation Committee implemented an executive compensation program that would be responsive to these drastically different operating environments and reward performance that was deemed critical to our success in navigating the pandemic and emerging stronger. Despite the unprecedented challenges and significant volatility caused by COVID-19 on the Company’s operations and financial results during the three-year period since 2020, the leadership team led the successful implementation of immediate emergency actions to protect employees, sustain operations, drive sales, protect profitability, drive stockholder value-creation and give back to the community. With the tremendous efforts of all our employees led by the leadership team, our revenue growth rate outperformed the China restaurant industry over the periods as indicated below:

LOGO

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EXECUTIVE COMPENSATION   

We believe our ability to stay nimble and to adapt quickly to the rapidly-changing operating environment were key to our successfully navigating the pandemic to date. We managed to grow, with a 6% growth in total revenue (excluding foreign currency translation) in 2022 compared to 2019, while the total revenue of the China restaurant industry declined by 6% over the same period. Despite the magnitude of our store closures and limited services during various waves of the pandemic, we remained profitable over all 12 quarters of 2020 to 2022.

•

Competitive Market and Retention Constraints: Knowledge of and expertise in U.S., China, and Hong Kong regulatory regimes and business practices are required for many of the Company’s executive officers. In addition, because our executive team is located in China, we are required to compete in the Chinese market for executive talent with this unique skillset. Given the uniqueness of executives with this profile, the Company increasingly competes for executive talent against China-based companies with, or planning for, listing outside of China. These competitors often offer compensation packages with significant one-time equity grants and equity awards with time-based vesting, which are common practices in the Chinese executive compensation market. In determining executive compensation decisions, the Compensation Committee considers this increased competition, the practice of granting one-time equity awards and granting equity awards with time-based vesting, and the Company’s need to retain and motivate the Company’s global and entrepreneurial leadership team.

In determining executive compensation decisions, the Compensation Committee also considered the fact that the challenging market for international executive talent was aggravated by a reduced number of global talent residing in China compared to pre-pandemic years. In particular, the Compensation Committee considered the hardship on the management team due to the inability to unite with their families for an extended period as a result of the strict travel restrictions and, at the same time, the requirements to continually evolve the Company’s operating plans to sustain operations, drive sales, and protect profits. Concerned with the risk of losing talent due to the large personal toll and sacri-

fice required of our management team for an extended period of time, as well as the potential inability to attract and retain future talent due to the ongoing COVID-19 pandemic restrictions, the Compensation Committee took actions that it considered appropriate to reward and recognize not only the strong Company performance that was led by the management team but also the significant retentive risks presented by the extended COVID-19 pandemic and public health measures in China.

Business Overview and Performance Highlights

As noted above, the COVID-19 pandemic had a significant impact on the Company’s operations starting in the first quarter of 2020 and continuing through 2022. Although the U.S. markets generally returned to normal, 2022 was in many ways the most volatile year for the Chinese restaurant sector during the past three years, during which we managed to navigate sporadic COVID outbreaks, entire city lockdowns and, in December 2022, nationwide infections. Right from the start of the pandemic, our management team took immediate actions to sustain operations, drive sales, and protect profits. As a result, the Company managed to grow, earned positive operating profit in every quarter of 2020 to 2022, and continued to invest in key strategic capabilities, which we believe helps position us with strengthened competitive edge to capture future growth opportunities. Key aspects of what we did and how we did it are highlighted below.

•

We quickly adapted our operations and offers to capture increasing off-premise demand when dine-in traffic was pressured. Enabled by dedicated riders, delivery sales of KFC and Pizza Hut combined grew by 17% year-over-year and accounted for approximately 39% of Company sales of these two brands in 2022. Combined with takeaway, off-premise services represented approximately 65% of Company sales in 2022, compared to approximately 40% in 2019. In addition, new retail packaged foods sales grew 50% and reached nearly RMB900 million in 2022.

•

We continued to drive traffic and sales by delivering good food with great value. Leveraging our innovation capabilities and supported by our industry-leading supply chain management system to secure supply at scale,

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we launched over 500 new or upgraded menu items in 2022, from regional offers to national launches. We effectively focused our marketing campaigns on more impactful value-for-money offerings. Our total system sales decreased 5% year-over-year in 2022, compared to a 6% decline in the total revenue of the China restaurant industry.

•

We further broadened our member base and engaged with members to drive repeat purchases. Our loyalty programs grew approximately 70% from over 240 million members at the end of 2019 to over 410 million members at the end of 2022. Member sales accounted for approximately 60% of our system sales in 2022.

•

We proactively managed costs by taking actions to improve operational efficiency. We leveraged digital capabilities, such as sales forecasting and inventory management, to continuously improve operational efficiency. Our initiatives such as optimizing staff scheduling and labor mix, as well as sharing restaurant management teams across stores enabled us to drive labor productivity. We also spent considerable efforts to add variable components to more of our leases. We emerged from the pandemic with a rebased cost structure that yielded a restaurant margin of 14.1% for the full year 2022, compared with 13.7% in the prior year, despite lower sales.

•

We invested heavily in building our digital capabilities across the value chain. The most visible aspects are consumer-facing – the apps and screens that empower digital ordering and our membership programs. Digital orders accounted for approximately 89% of KFC and Pizza Hut’s Company sales in 2022, compared to 55% in 2019. Similarly, the digitalization of our operations, from the supply chain to our kitchens, has been impactful.

•

We made significant investments in our supply chain infrastructure to support future business growth. We expanded from 29 to 33 logistics centers to enhance self-sufficiency in each province in China. In 2022, we began construction on our largest greenfield logistics center, which will serve as the headquarters for our logistics centers across China. Powered by our digital capabilities, our real-time inventory visibility from logistics centers to stores helped enable us to dispatch

raw materials with greater precision, allowing for more efficient operations and reduced food waste.

•

We maintained our rapid store network expansion with innovative store models and healthy payback periods. Over the 2020-2022 period, we expanded our store portfolio by approximately 40%, adding a total of approximately 3,800 new stores and reaching 12,947 total stores at the end of 2022. In 2022, we opened 1,824 gross new stores, closed underperforming stores, and achieved 1,159 net new stores in 2022 with healthy payback periods. KFC and Pizza Hut stores maintained an average payback period of two and three years, respectively. We lowered up-front investment and streamlined restaurant operations to improve efficiency. With multiple innovative store formats, we increased store density in higher tier cities and penetrated further into lower tier cities.

•

We strengthened our portfolio of emerging brands. We launched growth initiatives at Taco Bell and Lavazza, while we closed the operations of COFFii & JOY and East Dawning. In 2022, Taco Bell doubled its store count to 91 stores and Lavazza reached 85 stores by year end.

•

We continued to invest in sustainability and sustainable growth. In 2021, we committed to reaching net-zero value chain GHG emissions by 2050. In 2022, we set near-term science-based targets to reduce absolute Scope 1 and 2 GHG emissions by 63% by 2035 from a 2020 base year and reduce Scope 3 GHG emissions from purchased goods by 66.3% per ton of goods purchased by 2035 from a 2020 base year, which targets have been approved by the Science Based Targets initiative (SBTi).

•

We successfully converted from secondary listing to primary listing on the Hong Kong Stock Exchange. As the first Delaware-incorporated company becoming dual-primary listed on both the New York Stock Exchange and Hong Kong Stock Exchange, our management team had to navigate many novel and complex regulatory issues during the conversion application process. We believe this strategic move will provide enhanced access to investors and broaden our shareholder base.

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EXECUTIVE COMPENSATION   

•

We generated US$1.9 billion in free cash flow and returned over US$1 billion to shareholders through share repurchases and dividends over the past three years.

In summary, not only did we adapt rapidly to the many challenges of the pandemic to achieve outperforming total revenue growth compared to the China restaurant industry as noted above, but we also took the opportunity to strengthen our competitive position for the future. We expanded our store footprint, strengthened our supply chain, deepened our digital capabilities, and rebased our cost structure, laying the foundation for future growth opportunities. We rewarded our shareholders with leading TSRs compared to the constituents of the MSCI China Index and MSCI China Consumer Discretionary Index, as well as outperforming TSRs against the S&P 500 Consumer Discretionary Index, over the three-year period from 2020 to 2022, and in 2022, respectively, as noted above. All of these accomplishments were achieved in the context of an incredibly challenging and volatile operating environment.

Recent Compensation Highlights

In 2022, after extensive deliberations, the Compensation Committee implemented a few changes to our executive compensation program, as set forth below. In approving these changes, the Compensation Committee considered our strategic priorities, stockholder feedback, market practices in both the U.S. and China, input from the Compensation Committee’s compensation consultant, and the operating environment in China, as described further above.

•

AnnualLTI Grants—For 2022 annual long-term incentive awards, the Compensation Committee determined to grant annual equity awards in the form of 50% SARs, 30% performance share units (“PSUs”) and 20% restricted stock units (“RSUs”). The Compensation Committee introduced an RSU component into the annual long-term incentive (“LTI”) program for 2022 in order to further align with market practices and to support retention during the vesting period, in light of the continued uncertainty caused by the evolving COVID-19 pandemic. The Compensation Committee also considered the fact that a significant majority of its compensation peers include RSU awards as part of their annual LTI

grants, and the difficulty in setting three-year performance goals given the operating market at the time. As the value of the RSUs fluctuates based on the Company’s stock price, the entire LTI program remains at-risk. In order to set meaningful goals for the entire three-year performance period, the Compensation Committee determined to use relative TSR (“rTSR”) performance against the constituents of the MSCI China Index as the only metric for 2022 annual PSU awards (the “2022 Annual PSU Awards”), compared to the weighted performance goals relating to rTSR, growth in adjusted total revenue and growth in adjusted diluted earnings per common share that were used under the 2021 annual PSU awards. For 2023, the Compensation Committee determined to increase the percentage of annual equity awards granted in the form of PSUs to 50% in order to increase the portion of the annual long-term incentive awards that are tied to pre-established performance goals, with the remaining 50% to be granted in the form of the RSUs, in order to further align with market practices and to support retention during the vesting period while maintaining the at-risk nature of the long-term incentive program. The 2023 PSU awards will also include an ESG metric, in order to further align the incentives under our long-term incentive awards with the increased importance of ESG-related goals to the Company’s long-term strategy.

•

2022 Lavazza ESOP Grants—Despite the enormous challenges to drive sales and protect profits in the short-term, the Company is also committed to building core capabilities to achieve long-term sustainable growth. To support the Company’s long-term growth, the Compensation Committee has sought to design a compensation program aligned with our long-term strategy, including accelerating store network development, expanding to new categories, growing emerging brands and reinforcing strategic capabilities. This desire to incentivize performance to achieve the Company’s growth initiatives resulted in the granting of equity awards with respect to the joint venture (the “Lavazza Joint Venture”) of the Company and Lavazza Luigi S.p.A. (“Lavazza Group”), which was established to explore and develop the Lavazza coffee concept in China. As previously disclosed, in order to support a founder’s mentality and to incentivize the efforts of employees of the Company, Lavazza Group and the Lavazza Joint Venture to execute on the

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Lavazza Joint Venture’s business plan, including the target to open 1,000 Lavazza stores in China in the next few years, the Lavazza Joint Venture established equity plans (the “JV EquityPlans”) allowing for the grant of equity awards with respect to the Lavazza Joint Venture to key employees of the Lavazza Joint Venture, Lavazza Group and the Company. In February 2022, the Lavazza Joint Venture and the Compensation Committee approved equity awards under the applicable JV Equity Plan to certain employees of the Company, including theNEOs, in the form of PSUs. Under the JV Equity Plans, up to 15% of the equity in the Lavazza Joint Venture may be granted as equity awards, with employees and other eligible participants of the Lavazza Joint Venture eligible to receive up to 80% of the JV Equity Plan shares, or 12% of the equity in the Lavazza Joint Venture. The remaining JV Equity Plan shares will be allocated to the employees of the Company and Lavazza Group in accordance with their respective equity interest in the Lavazza Joint Venture, or up to 2% and 1%, respectively, of the equity in the Lavazza Joint Venture. The PSU awards (the “2022 Lavazza ESOP Grants”) granted to the NEOs are subject to both performance-based vesting conditions and the occurrence of a liquidity event. The liquidity event vesting condition, which includes the occurrence of an initial public offering of the Lavazza Joint Venture, must occur within seven years of the grant date for the awards to vest. As discussed above, the JV Equity Plans and related grants to key contributors were adopted in order to help execute the Company’s strategy for the Lavazza Joint Venture by aligning their interests to the success of the Lavazza Joint Venture.

•

Annual Incentive Program—To support key objectives linked to the Company’s long-term strategy, the Compensation Committee replaced system gross new builds with system net new builds and replaced member sales with member activity as performance goals to be used to determine payouts under the 2022 annual incentive program. As a result of this change, for 2022, annual incentive program payouts were originally to be determined based solely on adjusted operating profit growth, same store sales growth, delivery sales growth, system net new builds, and member activity.

The Company’s annual incentive program targets, which were set in early 2022, reflected the Company’s

business goals and priorities in light of the then prevailing operating environment. While the Compensation Committee’s practice has generally been to establish and communicate goals at the beginning of each year, the Compensation Committee also retains flexibility to modify the Company’s executive compensation program when circumstances warrant, in order to continue to incentivize actions to drive operational performance and retain key talent. In the first half of 2022, the highly transmissible Omicron variant caused significant volatility in our business operations. For example, during April and May 2022, over 2,500 of our stores in China, on average, were either temporarily closed or offered only takeaway and delivery services. In July 2022, in light of the volatile operating environment and the significant impact of the Omicron-variant outbreaks on the Company’s operating and financial performance in the first half of 2022, the Compensation Committee considered potential real-time actions to help manage the immediate challenges, retain talent and motivate performance. The Compensation Committee approved (i) the maintaining of the original key performance indicators (“KPIs”) to hold participants accountable for such goals, but with a reduction in the weighting of such KPIs from 100% to 30%, (ii) the introduction of two supplemental KPIs, accounting for 30% of the team factor weighting, to motivate strategic actions to align with the Company’s key priorities at the time of protecting operating margin and profitability, and (iii) the introduction of two relative measures requiring above-market performance in the form of relative revenue growth (comparing the Company’s 2022 year-over-year growth rate in total revenues against that of the China restaurant industry) and rTSR (comparing the Company’s TSR in 2022 against the TSR of the constituents of the MSCI China Index), with the relative measures accounting for the remaining 40% of the team factor weighting. This modified program continued to maintain the same performance-based structure, but with updates to reflect the evolving operating challenges created by the pandemic and changes in business focuses to address these challenges and the inclusion of relative measures to assess the Company’s success in navigating the operational environment as compared to the market. The Compensation Committee determined that this combination of performance metrics was aligned with the Company’s strategic actions to help

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EXECUTIVE COMPENSATION   

protect the Company’s operating margin and profitability during this challenging time and appropriate to motivate management to focus on the successful execution of the Company’s operational plan. When approving the final team factor for Company performance, the Compensation Committee applied discretion to reduce the result of Company performance from 135% to 120% of target. For details, see “Elements of the Executive Compensation Program—Annual Performance-Based Cash Bonuses—Team Performance Factors.”

•

Modification of 2020 Annual PSUs—Beginning with the 2020 annual equity grants, the group of recipients of PSUs had been expanded to include all of the Company’s leadership team, including the NEOs. In addition, unlike the 2019 PSUs where only a relative measure was used, the performance metrics and goals for the annual PSUs granted in 2020 (the “2020 Annual PSUs”) adopted two absolute growth targets, including adjusted total revenue growth (weighted 60%) and adjusted diluted earnings per share (“EPS”) growth (weighted 40%). A relative measure, the Company’s rTSR compared to the MSCI China Index, was included only as a modifier to increase or decrease the number of units to be earned by up to 20%. The absolute growth targets were established in early 2020 at a time when the Company could not have anticipated or known the duration or impact of the COVID-19 pandemic on the market in which the Company operates. In 2021 and 2022, the Compensation Committee closely monitored the impact of the pandemic on the Company and potential payouts, and considered different alternatives to fairly assess and reward management for their performance during the three-year performance period of the 2020 Annual PSUs.

Due to the ongoing impact of COVID-19, the Company was operating in a volatile and unpredictable market during the duration of the performance period. Compared to 2019, the 2022 total revenue for the China restaurant industry declined by 6%, with a negative CAGR of 2% from 2019 to 2022. As a result, the original absolute growth goals set for the 2020 Annual PSUs became less effective in incentivizing management and recognizing actions that would enable the Company to navigate the pandemic and emerge stronger. Facing the

unprecedented challenges, our revenue growth rate (excluding foreign currency translation) outperformed that of the China restaurant industry, with an increase by 6% comparing 2022 to 2019, and a CAGR of 2% from 2019 to 2022. In addition, comparing to the constituents of the MSCI China Index, the Company’s TSR ranked at the 68.91 percentile over the three-year period from 2020 to 2022.

In light of the Company’s executive officers.strong performance against its peers despite the COVID-19 pandemic and considering that keeping the original design of the 2020 Annual PSUs potentially would have resulted in zero payout, which the Compensation Committee believed would not appropriately reflect management’s performance or be aligned with the Company’s compensation philosophy, the Compensation Committee determined to adjust the weighting of the performance metrics of the 2020 Annual PSUs in December 2022. As adjusted, the performance goals applicable to the 2020 Annual PSUs are rTSR (weighted 60%), adjusted total revenue growth (weighted 24%) and adjusted diluted EPS growth (weighted 16%), with adjusted total revenue growth and adjusted diluted EPS growth having the same relative weightings to each other as prior to adjustment. The Compensation Committee placed more emphasis on the rTSR measure in recognition of the difficulty of measuring performance against absolute growth goals set before the onset of the COVID -19 pandemic, in light of the volatile operating environment, and its assessment that rTSR would better measure the Company’s success in execution of its evolving and COVID-19 responsive operational plan during the three-year performance period. Accordingly, these weightings were adjusted to better measure our performance relative to the operating market in which we operate, while keeping all original performance goals applicable to the 2020 Annual PSUs. Except for the changes in weighting of the performance goals, the terms and conditions applicable to the 2020 Annual PSUs remained unchanged. The Compensation Committee determined that this modification to the 2020 Annual PSUs was aligned with the Company’s compensation philosophy of retaining talent and rewarding performance, particularly in light of the operational achievements of the Company since the 2020 Annual PSUs were granted. Based on the reallocated weighting

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of the performance metrics, the 2020 Annual PSUs vested at 87.82%. For details, see “Context for Determining Executive Compensation Decisions” and “Elements of the Executive Compensation Program—Long Term Equity Incentives—2020 Annual PSUs.”

•

Incorporated ESG Metrics since 2021 Annual Incentive Program—Management and the Board have engaged in extensive discussions regarding how to further incentivize and assess performance with respect to specific ESG, Sustainability and Human Capital Management initiatives. Beginning with the 2021 annual incentive program, ESG measures have been incorporated into the KPIs that are used to determine the individual performance factor for each leadership team member. As such, the NEOs’ performance on ESG-related areas could significantly impact payouts under the Company’s 2022 annual incentive program. ESG performance goals are tailored for each member of the leadership team based on their roles and responsibilities and the Compensation Committee will assess their performance in these areas. ESG, Sustainability and Human Capital Management goals for 2022 included goals relating to the publication of the Company’s sustainability report, goals relating to climate, the Company’s supply chain and environmental impact, initiatives relating to customer awareness of environmental goals, plastic reduction initiatives, goals relating to the KFC food banks, employee satisfaction and gender equality. As noted above, in 2023, ESG and sustainability goals of the Company have been adopted as one of the performance goals applicable to the 2023 annual PSUs.

Alignment of Executive Compensation Program with Business Performance

Our pay-for-performance incentive compensation programs are designed to align the long-term interests of our executives with those of our stockholders and to attract and retain top talent in a competitive market. The Company’s executive compensation program has been designedis structured to attract and retain the talent necessary to achieve superior stockholder results and support the long-term sustainable growth of the Company while simultaneously hold-and create value for stockholders by aligning our executives with business performance goals and motivating entrepreneurial and innovative thinking. As such, the Compensation Committee reviews and endorses

ing our executives accountableperformance goals that are deemed central to continuously achieve resultsthe Company’s business performance, long-term strategy and stockholder value creation. Specifically, the Compensation Committee selected performance goals under the Company’s 2022 incentive programs that are based on metrics such as operating profit, same store sales, delivery sales, system net new builds, member activity, rTSR, and other KPIs described in greater detail below. These performance goals comprise an overall executive compensation program that the Compensation Committee believes appropriately reflects the Company’s emphasis on increasing profitability and revenue, supporting an entrepreneurial mindset, and creating stockholder value, while at the same time supporting key ESG initiatives.

While the Compensation Committee’s practice has generally been to establish and communicate goals at the beginning of each year, after year.the Compensation Committee also retains flexibility to modify the Company’s executive compensation program when circumstances warrant, in order to continue to incentivize actions to drive operational performance and long-term strategies. In addition,2022, in light of the changes in operating environment in China and the significant prolonged impact of COVID-19 on the Company’s operating and financial performance during the year and over the three-year period since 2020, the Compensation Committee adjusted the 2022 annual incentive program has been designedand modified the 2020 Annual PSUs. For details, see “Recent Compensation Highlights—Annual Incentive Program,” “Recent Compensation Highlights—Modification of 2020 Annual PSUs,” “Elements of the Executive Compensation Program—Annual Performance-Based Cash Bonuses—Team Performance Factors” and “Elements of the Executive Compensation Program—Long Term Equity Incentives—2020 Annual PSUs.” The Compensation Committee believes that maintaining this flexibility allows the Company to appropriately reward performance emphasizein areas deemed critical to the Company’s long-term strategy.

The following chart provides an overview of the 2022 target total direct compensation program applicable to our CEO, consisting of base salary, annual performance-based cash incentives (i.e., short-term incentives, or “STI”), and LTI. As demonstrated by the following chart, 2022 compensation for our CEO was heavily weighted toward variable pay elements, and such elements repre-

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EXECUTIVE COMPENSATION   

sented approximately 87% of the 2022 annual target compensation for Ms. Wat (consisting of the target payout opportunity under the annual performance-based cash bonus plan, target annual PSUs, RSUs and SARs). For purposes of this calculation, we have excluded the target grant date fair value creationof the 2022 Lavazza ESOP Grants and drive an ownership mentality.the incremental fair value associated with the modification of the 2020 Annual PSUs, as these do not represent a component of the Company’s typical annual executive compensation program.

2022 CEO Target Compensation Mix

LOGO

Pay Components

The Company’s executive compensation program has three primary pay components: (i) base salary; (ii) annual performance-based cash bonuses;bonuses (i.e., short-term incentives); and (iii) long-term equity awards. We believe thatthesethat

these key elements are aligned with the Company’s compensation philosophy and objectives, as illustrated in the following table.

 

 

Objective    Base

Salary		     Annual

Performance-

Based Cash

Bonuses		     

  Long-Term

Equity
Incentives

 

Attract and retain the right talent to achieve superior stockholder results — Competitive total reward program structure that enables pay to vary based on role, responsibility, experience, market value and future potential of talent in order to drive superior results year over year.year-over-year

 

    

X

    

X

    X

X

X

Reward performance — Motivate both short-term andlong-term performance through annual and long-term equity programs. A significant portionmajority of NEO payannual target compensation isperformance-based or variable and,therefore, at-risk.at-risk

 

    

X

    

X

X

Emphasize long-term value creation — The Company’s belief is simple: if it creates long-term value for stockholders, then it shares a portion of that value with those responsible for the results. Stock Appreciation Rights (“SARs”) reward value creation generated from sustained results and the favorable expectations of the Company’s stockholders. Restricted Stock Units (“RSUs”) and, beginning in 2018, PSUsEquity awards focus on the long-term performance of the Company and directly align the interests of the recipients with those of the Company’s stockholders.stockholders

 

            

X

Drive ownership mentality — We require executives to invest in the Company’s success by owning a substantial amount of Company stock.stock

 

            

X

X

 

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EXECUTIVE COMPENSATION

 

  

 

Executive Compensation Practices

The Compensation Committee reviews on an ongoing basis the Company’s executive compensation program to evaluate whether it supports the Company’s executive compensation philosophies and objectives and is aligned

with stockholder interests. Our executive compensation practices include the following, each of which the Compensation Committee believes reinforces our executive compensation philosophy and objectives:

Our Executive Compensation Practices

✓

We deliver a significant percentage of annual target compensation in the form of variable compensation tied to performance, with 87% of Ms. Wat’s 2022 annual target compensation in the form of variable pay elements

✓

We deliver a significant portion of total compensation in the form of equity

✓

Maximum payout opportunity for STI and PSUs

✓

We have multi-year vesting periods for equity awards

✓

We perform market comparisons of executive compensation against a relevant peer group, recognizing the different geographic regions where executives are sourced and recruited

✓

The vesting of the rTSR portion of the PSU awards will be capped at target if our TSR performance is negative over the performance period

✓

The payout for the rTSR measure for annual performance-based cash bonus program is capped at target if our TSR performance is negative

✓

We use an independent compensation consultant reporting directly to the Compensation Committee

✓

We have double-trigger vesting for equity awards in the event of a change in control under our long-term incentive plans

✓

We maintain stock ownership guidelines, which includes a retention requirement until the guideline is achieved

✓

We maintain a compensation recovery policy

✓

We maintain an equity-based awards grant policy specifying pre-determined dates for annual equity grants

✓

We hold an annual “say on pay” vote

✓

We maintain an annual stockholder engagement process

✓

Our Compensation Committee regularly meets in executive session without any members of management present

X

We do not pay dividends or dividend equivalents on PSUs unless and until they vest

X

We do not allow repricing of underwater SARs under our long-term incentive plan without stockholder approval

X

We do not allow hedging, short sales or pledging of our securities

X

We do not allow backdating of SARs

X

We do not provide for tax gross-ups relating to a change in control

Stockholder Engagement

In its compensation review process, the Compensation Committee focuses on structuring the executive compensation program to serve the interests of our stockholders. In that respect, as part of its ongoing review of our execu-

tive compensation program, the Compensation Committee considered the approval by approximately 89% of the votes cast for the Company’s “say on pay” vote at our 2022 annual meeting of stockholders. Although the Com-

YUM CHINA – 2023 Proxy Statement

  53

EXECUTIVE COMPENSATION   

pensation Committee was pleased with this favorable outcome and interpreted this level of support as an endorsement by our stockholders of our executive compensation program and policies, the Compensation Committee continuously evaluates program design and considers adjustments to the Company’s compensation program based on stockholder feedback, market practices, operating environment and other considerations in order to deliver a program designed to be aligned with our business strategy, the creation of long-term value and our stockholders’ interests.

During 2022, the Company reached out to its 75 largest stockholders and select stockholders who previously indicated interest for having engagement calls (which represented over 66% of the Company’s outstanding shares) to solicit feedback on a variety of corporate

governance matters (including with respect to the adoption of the Company’s 2022 Long Term Incentive Plan (the “2022 LTIP”)), and the Company held discussions with all stockholders who accepted an invitation. The topics of the discussions covered the 2022 LTIP and executive compensation matters more generally. Management shared the stockholder feedback with the Compensation Committee for its consideration.

Based on feedback received during the Company’s stockholder engagement efforts over the past several years, the Compensation Committee has approved changes to its compensation program, including the incorporation of ESG measures and targets into the KPIs, and the disclosure of the threshold and maximum achievement levels for the KPIs discussed in the CD&A.

54  

  YUM CHINA– 2023 Proxy Statement

   EXECUTIVE COMPENSATION

Elements of the Executive Compensation Program

 

The Company’s 2022 executive compensation program consists of three primary pay components: (i) base salary; (ii) annual performance-based cash bonuses;bonuses (i.e., short-term incentives); and (iii) long-term equity awards. The following chart demonstratescharts demonstrate that 20172022 annual target compensation for Mr. Pant,Ms. Wat, our CEO, duringand the year, and our other NEOs was heavily weighted toward variable pay elements. Such elements and such elements comprisedrepresented approximately 83%87% of the targeted 20172022 annual target compensation for Mr. Pant (consisting of the target

payout opportunity under the cash bonus plan and his SAR grants and excluding all other compensation reported in the 2017 Summary Compensation Table)Ms. Wat and, on average, 65%72% of

the targeted 20172022 annual target compensation for our other NEOs (consisting of the target payout opportunity under the performance-based cash bonus plan and SAR grantstarget annual equity grants). For purposes of this calculation, we have excluded the target grant date fair value of the 2022 Lavazza ESOP Grants and excluding theone-time RSU grants and all other incremental fair value associated with the modification of the 2020 Annual PSUs, as these do not represent a component of the Company’s typical annual executive compensation reported in the 2017 Summary Compensation Table).program.

 

 

2022 CEO Target Compensation Mix

2022 Other NEOs Average

Target Compensation Mix

LOGO

LOGO

YUM CHINA – 2023 Proxy Statement

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EXECUTIVE COMPENSATION   

 

Base Salary.

The Company provides a fixed level of cash compensation to attract and retain high-caliber talent. Base salary in the form of cash is provided to compensatecompensates executives for their primary roles and responsibilities. An executive’s actual salary is dependent on factors such as the executive’s role (including the market value of the role), level of responsibility, experience, individual performance and future potential. The Compensation Com-

mitteeCommittee annually reviews salary levels of the Company’s executive officers.officers to maintain

market competitiveness and reflect their evolving responsibilities.

Annual Performance-Based Cash Bonuses.

The principal purpose of our cash-based annual incentive program is to motivate and reward short-term team and individual performance. The following is the formula that was used to calculate 20172022 annual performance-based annualcash bonuses:

 

 

Base Salary × 

Target Bonus

Percentage
(As a % of
Base Salary)

 × 

Team
Performance

Factor(0-200%
(0%-200%)

 × 

Individual
Performance

Factor(0-150%
(0%-150%)

 = 

Final  

Individual  
Performance  
Bonus Payout  
(0-300%)  

 

In conjunction with setting 2017 compensation opportunities, theTeam Performance Factors

The Compensation Committee reviewed the performance measures used in the annual incentive plan to assess the program’s alignment of the incentive payouts with Company performance as an independent company, while maintaining a focus on key performance measures of the Company’s overall business and operating segments for 2017. The measures described below were selected because they were viewed as key indicators of the

Company’s success in executing against its business plans.

segments. The Compensation Committee established the initial team performance measures, targets and weights in January 2017for the 2022 bonus program at the beginning of the year after receiving input and recommendations from management and the Compensation Committee’s compensation consultant.

38  

  YUM CHINA– 2018 Proxy Statement

   EXECUTIVE COMPENSATION

The team performance objectives and targets in 20172022 were developed through the Company’s annual financial planning process, which took into account growth strategies, historical performance, and the existing and expected future operating environment of the Company.

The Company’s annual incentive program targets, which were set in early 2022, reflected the Company’s business goals and priorities in light of the then prevailing operating environment. While the Compensation Committee’s practice has generally been to establish and communicate goals at the beginning of each year, the Compensation Committee also retains flexibility to modify the Company’s executive compensation program when circumstances warrant, in order to continue to incentivize actions to drive operational performance and retain key talent. In

the first half of 2022, the highly transmissible Omicron variant caused significant volatility in our business operations. For example, during April and May 2022, over 2,500 of our stores in China, on average, were either temporarily closed or offered only takeaway and delivery services.

In light of the volatile operating environment and the significant impact of the Omicron-variant outbreaks on the Company’s operating and financial performance in the first half of 2022, the Compensation Committee considered potential real-time actions to help manage the immediate challenges, retain talent and motivate performance. The Compensation Committee revisited the structure of the 2022 annual incentive program in order to continue to incentivize performance and focus on key business priorities at the time. Based on this review, in July 2022, the Compensation Committee approved (i) the maintaining of the original KPIs to hold participants accountable for such goals, but with a reduction in the weighting of such KPIs from 100% to 30%, (ii) the introduction of two supplemental KPIs, accounting for 30% of the team factor weighting to motivate strategic actions to align with the Company’s key priorities to protect operating margin and profitability, and (iii) the introduction of two relative measures requiring above-industry performance in the form of relative revenue growth (comparing the Company’s 2022 year-over-year growth rate in total revenues

56  

  YUM CHINA– 2023 Proxy Statement

   EXECUTIVE COMPENSATION

against that of the China restaurant industry) and rTSR (comparing the Company’s TSR in 2022 against the TSR of the constituents of the MSCI China Index), with the relative measures accounting for the remaining 40% of the team factor weighting. This modified program continued to maintain the same performance-based structure, but with updates to reflect the evolving operating challenges created by the pandemic and changes in business focuses to address these challenges and the inclusion of relative measures to assess the Company’s success in navigating the pandemic against peers in the same operating market. The Compensation Committee assigned a 40% weight to the two new relative measures in recognition of the difficulty of forecasting absolute performance in light of the volatile operating environment. The Compensation Committee set rigorous targets were designedfor the new

relative measures, which required above-industry performance and results: target performance for the rTSR measure required the Company to be at the 55th percentile and target performance for the relative revenue growth metric required the Company’s total revenues, excluding foreign currency translation, to be at least 2% higher than that of the China restaurant industry. The payout for the rTSR measure would have been capped at target if the Company’s TSR performance was negative. The Compensation Committee determined that this combination of performance metrics was aligned with the Company’s strategic actions to help protect the Company’s operating margin and profitability during this challenging but achievabletime and appropriate to motivate management to focus on the successful execution of the Company’s operational plan.

LOGO

The Company’s performance metrics were established as growth goals with strong management performance.2021 as the baseline measure. This methodology required performance better than 2021 in order to receive a target payout. 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 istarget, with a threshold level of performance for all measures that must be metrequired in order for any bonus associated with such metric to be paid. Additionally, all measures havepaid and a cap on the level of performance above which no additional bonus will be paid regardless of performance above the cap.payments.

YUM CHINA – 2023 Proxy Statement

  57

EXECUTIVE COMPENSATION   

The team performance targets,threshold, target and maximum achievement levels, actual results, weights and overall

performance for each measure forfollowing the Company’s NEOsadjustments described above are outlined below.

 

 

COMPANY

 

Team Performance Measures   Target   Actual   
Earned As a
% of Target
 		     Weighting   
Final Team
Performance		 
 

Adjusted Operating Profit Growth*

   18%   25%   167      50%   84 

Same Store Sales Growth**

   3.4%   4.2%   152      25%   38 

System Gross New Builds

   600   691   200      15%   30 

System Customer Satisfaction***

   —   —   200      10%   20 
  

 

 

 

FINAL COMPANY TEAM FACTOR

   172        
  

 

 

 
Team Performance Measures  Threshold   Target   Maximum    Actual   
Earned as a
% of Target
 		   Weighting*    
Final Team
Performance
 

Adjusted Operating Profit Growth(1)

  0%   9.8%   25%    -14%   0%    12%    0% 

Same Store Sales Growth

  0%   2%   4%    -7%   0%    4.5%    0% 

Delivery Sales Growth

  9%   15%   21%    17%   135%    4.5%    6% 

System Net New Builds

  1,080   1,230   1,380    1,159   76%    6%    4% 

Member Activity(2)

  —     —     —      —     0%    3%    0% 

Commodity Cost Growth(3)

  4%   2%   0%    2.1%   98%    15%    15% 

Labor Cost Growth(4)

  5%   0%   -5%    -7%   200%    15%    30% 

Relative Revenue Growth(5)

  1%   2%   4%    7%   200%    20%    40% 

R-TSR(6)

  40th   55th   85th    93.65th   200%    20%    40% 
 

 

 

 

FINAL COMPANY TEAM FACTOR

           135% 
 

 

 

 

KFC China(7)

 

Team Performance Measures   Target   Actual   
Earned As a
% of Target
 		     Weighting   
Final Team
Performance		 
 

Adjusted Operating Profit Growth*

   18%   29%   200      50%   100 

Adjusted Same Store Sales Growth**

   3.5%   5.3%   200      25%   50 

System Gross New Builds

   325   408   200      15%   30 

System Customer Satisfaction***

   81%   85%   200      10%   20 
  

 

 

 

FINAL KFC China TEAM FACTOR

   200        
  

 

 

 
Team Performance Measures  Threshold     Target     Maximum     Actual     
Earned as a
% of Target		 
 		  Weighting*   
Final Team
Performance
 

Adjusted Operating Profit Growth (KFC)(1)

  1%   12%   28%   -1%   0%   12%   0% 

Same Store Sales Growth (KFC)

  0%   2%   4%   -7%   0%   4.5%   0% 

Delivery Sales Growth (KFC)

  9%   15%   21%   18%   143%   4.5%   6% 

System Net New Builds (KFC)

  700   800   900   926   200%   6%   12% 

Member Activity (KFC)(2)

  0%   6.4%   12.9%   -0.2%   0%   3%   0% 

Commodity Cost Growth (YUMC)(3)

  4%   2%   0%   2.1%   98%   15%   15% 

Labor Cost Growth (YUMC)(4)

  5%   0%   -5%   -7%   200%   15%   30% 

Relative Revenue Growth (YUMC)(5)

  1%   2%   4%   7%   200%   20%   40% 

R-TSR (YUMC)(6)

  40th   55th   85th   93.65th   200%   20%   40% 
 

 

 

 

FINAL KFC TEAM FACTOR

        143% 
 

 

 

 

*

The original weighting established at the beginning of 2022 and prior to the July 2022 adjustments by the Compensation Committee was Adjusted Operating Profit Growth – 40%, Same Store Sales Growth – 15%, Delivery Sales Growth – 15%, System Net New Builds – 20%, and Member Activity – 10%, based on which the team factor results of the Company and KFC would have been 36% and 62%, respectively.

 

*(1)

Adjusted Operating Profit Growth as a team performance factor is the reportedadjusted operating profit growth, excluding items thatthe effects of foreign currency translations (either positive or negative) because we believe are not directly relatingthat changes in the foreign exchange rate can cause operating profit growth to appear more or impacted by the performance of the executives, such as operatingless favorable than business results of the newly acquired business during 2017.indicate.

 

**(2)

Adjusted Same Store Sales GrowthMember Activity as a Company team performance factor is defined as the Same Stores Sales Growth disclosed inweighted average results of KFC and Pizza Hut active member spending indices. The active member spending index of each of KFC and Pizza Hut measures the Annual Reporton Form 10-K, but adjusted for items to reflect how we evaluate same storeyear-over-year growth rate of member sales, growth for our brands internally.excluding foreign currency translation.

 

***(3)

System Customer Satisfaction target forCommodity Cost Growth measures the year-over-year change in purchase costs of the key commodities purchased by the Company, is measured, startingexcluding foreign currency translation, with a lower or negative growth rate resulting in 2017, based on feedback obtained from real customers through online customer surveys to better gauge customer satisfaction.higher achievement against target.

Based on Company performance, each of the NEOs other than Mr. Huang was assigned a Final Team Factor of 172% since the portion of their bonus tied to the Team Performance Factor was based entirely on Company performance. Mr. Huang was assigned a Final Team Factor of 193%, reflecting the weighting of his Team Performance Factor of 25% Company performance and 75% KFC China. The Compensation Committee then assessed individual performance and assigned an individual performance factor for the NEOs ranging from 120% to 150%, as described below under “2017 Named Executive Officer Compensation and Performance Summary.”

 

(4)

Labor Cost Growth measures the year-over-year change in labor costs, excluding foreign currency translation, for crews and restaurant management teams of the Company at the store level, with the impact from temporary store closures normalized in the calculation by excluding such periods. A lower or negative growth rate will result in higher achievement against target.

YUM CHINA– 2018 Proxy Statement58   

  39  YUM CHINA– 2023 Proxy Statement

 

 

 

EXECUTIVE COMPENSATION

 

  

(5)

Relative Revenue Growth represents the excess of the Company’s 2022 year-over-year growth rate in total revenues, excluding foreign currency translation, over that of the China restaurant industry.

(6)

The rTSR is measured as the Company’s achievement of total shareholder return compared against the constituents of the MSCI China Index. TSR percentile rank was calculated based on the 20 trading day average closing prices up to and including January 1, 2022 and the 20 day average closing prices up to and including December 31, 2022 and assumes reinvestment of dividends. The payout for the rTSR measure would be capped at target if the Company’s TSR performance is negative.

(7)

The KFC Team Factor was determined based on a combination of Company (YUMC) and KFC goals as noted in the table above. The Compensation Committee believed that this combination of goals incentivized specific KFC goals but also aligned KFC participants with the broader efforts of the Company as a whole.

 

As noted above, a Company team factor of 135% and a KFC team factor of 143% were achieved based on the performance metrics and weighting. The Compensation Committee applied discretion to reduce the results and approved a final team factor of 120% for Company performance and 125% for KFC performance.

Individual Performance Factors

In February 2022, the Compensation Committee approved the performance goals that would be used to determine the Individual Performance Factor for the CEO and provided input on the performance goals recommended by the CEO for the other NEOs, which would subsequently be used by the CEO to recommend to the Compensation Committee as the Individual Performance Factor for each NEO. As part of the Company’s annual performance evaluation process, the CEO, after having received input from the Compensation Committee and after consultation with each NEO, establishes that NEO’s performance objectives for the coming year, which are ultimately approved by the Compensation Committee. These performance objectives are not intended to be rigid or formulaic, but rather to serve as the framework upon which the CEO evaluates the NEO’s overall performance.

These annual performance goals generally fell within the performance categories of mitigating the impact of the COVID-19 pandemic, increasing stockholder returns, accelerating the growth of our brands, driving new business initiatives, effectively managing costs, and achieving ESG and other strategic objectives. Under each performance goal category, each NEO has a number of under-

lying pre-established goals against which the NEO’s performance is assessed to determine whether the NEO has achieved the overall performance goal. The evaluation of an executive’s performance relative to these goals is inherently subjective, involving a high degree of judgment based on the CEO’s observations of, and interactions with, the executive throughout the year. As an additional input to the evaluation of an executive’s performance, the CEO assesses the overall performance of the Company in light of the dynamics of the China market. As a result, no single performance goal or group of goals is determinative for the CEO’s evaluation of the executive’s performance.

The above evaluation provides the basis for the CEO’s recommendation to the Compensation Committee for the executive’s Individual Performance Factor. The Compensation Committee then meets with the CEO and discusses the CEO’s recommendations, and meets separately in executive session and makes a determination of the Individual Performance Factor for the NEOs, excluding the CEO.

The Compensation Committee applies similar factors in determining the Individual Performance Factor for the CEO. The Compensation Committee meets in executive session to discuss the CEO’s individual performance and then consults with the Chairman of the Board for their collective determination of the CEO’s Individual Performance Factor. The evaluation of the CEO’s overall performance relative to these factors is also inherently subjective, involving a high degree of judgment. The Compensation Committee and the other independent

YUM CHINA – 2023 Proxy Statement

  59

EXECUTIVE COMPENSATION   

directors assess the overall performance of the Company in light of the dynamics of the China market in which the Company operates. As a result, no single performance goal or group of goals is determinative for the evaluation of the CEO’s performance.

The use of Individual Performance Factors provides the Company with a degree of flexibility to recognize performance and reward contributions to strategic business initiatives and the building of organizational capabilities supportive of the creation of long-term value.

Based on the foregoing, the Compensation Committee assigned 2022 Individual Performance Factors for the NEOs ranging from 80% to 140%, as described below under “2022 NEO Compensation and Performance Summary.”

Long-Term Equity Incentives.

The Company provides long-term equity compensation to its executives to encourage decision-making that creates long-term sustainable stockholder value. In determining the size of the award,annual equity awards, the Compensation Committee considers the following:

 

Prior year individual and team performance;

•

Prior year individual and team performance;

 

Expected contribution in future years;

•

Expected contributions in future years;

 

Consideration of the market value of the executive’s role compared with similar roles in the Company’s peer group and based on compensation survey data; and

•

The market value of the executive’s role compared with similar roles in the Company’s peer group or based on compensation survey data; and

 

•

Achievement of the Company’s stock ownership guidelines.

Achievement of the Company’s stock ownership guidelines.

Annual Equity Grants. For 2017,2022, the Compensation Committee granted SARs as the annual equity awards for eachin the form of our NEOs. These SARs,have ten-year terms PSUs and RSUs, weighted 50%, 30% and 20%, respectively. Eighty percent of the 2022 annual equity grant is considered by the Compensation Committee to be performance-based as the PSUs will vest over four years.based only on the Company’s achievement of performance goals relating to rTSR, and the SARs will realize value only to the extent the Company’s stock price increases from the date of grant. The SARs and RSUs vest annually in equal installments of 25%, beginning on the first anniversary of the grant date and generally subject to continued employment through the applicable vesting date. The exercise price of each SAR grant wasis based on the closing market price of the underlying Company common stock on the date of grant. Therefore, SAR awards will have value only if

The 2022 Annual PSU Awards are designed to incentivize each NEO’s performance over the share price appreciates above the awards’ exercise price.

Promotion Grants. In connectionperformance period from January 1, 2022 to December 31, 2024 and to further align their interests with her promotion to the position of President and Chief Operating Officer of

the Company, the Board awarded Ms. Wat a promotion equity grant in the form of service-based RSUs with a grant date economic value of $2,000,000. These RSUs cliff vest on the fourth anniversary of the grant date, thereby serving as a retention incentive for the entire vesting period and further aligning the interests of Ms. Wat withour stockholders through the use of an rTSR performance goal. The rTSR performance goal for the three-year performance period is measured as achievement compared against the constituents of the MSCI China Index. This index was selected as the companies included are generally impacted by the same market conditions as the Company. TSR is based on the average closing price over the 20 trading days up to and including the start and end of the performance period. Vesting of the PSUs will be capped at target if the Company’s stockholders by aligning her compensation withTSR performance is negative over the long-term performance period regardless of how well the Company. In addition,Company performs as described below under “2017 Named Executive Officer Compensation and Performance Summary,” in connection with Ms. Wat’s promotioncompared to the position of CEO ofindex. The following table sets forth the Company,TSR vesting schedule for the Compensation Committee granted Ms. Wat SARs and PSUs as part of her 2018 long-term incentive award, with an aggregate economic value of $5,017,000.

Retention Grants. In September 2017, the Compensation Committee awarded retention grants of RSUs to each of Ms. Ng and Mr. Huang, with a grant date economic value of $1,000,000 and $800,000, respectively. These retention grants were intended to further align the interests of Ms. Ng and Mr. Huang with those of the Company, incentivize management to maximize the value of the Company, and retain critical talent to support the CEO transition. The RSUs granted to Ms. Ng vest in 25% equal annual installments beginning on the first anniversary of the grant date, while the RSUs granted to Mr. Huang cliff vest on the fourth anniversary of the grant date.2022 Annual PSU Awards.

 

 

           Threshold   Target   Maximum 

TSR Percentile Rank Achieved

   <25%      25%    55%    85% 

Proportion of Target Award Vesting

   0%      40%    100%    200% 

2017 Named Executive Officer Compensation and Performance Summary2020 Annual PSUs

 

Below is a summaryBeginning with the 2020 annual equity grants, the group of recipients of PSUs had been expanded to include all of the Company’s leadership team, including the NEOs. Under the 2020 Annual PSU program, PSUs would be

settled in shares of our NEOs’ 2017 compensation—which includes base salary, annual cash bonus, equity awardscommon stock based on continued service and compensation arrangements entered into in

connection with the management transitions described above—and an overviewachievement of their 2017the underlying performance goals during the three-year performance period. Unlike the 2019 PSUs where only a relative to the annual performance goals.measure was

 

 

Micky Pant

Chief Executive Officer (through February 28, 2018)

2017 Performance Summary. Mr. Pant, currently Senior Advisor to the Company, served as the Company’s CEO for the duration of 2017. The Compensation Committee determined Mr. Pant’s performance to be significantly above target with an individual performance factor of 150%. In considering Mr. Pant’s performance, the Compensation Committee recognized that under the leadership of Mr. Pant in 2017, the Company had achieved an

adjusted operating profit growth of 25% while opening 691 new restaurants, exceeding the new builds target of 600. Mr. Pant was recognized for not only achieving strong operating and business results, but also for his management of the transition processes for our senior leadership changes during 2017, including with respect to the identification of strong internal candidates for the positions of CEO, CFO, and Chief People Officer.

40  60   

  YUM CHINA– 20182023 Proxy Statement

  

 

 

   EXECUTIVE COMPENSATION

 

   

 

2017 Decisionsused, the performance metrics and goals for the 2020 Annual PSUs adopted two absolute growth targets, including adjusted total revenue growth (weighted 60%) and adjusted diluted EPS growth (weighted 40%). A relative measure, the Company’s rTSR compared to the MSCI China Index, was included only as a modifier to increase or decrease the number of units to be earned by up to 20%. Based on performance, vesting could range from 0% to 240% of the target number of shares subject to the 2020 Annual PSUs. In January 2017,2021 and 2022, the Compensation Committee set Mr. Pant’s 2017 compensation levels after considering individualclosely monitored the impact of the pandemic on the Company’s performance and considered different alternatives to fairly assess and reward management for their performance during the inputthree-year performance period of its compensation consultant and market data.the 2020 Annual PSUs. 2022 represented the final year of the 2020-2022 performance period for the 2020 Annual PSUs.

Base Salary. For 2017, no changesThe absolute targets for the 2020 Annual PSUs were made to Mr. Pant’s annual base salary. Accordingly, Mr. Pant’s annual base salary remainedestablished in early 2020 at $1,100,000.

Annual Incentive Plan Target and Payout Level. For 2017, there were no changes to Mr. Pant’s 2017 annual cash bonus plan target. Accordingly, it remained at 130%a time when the Company could not have anticipated or known the duration or impact of base salary, or $1,430,000. Mr. Pant’s 2017 annual cash bonus award payout was $3,689,400, reflecting a total payout of 258% of target basedthe COVID-19 pandemic on the market in which the Company operates. Due to the ongoing impact of COVID-19, the Company was operating in a volatile and unpredictable market during the duration of the performance period. Compared to 2019, the 2022 total revenue for the China restaurant industry declined by 6%, with a negative CAGR of 2% from 2019 to 2022. As a result, the original absolute growth goals set for the 2020 Annual PSUs became less effective in incentivizing management

and recognizing actions that would enable the Company to navigate the pandemic and emerge stronger.

As noted above, during the three-year period impacted by the COVID-19, we stayed nimble and quickly adapted to the rapidly-changing operating environment. With the tremendous efforts from our employees led by the leadership team, factorour revenue growth rate outperformed that of 172% and individual performance factorthe China restaurant industry. The CAGR of 150% based on Mr. Pant’s individual performance.

Long-Term Incentive Award. For 2017, Mr. Pant’s annual long-term incentive award increasedour total revenue growth (excluding foreign currency translation) from a grant date economic value of $3,000,0002019 to 2022 was 2%, compared to a grant date economic valuenegative CAGR of $4,000,000 and was delivered2% in the formtotal revenue of SARs.

Compensation Adjustments in Connection with Resignation as CEO. On October 5, 2017, the Company announced that, effective March 1, 2018, Mr. Pant would be stepping down fromChina Restaurant industry over the position of CEO, and assuming the position of Senior Advisorsame period. In addition, compared to the Company for atwo-year term. Mr. Pant’s long tenureconstituents of the MSCI China Index, the Company’s TSR ranked at YUMthe 68.91 percentile over the three-year period from 2020 to 2022.

In light of the Company’s strong performance against its peers despite the COVID-19 pandemic and considering that keeping the Company and his expertiseoriginal design of the 2020 Annual PSUs potentially would have resulted in the global restaurant industry will continue to bring to the Company his valuable business and strategic development experience in his role of Senior Advisor. In order to account for Mr. Pant’s new role,zero payout, which the Compensation Committee adjusted Mr. Pant’s base salary from $1,100,000 to $1,000,000, payablebelieved would not appropriately reflect management’s performance and incentivize management in cash ordirecting the Company common stock, as elected by Mr. Pant. In his role as Senior Advisor, Mr. Pant is no longer eligible to participate in the Company’s annual incentive program or receive annual equity grants under the Company’s long-term incentive program. In connection with his stepping down as CEO and assuming the position of Senior Advisor effective March 1, 2018, the outstanding equity awards of Mr. Pant will be allowed to continue to vest undernavigate the termspandemic, the Compensation Committee determined to adjust the weighting of his letterthe performance metrics of understanding dated October 28, 2016the 2020 Annual PSUs in December 2022. The following graph illustrates the reallocation of the weighting of the performance metrics before and his transition agreement dated September 29, 2017.after the adjustment.

 

 

LOGO

YUM CHINA – 2023 Proxy Statement

Jacky Lo  61

Chief Financial Officer

EXECUTIVE COMPENSATION   

(1)

The number of performance units that vest shall be modified by up to +20% for outperformance, or up to -20% for underperformance, as compared to the MSCI China Index.

(2)

The following table sets forth the rTSR vesting schedule for the 2020 Annual PSUs after the adjustment:

           Threshold   Target   Maximum 

TSR Percentile Rank Achieved

   <25%      25%    55%    85% 

Proportion of Target Award Vesting*

   0%      40%    100%    200% 

*

Vesting proportion for performance between performance levels would be determined based on linear interpolation. Under the program, payout would be capped at target if the Company’s TSR was negative over the three-year performance period. TSR percentile rank was calculated based on the 20-trading day average closing prices up to and Treasurerincluding January 1, 2020 and the 20-day average closing prices up to and including December 31, 2022 and assumes reinvestment of dividends.

 

2017 Performance Summary.These weightings were adjusted to better reflect alignment between pay and performance over the multiple year performance period. The Compensation Committee determined Mr. Lo’smaintained the relative weighting of adjusted total revenue growth and adjusted diluted EPS growth with each other. The Compensation Committee placed more emphasis on the rTSR metric in recognition of the difficulty of measuring performance against absolute growth goals in total revenue and EPS, which were set before the onset of the COVID-19 pandemic, in light of the volatile operating environment and its assessment that rTSR would better measure the Company’s success in execution of its evolving operational plan during the three-year performance period and its performance compared to be above target with an individualthe China restaurant industry and the MSCI China Index.

Except for the changes in weighting of the performance factor of 120%.goals, the terms and conditions applicable to the 2020 Annual PSUs remained unchanged. The Compensation Committee determined that under Mr. Lo’s leadership, the Company achieved exceptional financial results in 2017, with payback periods for new restaurants reduced to two andthree-to-four years for KFC and Pizza Hut, respectively. Additionally, during his tenure as CFO, the Company declared its first dividend and expanded its share repurchase program.

In March 2017, the Compensation Committee approved the 2017 compensation levels for Mr. Lo in connection with his promotionthis modification to the position2020 Annual PSUs was aligned with the Company’s compensation philosophy of Vice President, Controllerretaining talent and Principal Accounting Officerrewarding performance, particularly in light of the Company. In September 2017, Mr. Lo’s compensation was further adjusted in connection with his promotion to the position of CFO. In approving the 2017 adjustments to Mr. Lo’s

compensation, the Compensation Committee considered the input of its compensation consultant, market data and the compensation paid to Mr. Lo’s predecessors at the Company.

Base Salary. In March 2017, in connection with Mr. Lo’s promotion to the position of Vice President, Controller and Principal Accounting Officeroperational achievements of the Company Mr. Lo’s base salary was increased from $301,667 to $330,018and further increased in September 2017 to $580,573 when he was promoted tosince the position of CFO.

2020 Annual Incentive Plan TargetPSUs were granted.

The table below sets forth the threshold, target and Payout Level. In March 2017, Mr. Lo’s annual cash bonus target was increased from 40% to 50% of his base salarymaximum achievement levels, weights and in September 2017 his annual cash bonus target was further increased to 70% of his base salary, resulting in a

YUM CHINA– 2018 Proxy Statement

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EXECUTIVE COMPENSATION   

blended bonus target for the year of $318,440. Mr. Lo’s 2017 annual cash bonus award payout was $657,261, reflecting a total payout of 206% of target based on the Company team factor of 172% and individual performance factor of 120% based on Mr. Lo’s individual performance.

Long-Term Incentive Award. For 2017, Mr. Lo’s annual long-term incentive award, provided in the form of SARs, had a face value of $550,000.

Transition Compensation. For his service as interim CFO during 2017, Mr. Lo received an additional monthly cash payment of $ 10,010 while in the interim role.

Joey Wat

President and Chief Operating Officer

2017 Performance Summary. Ms. Wat, our current CEO, served as the President and Chief Operating Officeractual results for each measure of the Company from February 2017 through February 28, 2018. In this role, general managers of KFC and Pizza Hut as well as Head of Technology and Public Affairs reported to Ms. Wat. Ms. Wat had previously served as CEO of KFC China. Ms. Wat’s 2017 performance was rated as significantly above target with an individual performance factor of 150%. During 2017, Ms. Wat directed2020 Annual PSUs following the Company’s formulation of a three-year corporate growth plan, which is now under execution. Ms. Wat assumed responsibilities with respect to Pizza Hut in February 2017 and applied her consumer instinct in driving its turnaround. In addition, Ms. Wat led a product improvement program by enhancing food taste and value perception. Ms. Wat was also viewed as instrumental in PH Bistro gaining traction and reductions in crew turnover, as well as the integration of Pizza HutDine-in and Delivery as one brand. The KFC “Little Bird” program that she championed was proven to be a meaningful and successful CSR initiative reaching over 21 provinces and benefiting over 60,000 children.

In January 2017, the Board’s independent andnon-management directors approved the 2017 compensation levels for Ms. Wat in connection with her promotion to the position of President and Chief Operating Officerreallocation of the Company.

Base Salary. In February 2017, Ms. Wat’s base salary was increased from $628,300 to $750,000.

Annual Incentive Plan Target and Payout Level. In February 2017, Ms. Wat’s annual cash bonus target was increased from 85% to 100%weighting of her base salary, resulting in a blended bonus target for the year of $738,288. Ms. Wat’s 2017 annual cash bonus award payout was $1,904,782, reflecting a total payout of 258% of target based on the Company team factor of 172% and individual performance factor of 150% based on Ms. Wat’s individual performance.

Long-Term Incentive Award. In 2017, Ms. Wat received an annual long-term incentive award in the form of SARs with a grant date face value of $3,000,000 (equal to a grant date economic value of $1,139,167). In addition, in connection with her promotion to the role of President and Chief Operating Officer, Ms. Wat received a grant of service-based RSUs with a grant date economic value of $2,000,000, which cliff vest on the fourth anniversary of the date of grant, subject to Ms. Wat’s continued employment with the Company through the vesting date.

Compensation Adjustments in Connection with Promotion to CEO.On October 5, 2017, the Company announced that Ms. Wat would be assuming the position of CEO of the Company, effective March 1, 2018. In formulating Ms. Wat’s compensation as CEO, the Compensation Committee worked closely with its compensation consultant to create an overall package that would be competitive and reasonable when compared against peer companies, potential competing offers and the compensation paid to the current CEO. After considering the advice of its compensation consultant, the Compensationmetrics:

 

 

Performance Measure  Threshold    Target    Maximum    Actual    
Earned as a
% of Target 		 
 		  Weighting    
Final Team
Performance 
 

R-TSR

  25th   55th   85th   68.91th   146.36%   60%   87.82% 

Adjusted Total Revenue CAGR(1)

  4%   7%   10%   3%   0%   24%   0% 

Adjusted Diluted EPS CAGR(2)

  4.5%   7.25%   10%   -12%   0%   16%   0% 

Final Payout Ratio

        87.82% 
 

 

 

  

 

 

  

 

 

 

(1)

Adjusted Total Revenue represents total revenues as reported in the Consolidated Financial Statements included in the Annual Report on Form 10-K for the year ended December 31, 2022 (the “Audited Financial Statements”), but adjusted to exclude (i) revenues from transactions with franchisees and unconsolidated affiliates; (ii) revenues generated from certain emerging brands; and (iii) the impact of foreign currency fluctuations. The performance goal is measured from 2019 year-end results, which is the base year for measuring CAGR.

(2)

Adjusted Diluted EPS is defined as Adjusted Net Income divided by Adjusted Weighted-Average Common and Diluted Potential Common Shares Outstanding, where:

42  • 

Adjusted Net Income represents adjusted net income presented in the Company’s annual report on Form 10-K, but further adjusted to exclude: (i) income generated from certain emerging brands; (ii) income tax expense

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   EXECUTIVE COMPENSATION

 

   

 

impact of planned or actual repatriations; (iii) investment gains or losses for equity investments measured at fair value; (iv) certain non-recurring adjustments; (v) the impact of foreign currency fluctuations; and (vi) the income tax effect of the above adjustments. The performance goal is measured from 2019 year-end results, which is the base year for measuring CAGR.

•

Adjusted Weighted-Average Common and Diluted Potential Common Shares Outstanding represents weighted-average common and diluted potential common shares outstanding presented in Note 5 to the Audited Financial Statements, and adjusted to exclude: (i) impact on share count associated with certain share repurchases; (ii) impact on share count as a result of the Company’s global offering and secondary listing on the HKEX; (iii) impact on outstanding shares held by employees of YUM! Brands, Inc. (“YUM”); and (iv) diluted shares associated with the 2020 partner PSU awards (“2020 Partner PSU Awards”).

Committee recommended andBased on the Board approved an increase in Ms. Wat’s annual base salary from $750,000 to $1,100,000 and an increase in her annual performance-based cash bonus target from 100% to 130% of her annual base salary. PursuantCompany’s 22.55% TSR performance during the three-year performance period, the Company ranked at the 68.91 percentile as compared to the Company’s long-term incentive program,TSR performance of the still-active constituents of the MSCI China Index at the end of the performance period, resulting in 2018, Ms. Wat is eligible to receive SARs87.82% vesting of the target PSUs and PSUs, weighted 75% and 25% in terms of face value, respectively, with a grant date face value of $10,000,000 (equal to a grant date economic value of $5,017,000). By economic value, approximately 50% of Ms. Wat’s 2018 target long-term incentive opportunity was delivered as PSUs. Ms. Wat remains eligible to receive certain expa-dividend equivalents.

triate benefits in connection with her employment withThe table below shows the Company. Ms. Wat will no longer be eligible for tax equalization benefits, except for those connected to previous equity grants and retirement contributions. If Ms. Wat’s employment is terminatednumber of shares of our common stock acquired by each of the Company without “cause” prior to March 1, 2021, then she will be entitled to a severanceNEOs upon the vesting of the 2020 Annual PSUs (before payment payable in monthly installments, equal to two times her base salary and annual bonus target, subject to her execution of a post-termination agreement that includes restrictive covenants relating tonon-solicitation,non-competition andnon-disclosure.applicable withholding taxes).

 

 

Name

Number

of Shares
Acquired on
Vesting

(#)

Shella NgMs. Wat

52,166

Chief Legal Officer and Corporate SecretaryMr. Yeung

12,520

Mr. Chan

8,347

Mr. Huang

12,520

Mr. Yuen

6,782

 

2017 PerformancePlease see the “2022 Summary. During 2017, Ms. Ng served as Compensation Table” and the Company’s Chief Legal Officer“2022 Grants of Plan-Based Awards Table” for further information regarding the 2020 Annual PSUs that vested during the year and Corporate Secretary. Ms. Ng’s performance was rated as abovethe incremental fair value associated with the modification of the 2020 Annual PSUs.

2022 Lavazza ESOP Grants

As disclosed in last year’s CD&A, the Company and Lavazza Group established the Lavazza Joint Venture to explore and develop the Lavazza coffee business in China. In order to incentivize the efforts of employees of the Company, Lavazza Group and the Lavazza Joint Venture to execute on the Lavazza Joint Venture’s business plan, including the target with an individual performance factor of 125%. In determining Ms. Ng’s bonus payout, Ms. Ng was recognizedto open 1,000 Lavazza

stores in China in the next few years, the Lavazza Joint Venture established the JV Equity Plans allowing for the leadership roles she assumedgrant of equity awards with respect to the Company’s establishment of a compliance oversight committee, the Company’s acquisition of Daojia, and declarationLavazza Joint Venture to key employees of the Company’s first dividend. Dating backLavazza Joint Venture, as well as select employees of Lavazza Group and the Company. Under the JV Equity Plans, up to her time with YUM, Ms. Ng has over 22 years15% of experience with the Company, andher know-how has been critical to providing a strong legal and corporate foundation to our newly independent company.

In January 2017, the Compensation Committee set Ms. Ng’s 2017 compensation levels after considering the input of its compensation consultant and market data.

Base Salary. For 2017, Ms. Ng’s base salary was increased from $370,307 to $400,000.

Annual Incentive Plan Target and Payout Level. For 2017, Ms. Ng’s annual cash bonus target was increased from 60% to 65% of her base salary, resulting in a blended bonus target for the year of $257,363. Ms. Ng’s 2017 annual cash bonus award payout was $553,331,

reflecting a total payout of 215% of target based on the Company team factor of 172% and individual performance factor of 125% based on Ms. Ng’s individual performance.

Long-Term Incentive Award. In 2017, Ms. Ng received an annual long-term incentive awardequity in the form of SARsLavazza Joint Venture may be granted as equity awards, with a face value of $1,000,000.

In September 2017, the Compensation Committee awarded a retention award of RSUs with a grant date economic value of $1,000,000, which vests in 25% annual installments beginning on the first anniversaryemployees and other eligible participants of the grant date. Concurrently with the award of RSUs, Ms. Ng was awarded a cash retention award of $256,664 payable in 2019, subject to her remaining employed with the Company through March 31, 2019. Ms. Ng isLavazza Joint Venture, including restaurant general managers, eligible to receive apro-rated portionup to 80% of her retention bonus based on the numberJV Equity Plan shares, or 12% of days she remained with the Company from November 1, 2017 through March 31, 2019equity in the event her employment is terminated byLavazza Joint Venture. The remaining JV Equity Plan shares will be allocated to the Company without cause on or after November 30, 2018. These retention grants were intended to further align the interests of Ms. Ng with those of the Company, incentivize management to maximize the valueemployees of the Company and retain critical talentLavazza Group in accordance with their respective equity interest in the Lavazza Joint Venture, or up to support2% and 1%, respectively, of the CEO transition.equity in the Lavazza Joint Venture.

 

 

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Johnson Huang

General Manager, KFC

 

2017 Performance Summary. Mr. Huang has served as General Manager, KFC since February 2017. He previously served as the Company’s Chief Information and Marketing Support Officer from October 2016 to February 2017. During 2017, Mr. Huang’s performance was rated as above target with an individual performance factor of 130%. The Compensation Committee determined that under Mr. Huang’shas discretion to award the portion of the JV equity pool allocated to the Company to employees of the Company who have been key contributors to the efforts of the Lavazza Joint Venture and are deemed to be essential to the successful execution of the Lavazza Joint Venture’s business plan. The JV Equity Plans and related grants were adopted in order to support entrepreneurial and innovative thinking and leadership in 2017, KFC achieved exceptional performance, exceeding targets in adjusted operating profit growth, adjusted same stores sales growth, new buildsthrough a compensation structure linked to brand expansion and customer satisfaction. Mr. Huang’s technology-driven expertise was considered byour long-term strategy.

After considering the input of the Compensation Committee’s compensation consultant with respect to form and amount of equity awards to be granted to Company employees, on February 10, 2022, the Lavazza Joint Venture and the Compensation Committee approved equity awards under the applicable JV Equity Plan to be critical to KFC’s continued developmentcertain employees of digital and customer relationship management initiatives, with KFC loyalty program members surpassing 110 million, with member sales representing 38%the Company, including awards accounting for 0.9% of KFC’s salesthe equity in the fourth quarter of 2017.

In January 2017, in connection with Mr. Huang’s promotionLavazza Joint Venture to the position of General Manager, KFC, the Board’s independent andnon-management directors approved Mr. Huang’s 2017 compensation levels. In September 2017, the Compensation Committee increased Mr. Huang’s compensation to reflect his increased responsibilities as General Manager, KFC, based on the input of its compensation consultant and market data, Mr. Huang’s performance and potential and the compensation package of his predecessor.

Base Salary. In March 2017, Mr. Huang’s base salary was increased from $362,900 to $400,000 and further increased in October 2017 to $585,000.

Annual Incentive Plan Target and Payout Level. In February 2017, Mr. Huang’s annual cash bonus target was increased from 55% to 65% of his base salary, and in October 2017 his annual cash bonus target was further increased to 75% of his base salary, resulting in a blended bonus target for the year of $388,905. Mr. Huang’s 2017 annual cash bonus award payout was $975,762, reflecting a total payout of 251% of target based on the blended team factor of 193% and individual performance factor of 130% based on Mr. Huang’s individual performance.

Long-Term Incentive Award. In 2017, Mr. Huang received an annual long-term incentive awardNEOs, in the form of SARsPSUs. The PSUs are subject to both performance-based vesting conditions and the occurrence of a liquidity event. The performance-based vesting conditions relate to the Lavazza Joint Venture’s performance with respect to revenue (RMB606 million), store-level profitability (to achieve restaurant profit breakeven), brand-level profitability (to achieve operating profit breakeven) and store count (net store count to reach 1,000), each equally weighted, with performance to be measured on a face valuerolling last four quarter basis over a four-year performance period. The liquidity event vesting condition, which includes the occurrence of $1,000,000.

In September 2017,an initial public offering of the Lavazza Joint Venture, must occur within seven years of the grant date for the awards to vest. Any portion of the award that does not vest, either based on the achievement of the applicable performance-based vesting conditions or the non-occurrence of the liquidity event, will be forfeited in their entirety. To recognize the efforts of each of theNEOs with respect to the Lavazza Joint Venture and to incentivize and galvanize their continued focus on the success of the Lavazza Joint Venture, the Compensation Committee awarded a retention award of RSUsgranted PSUs with athe following target grant date economic value of $800,000, which cliff vest on the fourth anniversaryfair values to each of the date of grant, subject toNEOs: Ms. Wat, $1,000,000; Mr. Huang’s continued employment with the Company through the vesting date. This retention grant was intended to further align the interests ofYeung, $200,000; Mr. Chan, $200,000; Mr. Huang, with those$200,000 and Mr. Yuen, $200,000.

As noted in the “2022 Summary Compensation Table,” as of the Company, incentivize management to maximizegrant date, the valueachievement of the Company,performance-based vesting conditions and retain critical talentthe occurrence of a liquidity event with respect to support the CEO transition.

Ted Stedem

Former Chief Financial Officer

Mr. Stedem served as the Company’s CFO from the beginning of the year until June 1, when he resigned2022 Lavazza ESOP Grants were not considered probable for accounting purposes and, ceased to have an employment relationship with the Company.

In January 2017, the Compensation Committee set Mr. Stedem’s 2017 compensation levels after considering the input of its compensation consultant, individual performance and market data.

Base Salary. For 2017, Mr. Stedem’s base salarytherefore no associated expenses was increased from $525,000 to $580,000.

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   EXECUTIVE COMPENSATION

Annual Incentive Plan Target and Payout Level. For 2017, Mr. Stedem’s annual cash bonus target was increased from 65% to 70% of his base salary, which would have resulted in a blended bonus targetrecognized for accounting purposes that can be included for the year of $400,086. As noted below, Mr. Stedem received a prorated target payout under the annual cash bonus plan in connection with his resignation from the Company in June 2017.

Long-Term Incentive Award. In 2017, Mr. Stedem received an annual long-term incentive award2022 Lavazza ESOP Grants in the form2022 Summary Compensation Table.

Other Elements of SARs with a face value of $3,000,000. In con-

nection with his resignation, Mr. Stedem forfeited his 2017 annual long-term incentive award.

Transition Compensation. In connection with Mr. Stedem’s resignation, theExecutive Compensation Committee approved a prorated 2017 annual bonus for Mr. Stedem at his target level and a repatriation expense reimbursement of $35,775 to compensate Mr. Stedem and his family for airfare and shipment of personal belongings to the U.S.Program

Retirement and Other Benefits

As with all Company employees, Company executive officers receive certain employment and post-employment benefits. BenefitsWe believe the benefits we offer are an important part of retention and capital preservation for all levels of employees. Our benefits are designed to protect against unexpected catastrophic losses of health and earnings potential and provide a means to save and accumulate assets for retirementretirement.

Post-Termination and other post-employment needs.Change in Control Compensation.

Retirement Plans.The Company provides certain post-termination and change in control compensation to help accomplish the Company’s compensation philosophy of attracting and retaining executive talent.

The Company maintains the Yum China Holdings, Inc. Leadership Retirement Plan (“YCHLRP”),a change in control severance plan that covers all NEOs. Severance benefits are payable only upon a qualifying termination, which is an unfunded, unsecured account-based retirementdefined as a termination by the Company without cause or by the participant due to good reason, within 24 months following the consummation of a change in control of the Company. The Compensation Committee believes change in control compensation promotes management independence and helps retain, stabilize, and focus the executive officers in the event of a change in control.

The Company also maintains the Executive Severance Plan, which provides severance benefits to certain key management employees of the Company and its affiliates who are selected by the Compensation Committee to participate in the plan, including each of the NEOs, and who experience a qualifying termination under the terms of the plan. The Executive Severance Plan aids in recruitment and retention and promotes smooth succession planning,

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   EXECUTIVE COMPENSATION

while providing transitional pay for a limited period of time to executives whose employment is involuntarily terminated. Payments are conditioned upon the executive’s execution of a release of claims in favor of the Company and compliance with restrictive covenants. The terms of the Change in Control Severance Plan and Executive Severance Plan were determined after considering market data and the input of the compensation consultant. The award agreements with respect to the Company’s outstanding equity awards also provide for pro-rata vesting in the event of certain qualifying terminations of employment. Please see the “Potential Payments upon a Termination or a Change in Control” section below for a quantification of the amounts that allocates a percentage of pay to an accountwould be payable to a participating executive following the later to occureach of the executive’s separationNEOs in connection with a termination of employment and attainmentor change in control as of age 55. During 2017, Messrs. Pant and Stedem received annual allocations to their accounts under the YCHLRP.December 31, 2022.

Retirement Plans. The Company offers certain executives working in China retirement benefits under the Bai Sheng Restaurants (Hong Kong)China Holdings Limited Retirement Scheme.Scheme (“BSRCHLRS”). Under this program,the BSRCHLRS, executives may make personal contributions, and the Company provides a company-funded contribution ranging from 5% to 10% of ana participating executive’s base salary. During 2017, Mr. Lo, Ms. Wat, Ms. Ng and Mr. Huang2022, all of our NEOs were participants in the program.BSRCHLRS, and each NEO received a company-funded contribution.

Medical, Dental, and Life Insurance and Disability Coverage.Coverage. The Company provides benefits such as medical, dental, and life insurance and disability coverage to its executive officers through the same benefit plans that are provided to all eligible China-based employees.

Perquisites. CertainPerquisites. As noted earlier in the CD&A, the Company’s executive compensation program may differ from our U.S. peers to reflect the competitive market in China, the need to attract a global skillset with deep knowledge of both U.S. and Chinese regulatory regimes and the Company’s desire to incentivize an entrepreneurial mindset to encourage actions that support our long-term growth and strategy. Because the Company is designing an executive compensation program that attracts, retains and incentivizes global talent, the Company provides certain perquisites are provided to certain Company executive officers relating to overseas assignments.assignments as part of a competitive compensation package to attract and retain globally mobile executives. These perquisites are governed by the Company’s formal mobility policy, are offered ona case-by-case basis and reflect each executive’s particular circumstances while also generally reflecting market practices for similarly situated, globally mobile executives working in international companies based in Mainlandmainland China. For example, the Company may offer executive perquisites such as housing reimbursement, childrencost subsidies, dependent education, mobility allowances,and home leave payments costto executives performing services in China.

Prior to our spin-off from YUM, certain of living allowances, tax preparation services andour NEOs were offered tax equalization benefits while the executive is performing services in China.as an element of their compensation. These perquisites are intended to help the Company attract and retain high-performing executives from different countries who have the skill sets and experience to successfully manage and lead the Company while living in Mainland China. While tax equalization benefits are viewed as an important element in our ability to recruit and retain talent to work in Mainland China, we intend to review these benefits in connection with newrepresent legacy compensation arrangements to assess whether they remain consistententered into with our overall compensation program. In connection withformer parent. After the entry into Ms. Wat’s letter agreement for her role as CEO, we eliminated tax equalization benefits other than certain grandfathered tax equalization benefits. In addition,spin-off, the Compensation Committee phased out tax equalization benefits for Messrs. Lo and Huang were also eliminated, otherthe NEOs (other than certain grandfathered tax equalization benefits. benefits pursuant to the legacy arrangements).

See the 20172022 All Other Compensation Table in this CD&A for details regarding the perquisites received by our NEOs with respect to 2017.during 2022.

 

 

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EXECUTIVE COMPENSATION   

2022 NEO Compensation and Performance Summary

Below is a summary of our NEOs’ 2022 compensation—which includes base salary, annual cash incentive, and equity awards, as well as an overview of our NEOs’ 2022 performance relative to their individual annual performance goals. The specific performance summaries described below were considered in determining the Individual Performance Factor under the annual cash bonus program. As noted in the CD&A, in February 2022, the Compensation Committee approved the performance goals that would be used to determine the Individual Per-

formance Factor for the CEO and other NEOs. These annual performance goals generally fell within the performance categories of mitigating the impact of the COVID-19 pandemic, increasing stockholder returns, accelerating the growth of our brands, driving new business initiatives, effectively managing costs, and achieving ESG and other strategic objectives. Under each performance goal category, each NEO has a number of underlying pre-established goals against which the NEO’s performance is assessed. See “Elements of the Executive Compensation Program—Annual Performance Based Cash Bonuses—Individual Performance Factor.”

Joey Wat

Chief Executive Officer

2022 Performance Summary. The Compensation Committee determined Ms. Wat’s performance to be significantly above target with an Individual Performance Factor of 140%. Ms. Wat was recognized for leading the Company’s crisis management team in taking timely and decisive actions in tackling the many unprecedented challenges arising out of the COVID-19 pandemic in 2022, which was viewed as even more difficult than 2020 or 2021. Those measures included protecting employees, sustaining operations, driving sales and protecting profitability. Despite a decline in the total revenue for the China restaurant industry due to massive lockdowns and infections in both early and late 2022, Ms. Wat led the Company to achieve profitability in every quarter in 2022. The Company also delivered revenue growth (excluding foreign currency translation) which outperformed the China restaurant industry revenue growth by 7% in 2022. Ms. Wat led the effort to restructure both commodity and labor cost bases to protect margins, resulting in a full year restaurant margin of 14.1%, compared to 13.7% in 2021. The Company’s 2022 TSR ranked 93.65 percentile against the constituents of the MSCI China Index. Despite a very challenging business environment, the Company achieved net new stores of 1,159 with healthy average payback period of two and three years for KFC and Pizza Hut, respectively. Ms. Wat also provided strategic guidance to the emerging brands including Taco Bell and Lavazza, both making solid progress in 2022. Taco Bell doubled its store count to 91 while Lavazza reached a store count of 85, at the end of 2022. On ESG, under

Ms. Wat’s direction, the Company also formulated its near term greenhouse gas (GHG) emissions reduction targets and roadmap and received SBTi’s approval in November 2022. The Company also published its first TCFD report and received the industry highest score for the third year from Dow Jones Sustainability Index.

2022 Compensation Decisions. Effective February 1, 2022, the Compensation Committee decided to bring Ms. Wat’s 2022 target compensation levels at slightly above the median of the Company’s compensation peer group, after taking into account Ms. Wat’s experience in and knowledge of the China consumer market and global expertise. These decisions positioned Ms. Wat’s total target direct compensation at the 54th percentile of the Company’s 2022 compensation peer group. After considering the advice of its compensation consultant, market practice, and Ms. Wat’s individual performance, the Compensation Committee made the following compensation decisions.

•

Base Salary. Ms. Wat’s base salary was increased from $1,350,000 to $1,425,000, an increase of 5.6%.

•

Annual Incentive Plan Target and Payout Level. Ms. Wat’s annual cash bonus target remained unchanged at 200% of her base salary, resulting in a bonus target for the year of $2,850,000. Ms. Wat’s 2022 annual cash bonus award payout was $4,788,000,

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reflecting a total payout of 168% of target based on the Team Performance Factor of 120% and Individual Performance Factor of 140%.

•

Long-Term Incentive Award. The Compensation Committee approved an annual long-term incentive award

of $6,500,000 to Ms. Wat in February 2022, delivered in 50% SARs, 30% PSUs and 20% RSUs, which was increased from an annual long-term incentive award of $6,000,000 in 2021. Ms. Wat also received a 2022 Lavazza ESOP Grant with a grant date fair value of $1,000,000.

Andy Yeung

Chief Financial Officer

2022 Performance Summary. The Compensation Committee determined Mr. Yeung’s performance to be significantly above target with an Individual Performance Factor of 140%. Mr. Yeung was recognized for driving the disciplined scenario planning approach in financial planning and vigorous austerity measures, which helped maintain yearly and quarterly profitability in a highly volatile business environment in 2022 and achieved a full year restaurant margin of 14.1%, compared to 13.7% in 2021. Mr. Yeung played an instrumental role in contributing to the Company’s successful primary conversion on the Hong Kong Stock Exchange despite the challenges of lockdown and travel restrictions. Mr. Yeung was instrumental in resolving many novel issues arising from regulatory framework differences between Hong Kong and U.S. Under Mr. Yeung’s leadership, systems were set up to fulfill financial reporting requirements applicable to a dual-primary issuer on both the New York Stock Exchange and Hong Kong Stock Exchange. Mr. Yeung provided in-depth guidance to KFC, Pizza Hut and the emerging brands, resulting in improvement in their store unit economics under difficult macro and COVID conditions. Mr. Yeung also served as a core member of the Company’s Sustainability Committee and played an active role in ESG discussions, including the Company’s strategy and roadmap relating to near term Science Based Target setting, which was approved by SBTi in November 2022.

2022 Compensation Decisions. Effective February 1, 2022, the Compensation Committee set Mr. Yeung’s 2022 compensation levels after considering the advice of its compensation consultant, market practice and Mr. Yeung’s individual performance.

•

Base Salary. Mr. Yeung’s base salary was increased from $800,000 to $840,000, an increase of 5.0%.

•

Annual Incentive Plan Target and Payout Level. Mr. Yeung’s annual cash bonus target remained at 100% of his base salary, resulting in a bonus target for the year of $840,000. Mr. Yeung’s 2022 annual cash bonus award payout was $1,411,200, reflecting a total payout of 168% of target based on the Team Performance Factor of 120% and Individual Performance Factor of 140%.

•

Long-Term Incentive Award. The Compensation Committee approved an annual long-term incentive award of $1,580,000 to Mr. Yeung in February 2022, delivered in 50% SARs, 30% PSUs and 20% RSUs, which was increased from an annual long-term incentive award of $1,500,000 in 2021, which positioned Mr. Yeung’s annual target total direct compensation at approximately 90% of the market median of the compensation peer group. Mr. Yeung also received a 2022 Lavazza ESOP Grant with a grant date fair value of $200,000.

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EXECUTIVE COMPENSATION   

Joseph Chan

Chief Legal Officer

2022 Performance Summary. The Compensation Committee determined Mr. Chan’s performance to be on target with an Individual Performance Factor of 80%. Mr. Chan led the Company’s successful primary conversion on the Hong Kong Stock Exchange. Under Mr. Chan’s leadership, the Company’s governance, reporting and compliance policies and practices were further updated and enhanced, reflecting the requirements applicable to a dual-primary issuer on both the New York Stock Exchange and Hong Kong Stock Exchange. Mr. Chan was instrumental in resolving many novel issues arising from regulatory framework differences between Hong Kong and the U.S. Mr. Chan also played a critical role in establishing a compliance process and system in monitoring and proactively managing risks regarding the continuing evolving areas of PRC privacy and cybersecurity laws. Mr. Chan also played an instrumental role in supporting the execution of strategic investments, including transaction structure, due diligence, agreement drafting and negotiation, as well as regulatory approvals. Mr. Chan was recognized for serving as a core member of the Company’s Sustainability Committee and played an active role in ESG discussions, including the Company’s strategy and roadmap relating to near term Science Based Target setting, which was approved by SBTi in November 2022.

2022 Compensation Decisions. Effective February 1, 2022, the Compensation Committee set Mr. Chan’s 2022 compensation levels after considering the advice of its compensation consultant, market practice and Mr. Chan’s individual performance.

•

Base Salary. Mr. Chan’s base salary was increased from $600,000 to $630,000, an increase of 5.0%.

•

Annual Incentive Plan Target and Payout Level. Mr. Chan’s annual cash bonus target remained at 80% of his base salary, resulting in a bonus target for the year of $504,000. Mr. Chan’s 2022 annual cash bonus award payout was $483,840, reflecting a total payout of 96% of target based on the Team Performance Factor of 120% and Individual Performance Factor of 80%.

•

Long-Term Incentive Award. The Compensation Committee approved a long-term incentive award of $1,200,000 to Mr. Chan in February 2022, to be delivered in 50% SARs, 30% PSUs and 20% RSUs, which was increased from an annual long-term incentive award of $1,125,000 in 2021 Mr. Chan also received a 2022 Lavazza ESOP Grant with a grant date fair value of $200,000.

Johnson Huang

Chief Customer Officer (since May 1, 2022); General Manager, KFC (through April 30, 2022)

2022 Performance Summary. Mr. Huang has served as the Company’s Chief Customer Officer since May 1, 2022, after serving as General Manager, KFC through April 30, 2022. The Compensation Committee determined that Mr. Huang’s 2022 performance was on target with an Individual Performance Factor of 105%. Mr. Huang, as General Manager of KFC, was recognized for driving KFC’s prompt response to address the business challenges due to the COVID-19 pandemic and regional lockdowns in the first quarter of 2022. He was appointed as the Company’s newly created role as Chief Customer Officer in May 2022. In this new role, Mr. Huang was instrumental in redesigning the Compa-

ny’s membership strategy and roadmap to empower sales growth and enhance member experience. Mr. Huang also improved marketing investments through optimizing the conversion rate. Mr. Huang also led the launch of a digital platform to better monitor member traffic and better analyze member activities to set a foundation for marketing automation and future growth. Mr. Huang also revamped the Company’s customer incentive program to include the Company’s emerging brands for better cross brand marketing.

2022 Compensation Decisions. Effective February 1, 2022, the Compensation Committee set Mr. Huang’s

68  

  YUM CHINA– 2023 Proxy Statement

   EXECUTIVE COMPENSATION

2022 compensation levels after considering the advice of its compensation consultant, market practice, Mr. Huang’s individual performance and the strong performance of KFC.

•

Base Salary. Mr. Huang’s base salary was increased from $740,000 to $762,200, an increase of 3.0%.

•

Annual Incentive Plan Target and Payout Level. Mr. Huang’s annual cash bonus target remained at 100% of his base salary, resulting in a bonus target for the year of $762,200. Mr. Huang’s 2022 annual cash bonus award payout was $970,896, reflecting a total

payout of 127% of target based on the blended Team Performance Factor of 121% and Individual Performance Factor of 105%.

•

Long-Term Incentive Award. The Compensation Committee approved a long-term incentive award of $1,330,000 to Mr. Huang in February 2022, to be delivered in 50% SARs, 30% PSUs and 20% RSUs, which was increased from an annual long-term incentive award of $1,250,000 in 2021. Mr. Huang also received a 2022 Lavazza ESOP Grant with a grant date fair value of $200,000.

Aiken Yuen

Chief People Officer

2022 Performance Summary. The Compensation Committee determined Mr. Yuen’s performance to be above target with an Individual Performance Factor of 125%. Mr. Yuen was recognized for coordinating the Company’s Crisis Management Team in developing responsive policy to protect employees’ health and well-being, especially during lockdowns. The Company enhanced a number of benefits programs for frontline employees in 2022, including enhanced medical coverage for restaurant managers. Mr. Yuen played an instrumental role to orchestrate a smooth transition of new leadership team appointments, including General Manager KFC, Chief Customer Officer and Chief Development Officer. Mr. Yuen served as a core member of the Company’s Sustainability Committee and played an active role in ESG discussions, including the Company’s strategy and roadmap relating to near term Science Based Target setting, which was approved by SBTi in November 2022. In 2022, Yum China was rated as one of the top 20 China employers by Top Employer Institute and included in Bloomberg’s “Gender Equality Index” for the fourth consecutive year.

2022 Compensation Decisions. Effective February 1, 2022, the Compensation Committee set Mr. Yuen’s 2022 compensation levels after considering the advice of its

compensation consultant, market practice and Mr. Yuen’s individual performance.

•

Base Salary. Mr. Yuen’s base salary was increased from $600,000 to $630,000, an increase of 5.0%.

•

Annual Incentive Plan Target and Payout Level. Mr. Yuen’s annual cash bonus target remained at 70% of his base salary, resulting in a bonus target for the year of $441,000. Mr. Yuen’s 2022 annual cash bonus award payout was $661,500, reflecting a total payout of 150% of target based on the Team Performance Factor of 120% and Individual Performance Factor of 125%.

•

Long-Term Incentive Award. The Compensation Committee approved a long-term incentive award of $750,000 to Mr. Yuen in February 2022, to be delivered in 50% SARs, 30% PSUs and 20% RSUs, which was increased from an annual long-term incentive award of $700,000 in 2021, as the compensation review showed that the prior year annual long-term incentive award was below the market median. Mr. Yuen also received a 2022 Lavazza ESOP Grant with a grant date fair value of $200,000.

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EXECUTIVE COMPENSATION   

How Compensation Decisions Are Made

 

Executive Compensation Philosophy

A unique feature of the Company is that while incorporated in Delaware and listed on the NYSE and Hong Kong Stock Exchange, substantially all of its operations are located in China. As a result, knowledge of and expertise in both U.S. and China regulatory regimes and business practices are required for many of the Company’s executive officers.

The Compensation Committee annually reviews the company’s executive compensation program to evaluate whether the program continues to support the attraction and retention of highly-qualified executives necessary to achieve superior stockholder results and support the long-term sustainable growth of the Company while simultaneously holding them accountable to continuously achieve results based on our high standards of ethical behavior and corporate governance.

Role of the Compensation Committee.

The Compensation Committee reviews and approves corporate goals and objectives relevant to the compensation of the CEO and other executive officers, sets the compensation levels of each of the executive officers, and together with the other independent directors of the Board, approves the compensation of the CEO, with ratification by the independent directors of the Board.CEO. The Compensation Committee’s responsibilities under its charter are further described in the “Governance of the Company” section of this Proxy Statement. While not members of the Compensation Committee, the CEO, andthe CFO, the Chief People Officer, as well asand the Chief Legal Officer, when necessary, also attended meetings of the Compensation Committee in 20172022 to contribute to and understand the committee’sCompensation Committee’s oversight of, and decisions relating to, executive compensation. The CEO, the CFO, the Chief People Officer, and the Chief Legal Officer did not attend portions of the meetings relating to their own compensation. The Compensation Committee regularly conducts executive sessions without management present. The Compensation Committee also engages in an ongoing dialogdialogue with its compensation consultant, the CEO, and the Chief People Officer and the committee’s compensation consultant infor the evaluation and establishment of the elements of our executive compensation program.

Role of the Independent Consultants.Consultant

During 2017,2022, the Compensation Committee retained Willis Tower WatsonMercer (Hong Kong) Limited (“WTWMercer”) as its principal independent consultant to advise it on executive compensation matters. WTW’s responsibilities for 2017 included providingMercer attended Compensation Committee meetings in 2022 and provided advice and guidance to the Compensation Committee on (i) the designmarket competitiveness of the Company’s executive pay practices and levels; (ii) the Company’s 2022 annual and long-term incentive plans,awards, including the design2022 Lavazza ESOP Grants, as well as the modification of the new PSU plan;2020 Annual PSUs; (iii) the market competitiveness2023 compensation peer group; (iv) the results of executive pay policies, practicesequity compensation analytics and levels, including those pertaining to expatriates; pay recommendations for executive officers, including pay actions in response to promotionsaward valuations; (v) the 2022 LTIP adopted upon the dual primary listing of the Company’s common stock on the Hong Kong Stock Exchange; and other role changes; the competiveness and design of non-employee director compensation; stock ownership guidelines for executives and Board members; equity award valuation services; and advice on pay(vi) compensation disclosures, including thethis CD&A. The Compensation Committee has assessed the independence of WTW pursuant to NYSE rules,&A and the Company has concluded that WTW’s work for the Compensation Committee does not raise any conflicts of interest.

During 2017, the Compensation Committee also retained Mercer to conduct a competitive market review of executive officer (excluding the CEO position) compensation and advise the Compensation Committee regarding the form and level of compensation for these officers.pay versus performance disclosure. The Compensation Committee has assessed the independence of Mercer pursuant to NYSE rules and conflicts of interest specifically enumerated by the SEC’s six factors, and the Company has concluded that Mercer’s work for the Compensation Committee does not raise any conflicts of interest. The Compensation Committee annually reviews its relationship with Mercer and determines whether to renew the engagement. Only the Compensation Committee has the right to approve the services to be provided by, or to terminate the services of, its compensation consultant.

Executive Compensation Peer Group

Competitive Market Review.One of the key objectives of our executive compensation program is to retain and reward the right talent by providing reasonable and competitive compensation. Accordingly, in 2017,One method that the Compensation Committee determined that it should establishutilizes to attain this objective is by establishing a group of peer companies for comparison of executive compensation practices.

The peer group applicable to the Company. Recognizing the evolving nature of the competitive landscape for executive talent,approved by the Compensation Committee intends to reassessbased on the peer companies on a periodic basis to evaluate the continued appropriatenessrecommendations of such peer companies. As partMercer consisted of its engagement with the Compensation Committee, WTW assisted with the development of the peer group.

Based on its review and after consideration of the skills, background and understanding of the business and regulatory environments that are required of the management team to run a U.S. listed company with all operations in China, WTW developed two sets of peer companies with the following characteristics:

Publicly listed Greater China companies primarily in the F&B, restaurant, retail, hospitality, and consumer goods and general industry and of similar revenue size to the Company.

For Greater China companies, additional criteria are applied to include companies of similar market prominence with globally mobile executive teams and rigorous pay governance practices and processes.

Publicly listed U.S. companies in the F&B, restaurant, hospitalityfood and consumer goods industryservices industries in the United States, Greater China and of similar revenue sizeEurope, as these represent the Company.sectors with which the Company

 

 

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   EXECUTIVE COMPENSATION

 

   

 

Having consideredcompetes for executive talent. In addition, Mercer suggested that, for purposes of benchmarking compensation levels for NEOs other than the CEO, the peer group selection criteria above and the comparability of each ofdata be supplemented with compensation survey data to provide a broader perspective on market practices. References in this CD&A to market data refer to the peer companies in termsgroup or survey data, as appropriate.

After considering the advice of business size, industry, regulatory environment and source of executive talent,Mercer, the Compensation Committee approved a revised peer group in September 2021 for evaluating 2022 compensation decisions for the following twoNEOs, which consisted of the companies below. The Compensation Committee removed four (4) companies and added three (3) companies for reasons

of industry appropriateness and disclosed data availability. The Compensation Committee removed Beyond Meat, Inc., eBay Inc., WH Group Limited and Want Want China Holdings Limited, and added DoorDash, Inc., General Mills, Inc. and Chow Tai Fook Jewellery Group Limited. These changes were made in order to further align the peer groupsgroup with the Company’s size and operations. The Founder CEOs at DoorDash Inc. and Haidilao International Holdings Ltd. were excluded from the competitive market review. Our peer group reflects a median market capitalization of companies to be used for purposes$19.4 billion and median annual revenues of evaluating 2017 executive compensation decisions:$10.6 billion, both as of June 30, 2022, and consists of 17 U.S. and nine non-U.S. companies.

 

Greater China2022 Executive Compensation Peer Group  U.S.

Previous Peer Group

LOGO

New Peer Group for 2022

Data from our 2022 peer group was supplemented by data from companies included in three executive compensation surveys conducted by Mercer in China, Hong Kong, and the U.S., size-adjusted to reflect the Company’s revenue. During 2022, the Compensation Committee reviewed a report summarizing compensation levels at the 25th, 50th and 75th percentiles of the peer group and, as applicable, of the survey data for positions comparable to our NEOs. The report compared target and actual total cash compensation (base salary and annual incentives) and total direct compensation (base salary plus annual incentives plus long-term incentives) for each of the NEOs against these benchmarks. The Compensation Committee also reviewed detailed tally sheets that captured comprehensive compensation, benefits and stock ownership details, and comparisons of the CEO’s realized

total direct compensation and realizable equity vis-à-vis that of the peer group.

Competitive Positioning and Setting Compensation

At the beginning of 2022, the Compensation Committee considered executive compensation peer group data as a frame of reference for establishing target compensation levels for base salary and annual and long-term incentive awards for each NEO. The Compensation Committee conducted an extensive review of market data and made the decision to position target total direct compensation close to the market median, with variation based on the marketability, performance and potential of each NEO and the criticality of the role on the organization.

Cathay Pacific Airways Limited

China Mengniu Dairy Co. Ltd.

Chow Tai Fook Jewellery Group Ltd.

CLP Holdings Ltd.

Dah Chong Hong Holdings Limited

Esprit Holdings Limited

Inner Mongolia Yili Industrial Group Co., Ltd

MGM China Holdings Limited

Sands China Ltd.

Shangri-La Asia Limited

SJM Holdings Limited

Swire Pacific Limited

Swire Properties Limited

Techtronic Industries Company Limited

Want China Holdings Ltd.

WH Group Limited

Wilmar International Limited

Wynn Macau Ltd.

YUM CHINA – 2023 Proxy Statement		 

AutoZone, Inc.

Avon Products, Inc.*

Bloomin’ Brands, Inc.

Brinker International, Inc.

Campbell Soup Company*

Colgate-Palmolive Company

Conagra Brands, Inc.*

Constellation Brands, Inc.

Darden Restaurants, Inc.

Dean Foods Company*

Domino’s Pizza, Inc.

Dr Pepper Snapple Group, Inc.

General Mills, Inc.

Hilton Worldwide Holdings Inc.

Hormel Foods Corporation*

Hyatt Hotels Corporation

Kellogg Company*

Kimberly-Clark Corporation

L Brands, Inc.*

Marriott International, Inc.

McCormick & Company, Incorporated*

McDonald’s Corporation

MGM Resorts, International*

Molson Coors Brewing Company

Starbucks Corporation*

The Clorox Company*

The Gap, Inc.*

The Hershey Company

The J.M. Smucker Company*

The Wendy’s Company

Wyndham Worldwide Corporation

Yum! Brands, Inc.

*

Added to the peer group in September 2017 to provide a more robust group of peers based on the criteria noted above with respect to publicly listed U.S. companies.

The Company’s revenue size falls at or about the median of each of the peer groups.

YUM CHINA– 2018 Proxy Statement

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EXECUTIVE COMPENSATION   

 

    

 

Compensation Policies and Practices

 

Payments upon Termination of Employment. Currently, Ms. Wat is the only executive whom the Company has an agreement with that provides for severance payments upon termination of employment, the terms of which were determined during the negotiation of the CEO compensation offer considering the peer group data and the input of WTW.Compensation Recovery Policy

The award agreements with respectPursuant to the Company’s outstanding equity awards provide for “double trigger” vesting 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 for cause) on or within two years following the change in control.

In addition, in the case of an executive officer’s retirement, the Company provides retirement benefits described above and the continued ability to exercise vested SARs/Options in accordance with the underlying award agreements.

Compensation Recovery Policy. Pursuant to the Compensation Recovery Policy, in the event of any restatement of the Company’s financial statements due to material noncompliance with any financial reporting requirement under the securities laws, the Compensation Committee will recover or cancel any performance awards that were awarded to a current or former executive officer as a result of achieving performance targets that couldwould not have been met under the restated results. The Company’s recovery authority applies to any performance award received by such individuala current or former executive officer during the three most-recently completed fiscal years immediately preceding the date on which the Company is required to prepare the restatement. Under the terms of the policy, a performance award means any cash or equity-based award that is made, vests or is payable based wholly or in part on the results of a financial reporting measure.

The Company will review and modify the Compensation Recovery Policy as necessary to reflect the final NYSE listing rules adopted to implement the compensation recovery requirements under the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Equity-Based Awards Grant Policy. In 2017, the Compensation Committee adopted the

The Company’s Equity-Based Awards Grant Policy which establishesprovides for certain procedures with

respect to the granting of equity awards, including specifyingpre-determined dates for annual andoff-cycle grants and specifying that the Company will not purposely accelerate or delay the public release of material information in consideration of pending equity grants. AllGenerally, annual equity grants are to be effective as of the date that is two business days after the Company publicly discloses its results for the previous fiscal year.

Stock Ownership Guidelines. Under the Stock Ownership Guidelines anand Retention Policy

To align the efforts of our executives with the long-term interests of our stockholders and to reinforce their commitment to the Company’s long-term objectives, the

Compensation Committee established a stock ownership and retention policy that applies to our Section 16 Officers and all members of our Leadership Team. Under the stock ownership and retention policy, the executives have a five-year period from the date of appointment to a covered position to attain the required ownership level. During the five-year phase-in period, the executives must retain, until the required ownership guideline levels have been achieved, at least 50% of the after-tax shares resulting from the vesting or exercise of equity awards, including PSUs. If the guideline is not achieved after such five-year compliance period, the executive isofficer will be required to own a minimum value of shares (which may be met in actual shares and/or immediate rights to shares) in a guideline amount set under the Stock Ownership Guidelines for the executive’s position. An executive must meetretain 100% of after-tax shares resulting from the applicable guideline within five yearsvesting or exercise of becoming subject to such guidelines, with 25% ofequity awards until the guideline to be met within two years, 50% within three years and 75% within four years. is achieved.

The tablechart below shows the value of shares (asstock ownership requirements as a multiple of annual base salary) that must be owned by each NEO. Eachsalary for our NEOs. As of the NEOsrecord date, each NEO is expected to satisfyin compliance with the applicableCompany’s stock ownership multiple within the timeframe set forth in the Stock Ownership Guidelines.requirements and retention policy.

 

NEOsNEO  Stock Ownership as
a Multiple of Annual

Base Salary		 

CEO

  6X

CFO

  3X

President & Chief OperatingLegal Officer

  3X2X
Chief Customer Officer  2X

Chief LegalPeople Officer

  2X

General Manager, KFC

2X

 

 

Hedging and Pledging of Company Stock. 

Under the Company’s Code of Conduct, no employee or director is permitted to engage in securities transactions that would allow such employee or director either to insulate himself or herself from, or profit from, a decline in the Company’s stock price. Similarly, no employee or director may enter into hedging transactions in Company stock. Such transactions include, (without limitation)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 the Company’s stock. Pledging of Company stock by executive officers and directors is also prohibited.

 

 

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   EXECUTIVE COMPENSATION

 

   

 

COMPENSATION COMMITTEE REPORT

 

 

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with management.

Based on such review and discussion with management, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statementProxy Statement and incorporated by reference in the Company’s Annual Report onForm 10-K for the fiscal year ended December 31, 2017.2022.

Compensation Committee:

Ruby Lu (Chair)

Edouard Ettedgui (Chair)

Jonathan S. Linen

William Wang

2017Min (Jenny) Zhang

YUM CHINA – 2023 Proxy Statement

  73

EXECUTIVE COMPENSATION   

2022 SUMMARY COMPENSATION TABLE

 

 

The following table and footnotes summarize the total compensation awarded to, earned by or paid to the NEOs for fiscal year 20172022 and, to the extent required by SEC executive compensation disclosure rules, fiscal years 20162021 and 2015.2020. The Company’s NEOs for the 2022 fiscal year are its Chief Executive Officer, Chief Financial Officer, former Chief Financial Officer andCEO, CFO, the three other most highly compensated executive officers for the 2017 fiscal year.officers.

 

Name and Principal Position

 Year  

Salary

($)

  

Bonus

($)(1)

  

Stock

Awards

($)(2)

  

Option/
SAR

Awards

($)(3)

  

Non-Equity

Incentive Plan

Compensation

($)(4)

  

Change in

Pension

Value and

Nonqualified

Deferred

Compensation

Earnings

($)(5)

  

All Other

Compensation

($)(6)

  

Total

($)(7)

 
(a) (b)  (c)  (d)  (e)  (f)  (g)  (h)  (i)    
Micky Pant  2017   1,100,000   —   —   4,000,008   3,689,400   62,098   719,511   9,571,017 
Chief Executive Officer  2016   1,013,645   —   1,500,007   4,500,017   2,470,417   63,974   881,776   10,429,836 
   2015   849,038   —   355,012   1,419,011   1,473,548   42,979   950,622   5,090,210 
Jacky Lo  2017   407,917   —   —   208,848   657,261   —   291,305   1,565,331 
Chief Financial Officer and Treasurer                                    
Joey Wat  2017   739,858   200,000   2,000,021   1,139,167   1,904,782   —   1,583,655   7,567,483 
President and
Chief Operating Officer		  2016   626,775   —   899,486   1,096,251   1,231,175   —   979,262   4,832,949 
   2015   590,000   —   —   1,059,813   518,500   —   1,560,728   3,729,041 
Shella Ng  2017   396,058   179,663   1,007,342   379,722   553,331   —   1,240,914   3,757,030 
Chief Legal Officer and Corporate Secretary  2016   369,408   —   649,489   418,935   425,112   —   854,506   2,717,450 
   2015   359,243   —   —   185,558   135,147   —   900,935   1,580,883 
Johnson Huang  2017   443,158   165,000   805,898   379,722   975,762   —   280,672   3,050,212 
General Manager, KFC                                    
Ted Stedem  2017   246,635    —   1,139,167   286,571   690   213,354   1,886,417 
Former Chief Financial Officer  2016   439,931   —   500,020   649,072   400,712   229   829,754   2,819,718 
   2015   356,280   —   —   120,076   160,867   —   514,250   1,151,473 

Name and Principal Position

 Year  

Salary

($)

  

Bonus

($)

  

Stock

Awards

($)(1)

  

Option/
SAR

Awards

($)(2)

  

Non-Equity

Incentive Plan

Compensation

($)(3)

  

All Other

Compensation

($)(4)

  

Total

($)(5)

 
  (a) (b)  (c)  (d)  (e)  (f)  (g)  (h)  (i) 

Joey Wat

  2022   1,418,750   —   6,035,116   3,250,011   4,788,000   401,002   15,892,879 

Chief Executive Officer

  2021   1,341,667   —   5,703,920   3,000,004   3,607,246   2,902,835   16,555,672 
   2020   1,151,083   —   14,500,084   2,500,003   2,502,664   517,744   21,171,578 

Andy Yeung

  2022   836,667   —   1,458,490   790,010   1,411,200   198,795   4,695,162 

Chief Financial Officer

  2021   791,512   —   2,401,075   750,014   1,032,164   135,769   5,110,534 
   2020   643,333   —   2,600,068   600,013   701,865   149,144   4,694,423 

Joseph Chan

  2022   627,500   —   1,045,708   600,004   483,840   172,256   2,929,308 

Chief Legal Officer

  2021   595,000   —   2,100,748   562,502   619,967   177,468   4,055,685 

Johnson Huang

  2022   760,350   —   1,333,522   665,014   970,896   305,908   4,035,690 

Chief Customer Officer

  2021   740,000   —   667,558   625,000   847,441   320,245   3,200,244 
   2020   516,814   —   2,600,068   600,013   251,021   209,701   4,177,617 

Aiken Yuen

  2022   621,063   —   737,151   375,004   661,500   253,560   2,648,278 

Chief People Officer

  2021   595,236   —   373,881   350,011   547,906   596,068   2,463,102 
   2020   517,413   100,566   1,825,078   325,011   461,599   542,754   3,772,421 

 

YUM CHINA– 2018 Proxy Statement

  49

EXECUTIVE COMPENSATION   

(1)

The amounts reported in this column for Ms. Wat, Ms. Ng and Mr. Huang represent Founder’s cash retention awards approved by YUM in January 2016, in connection with thespin-off, the payment of which was subject to the executive’s continued employment through January 31, 2017.

(2)

The amounts reported in this column for 20172022 represent the grant date fair value of the February2022 Annual PSU Awards, RSU awards granted to Ms. Wat andeach Named Executive Officer, as well as the November RSU awards granted to Ms. Ng and Mr. Huang,incremental fair value associated with the modification of the 2020 Annual PSUs, as described in the CD&A, calculated in accordance with Accounting Standards Codification Topic 718 (“ASC 718”), Compensation-StockCompensation—Stock Compensation. The grant date fair value for the RSU awards was calculated by multiplying the number of RSUs granted by the closing price of a share of Company common stock on the date of grant. The per share fair value of the 2022 Annual PSU Awards was calculated using a Monte-Carlo simulation model. Under ASC 718, the rTSR vesting condition related to the 2022 Annual PSU Awards is considered a market-based condition and not a performance-based condition. Accordingly, there is no maximum performance, and no grant date fair value below or in excess of the amount reflected in the table above for the 2022 Annual PSU Awards that could be calculated and disclosed. See Note 15 to the Company’s ConsolidatedAudited Financial Statements for further discussion of the relevant assumptions used in calculating these amounts. For 2022, the amounts reported in this column also includes the incremental fair value of the 2020 Annual PSUs due to the modifications approved by the Compensation Committee in December 2022, as follows: Ms. Wat, $2,785,040; Mr. Yeung, $668,425; Mr. Chan, $445,649; Mr. Huang, $668,425; and Mr. Yuen, $362,095. See “CD&A—Recent Compensation Highlights—Modification of 2020 Annual PSUs,” “CD&A—Elements of the Executive Compensation Program—Long Term Equity Incentives—2020 Annual PSUs.” As of the grant date, the achievement of the performance-based vesting conditions and the occurrence of a liquidity event with respect to the 2022 Lavazza ESOP Grants were not considered probable, and therefore no associated expenses was recognized for accounting purposes that can be included for the 2022 Lavazza ESOP Grants in this column. Assuming the Annual Report onForm 10-Kliquidity event and the performance conditions for the year ended December 31, 2017 (the “Audited Financial Statements”).2022 Lavazza ESOP Grants were achieved, the grant date fair value for the awards would be as follows: Ms. Wat, $1,000,000; Mr. Yeung, $200,000; Mr. Chan, $200,000; Mr. Huang, $200,000; and Mr. Yuen, $200,000.

 

(3)
74  

  YUM CHINA– 2023 Proxy Statement

   EXECUTIVE COMPENSATION

(2)

The amounts reported in this column for 20172022 represent the grant date fair value of the annual SAR awards granted to each of the NEOs, calculated in accordance with ASC 718. See Note 15 to the Company’s Audited Financial Statements for afurther discussion of the relevant assumptions used in calculating these amounts.

 

(4)(3)

Amounts in this column reflect the annual incentive awards earned for the applicable fiscal year performance periods under the annual bonus program, which is described further in our Compensation Discussion and AnalysisCD&A under the heading “Annual Performance-Based Cash Bonuses.”

 

(5)

Pursuant to SEC disclosure rules, the amounts reported for Messrs. Pant and Stedem represent above-market earnings credited under the YCHLRP that exceed 120% of the applicable federal long-term rate. Please see the narrative accompanying the “2017 Nonqualified Deferred Compensation” table for further information regarding the YCHLRP.

(6)(4)

The amounts in this column for 20172022 are explaineddetailed in the 2022 All Other Compensation Table and footnotes to that table, which follow.

 

(7)(5)

Certain compensation included in the All Other Compensation column was denominated in Chinese Renminbi. Mr. Lo and Ms. Ng’s salaries and 2017 bonus awards were denominated in Hong Kong dollars. Compensation paid in Chinese Renminbi, or Hong Kong dollars werewhich was converted to U.S. dollars using an exchange rate of 6.74236.72. Mr. Yuen’s 2022 salary and 7.7923, respectively, for disclosure purposes.annual incentive was denominated in Hong Kong dollars, which was converted to U.S. dollars using an exchange rate of 7.83.

 

50  YUM CHINA – 2023 Proxy Statement 

  YUM CHINA– 2018 Proxy Statement  75

 

 

 

EXECUTIVE COMPENSATION

 

    

 

20172022 ALL OTHER COMPENSATION TABLE

 

 

The following table and footnotes summarize the compensation and benefits included under the “All Other Compensation” column in the 20172022 Summary Compensation Table that were awarded to, earned by or paid to the Company’s NEOs for the fiscal year endingended December 31, 2017.2022.

 

Name

  

Perquisites and

other personal

benefits

($)(1)

     

Tax

Reimbursements

($)(2)

     

Insurance

premiums

($)(3)

     

Retirement

Scheme

Contributions

($)(4)

     

Other

($)(5)

     

Total

($)

   

Perquisites and
Other Personal
Benefits

($)(1)

   

Tax

Reimbursements

($)(2)

   

Retirement

Scheme

Contributions

($)(3)

   

Other

($)(4)

   

Total

($)

 

(a)

  (b)     (c)     (d)     (e)     (f)     (g)   (b)   (c)   (d)   (e)   (f) 

Mr. Pant

   137,555      —      17,684      521,857      42,415      719,511 

Mr. Lo

   88,893      143,304      —      20,396      38,712      291,305 

Ms. Wat

   148,295      1,278,568      —      36,975      119,817      1,583,655 

Ms. Ng

   91,660      1,070,682      —      39,606      38,966      1,240,914 

Ms. Wat

Ms. Wat

Ms. Wat

   174,177    —    141,897    84,928    401,002 

Mr. Yeung

Mr. Yeung

Mr. Yeung

Mr. Yeung

   91,292    —    41,840    65,663    198,795 

Mr. Chan

Mr. Chan

Mr. Chan

Mr. Chan

   97,222    —    31,380    43,654    172,256 

Mr. Huang

   111,264      92,004      —      44,307      33,097      280,672 

Mr. Stedem

   68,244      —      562      40,411      104,137      213,354 

Mr. Huang

Mr. Huang

Mr. Huang

   96,250    100,030    76,046    33,582    305,908 

Mr. Yuen

Mr. Yuen

Mr. Yuen

Mr. Yuen

   81,487    84,781    62,107    25,185    253,560 
     

 

(1)

Amounts in this column represent: for Messrs. Pant, Lo, and Huang and Ms. Ng, a housing reimbursement; for Ms. Wat, an education reimbursement ($26,111)33,279) and housing reimbursementcost subsidy ($122,184)140,898); and for Mr. Stedem, an education reimbursement ($12,412)Messrs. Yeung, Chan, Huang and Yuen, a housing reimbursement ($55,832).cost subsidy. Such amounts are valued based on the amounts paid directly to thesethe NEOs or the service provider,providers, as applicable.

 

(2)

Amounts in this column for Messrs. Huang and Yuen represent legacy tax reimbursements for salarygains realized in 2022 on equity awards granted before 2018, and expenditure/housing allowances. These tax reimbursements as well asdo not represent any new benefits but rather the other overseas assignment allowances provided are intended to ensure that our executives serving on overseas assignments are in the same approximate financial position as they would have been if they have remained in their home country during their time on overseas assignment. As noted in the Compensation Discussion and Analysis, pursuant to her CEO letter agreement, Ms. Wat will no longer receive tax reimbursements, other than in connection with certain grandfathered benefits. Tax equalization benefits for Messrs. Lo and Huang were also eliminated, other than certain grandfathered tax equalization benefits.settlement of existing contractual agreements.

 

(3)

These amounts reflectThis column represents contributions to the income each NEO was deemed to receive from IRS tables related to Company provided life insurance in excessBSRCHLRS for all of $50,000.our NEOs.

 

(4)

This column represents allocations to the YCHLRP for Messrs. Pant and Stedem and contributions to the Bai Sheng Restaurants (Hong Kong) Limited Retirement Scheme for Mr. Lo, Ms. Wat, Ms. Ng and Mr. Huang.

(5)

This column reports the total amount of other benefits provided. Such amounts, which are reflective of market practice for similarly situated global executives working in international companies based in mainland China, are paid directly to the NEOs or service providers, as applicable. Other than for certain benefits described below, none of the other benefits individually exceeded the greater of $25,000 or 10% of the total amount of these other benefits and the perquisites and other personal benefits shown in column (b) for the NEO. These other benefits consist of amounts paid for utilities, home leave expenses, transportation expenses, club membershipsallowances, and executive physicals. In 2017, Mr. Pant received car expense reimbursement of $35,698, Mr. Stedem2022, Ms. Wat received home leave reimbursement of $39,133$49,801, and a repatriation expenseMr. Yeung received home leave reimbursement of $35,775, Mr. Lo received an additional cash payment of $30,030 for his service as interim CFO during 2017, and Ms. Wat received mobility premiums of $60,000. These amounts were valued based on the amounts paid directly to the NEO or the service provider, as applicable.$34,700.

 

YUM CHINA– 2018 Proxy Statement76   

  51  YUM CHINA– 2023 Proxy Statement

 

 

 

EXECUTIVE COMPENSATION

 

  

 

20172022 GRANTS OF PLAN-BASED AWARDS

 

 

The following table provides information on the annual incentive program that the Company’s NEOs participated in during 2017 and2022, including the SARs, 2022 Annual PSU Awards and RSUs granted under the Company’s long term incentive plan adopted in 20172016 (the “2016 LTIP”) in 2022 and the 2022 Lavazza ESOP Grants granted under the JV Equity Plans to the Company’s NEOs. The per share valueIn addition, the table below includes the 2020 Annual PSUs due to the modification of each award is determined based onsuch PSUs in 2022, as further disclosed in the Company’s stock price on the date of grant.CD&A.

 

Name

     Estimated Possible Payouts
Under Non-Equity Incentive
Plan Awards(1)		      Estimated Future Payouts
Under Equity Incentive
Plan Awards		  All Other
Stock
Awards;
Number of
Shares of
Stock or
Units
(#)(2)		  All Other
Option/
SAR
Awards;
Number of
Securities
Underlying
Options
(#)(3)		  Exercise or
Base Price
Option/SAR
Awards
($/Sh)(4)		  Grant Date
Fair Value
($)(5)		      

Estimated Future Payouts

Under Non-Equity Incentive
Plan Awards(1)

      Estimated Future Payouts
Under Equity Incentive
Plan Awards		  All Other
Stock
Awards:
Number of
Shares of
Stock or
Units
(#)(2)		 All Other
Option/
SAR
Awards:
Number of
Securities
Underlying
Options
(#) (3)		 Exercise or
Base Price
of
Option/
SAR
Awards
($/Sh)(4)		 

Grant Date

Fair Value

of Stock,

Option and

SAR
Awards

($)(5)

 
(a)Grant
Date		 Threshold
($)		 Target
($)		 Maximum
($)		   Threshold
(#)		 Target
(#)		 Maximum
(#)		   Grant
Date		  Threshold
($)		 Target
($)		 

Maximum

($)

      Threshold
(#)		 Target
(#)		 Maximum
(#)		 

(a)

 (b) (c) (d) (e)    (f) (g) (h) (i) (j) (k) (l)  (b) (c) (d) (e)   (f) (g) (h) (i) (j) (k) (l) 

Mr. Pant

  —   —  1,430,000  4,290,000    —   —   —   —   —   —   — 
 2/10/2017   —   —   —    —   —   —   —  392,477  26.56  4,000,008 

Mr. Lo

  —   —  318,440  955,320    —   —   —   —   —   —   — 
 2/10/2017   —   —   —    —   —   —   —  20,492  26.56  208,848 

Ms. Wat

Ms. Wat

Ms. Wat

Ms. Wat

  —   —  738,288  2,214,863    —   —   —   —   —   —   —   —   —  2,850,000  8,550,000    —   —   —   —   —   —   — 
 2/10/2017   —   —   —    —   —   —   —  111,774  26.56  1,139,167 
 2/10/2017   —   —   —    —   —   —  75,302   —   —  2,000,021 

Ms. Ng

  —   —  257,363  772,090    —   —   —   —   —   —   — 
 2/10/2022   —   —   —    —   —   —   —  208,969  50.16  3,250,011 
 2/10/2022   —   —   —    —   —   —  25,918   —   —  1,300,047 
 2/10/2022(6)   —   —   —   11,439  28,597  57,194   —   —   —  1,950,029 
 2/10/2022(7)   —   —   —   250,000  1,000,000  1,000,000   —   —   —   — 
 12/30/2022(8)   —   —   —     —  50,961   —   —   —   —  2,785,040 

Mr. Yeung

Mr. Yeung

Mr. Yeung

Mr. Yeung

  —   —  840,000  2,520,000    —   —   —   —   —   —   — 
 2/10/2022   —   —   —    —   —   —   —  50,796  50.16  790,010 
 2/10/2022   —   —   —    —   —   —  6,300   —   —  316,008 
 2/10/2022(6)   —   —   —   2,781  6,952  13,904   —   —   —  474,057 
 2/10/2022(7)   —   —   —   50,000  200,000  200,000   —   —   —   — 
 12/30/2022(6)   —   —   —     —  12,231   —   —   —   —  668,425 

Mr. Chan

Mr. Chan

Mr. Chan

Mr. Chan

  —   —  504,000  1,512,000    —   —   —   —   —   —   — 
 2/10/2022   —   —   —    —   —   —   —  38,579  50.16  600,004 
 2/10/2022   —   —   —    —   —   —  4,785   —   —  240,016 
 2/10/2022(6)   —   —   —   2,112  5,280  10,560   —   —   —  360,043 
 2/10/2022(7)    —   —   50,000  200,000  200,000   —   —   —   — 
 2/10/2017   —   —   —    —   —   —   —  37,258  26.56  379,722  12/30/2022(8)     —   —     —  8,155   —   —   —   —  445,649 
 11/1/2017   —   —   —    —   —   —  25,253   —   —  1,007,342 

Mr. Huang

  —   —  388,905  1,166,714    —   —   —   —   —   —   — 

Mr. Huang

Mr. Huang

Mr. Huang

  —   —  762,200  2,286,600    —   —   —   —   —   —   — 
 2/10/2017   —   —   —    —   —   —   —  37,258  26.56  379,722 
 11/1/2017   —   —   —    —   —   —  20,203   —   —  805,898 

Mr. Stedem

  —   —  400,086  1,200,257    —   —   —   —   —   —   — 
 2/10/2017   —   —   —     —   —   —   —  111,774  26.56  1,139,167 
 2/10/202   —   —   —    —   —   —   —  42,759  50.16  665,014 
 2/10/2022   —   —   —    —   —   —  5,304   —   —  266,049 
 2/10/2022(6)   —   —   —   2,341  5,852  11,704   —   —   —  399,048 
 2/10/2022(7)    —   —   50,000  200,000  200,000   —   —   —   — 
 12/30/2022(8)     —   —     —  12,231   —   —   —   —  668,425 

Mr. Yuen

Mr. Yuen

Mr. Yuen

Mr. Yuen

  —   —  441,000  1,323,000    —   —   —   —   —   —   — 
 2/10/2022   —   —   —    —   —   —   —  24,112  50.16  375,004 
 2/10/202   —   —   —    —   —   —  2,991   —   —  150,029 
 2/10/2022(6)   —   —   —   1,320  3,300  6,600   —   —   —  225,027 
 2/10/2022(7)    —   —   50,000  200,000  200,000   —   —   —   — 
 12/30/2022(8)     —   —     —  6,626   —   —   —   —  362,095 

 

(1)

Amounts in columns (c), (d) and (e) provide the minimum, amount, target amount and maximum amountamounts payable as annual incentive compensation under the 2017 annual bonus programto each NEO based on respective team performances and on individual performance during 2017.2022. The actual amounts of annual incentive compensation awards paid for 20172022 performance are shown in the “Non-Equity Incentive Plan Compensation” column (g) of the 20172022 Summary Compensation Table. The performance measurements, performance targets and target bonus percentages are described in the Compensation Discussion and Analysis,CD&A, beginning under the discussion of annual incentive compensation.heading “Annual Performance-Based Cash Bonuses.”

 

(2)
YUM CHINA – 2023 Proxy Statement

RSUs allow the grantee to receive  77

EXECUTIVE COMPENSATION   

(2)

Amounts in column (i) represent the number of shares of the underlying common stock subjectRSUs awarded to the award upon vesting. Theeach NEO. RSUs granted to Ms. Wat on February 10, 2017 vest 100% on the fourth anniversary of the grant date, subject to Ms. Wat’s continued employment through the vesting date. The RSUs granted to Ms. Ng on November 1, 2017 vest 25%in equal installments on the first, second, third and fourth anniversaries of the grant date, subject to Ms. Ng’sthe recipient’s continued employment through the applicable vesting date. The RSUs granted to Mr. Huang on November 1, 2017 vest 100% on the fourth anniversary of the grant date, subject to Mr. Huang’s continued employment through the vesting date. During the vesting period, the RSUs will be adjusted to reflect the accrual of dividend equivalents, which will be distributed inas additional Company shares at the same time and to the extent the underlying shares vest.

 

(3)

SARs allow the grantee to receive in cash or the number of shares of the underlying common stock that in each case, is equal in value to the appreciation in the underlying common stock with respect to the number of SARs granted from the date of grant to the date of exercise. SARs become exercisable in equal installments on the first,

52  

  YUM CHINA– 2018 Proxy Statement

   EXECUTIVE COMPENSATION

second, third and fourth anniversaries of the grant date, subject to the recipient’s continued employment through the applicable vesting date.

 

(4)

The exercise price of the SARs equals the closing price of the underlying common stock on the grant date.date under the 2016 LTIP.

 

(5)

The amounts reported in this column for 20172022 represent the grant date fair value of the annual SAR awards, the 2022 Annual PSU Awards, and RSU awards granted to each of the NEOs, and the RSU awards granted to Ms. Wat, Ms. Ng and Mr. Huang, calculated in accordance with ASC 718. The grant date fair value of the 2022 Annual PSU Awards with market-based conditions has been determined based on the outcome of a Monte-Carlo simulation model. The grant date fair value of the RSU awards was determined based on the closing price of Company common stock on the date of grant. In addition, the amounts reported in this column include the incremental fair value associated with the modification of the 2020 Annual PSUs. As of the grant date, the achievement of the performance-based vesting conditions and the occurrence of a liquidity event with respect to the 2022 Lavazza ESOP Grants were not considered probable, and therefore no associated expenses was recognized for accounting purposes that can be included for the 2022 Lavazza ESOP Grants in this column. Assuming the liquidity event and the performance conditions for the 2022 Lavazza ESOP Grants were achieved, the grant date fair value for the awards would be as follows: Ms. Wat, $1,000,000; Mr. Yeung, $200,000; Mr. Chan, $200,000; Mr. Huang, $200,000; and Mr. Yuen, $200,000. See Note 15 to the Company’s Audited Financial Statements for afurther discussion of the relevant assumptions used in calculating these amounts.the grant date fair value for the SAR, RSU and PSU awards.

 

(6)

Amounts reported in this row and associated with columns (f), (g) and (h) provide the threshold, target and maximum numbers of shares of common stock that may be received by the grantee upon vesting of the 2022 Annual PSU Awards. The 2022 Annual PSU Awards granted to each of the NEOs on February 10, 2022 will be settled in shares of common stock, subject to the achievement of performance goals relating to rTSR during the performance period beginning on January 1, 2022 and ending on December 31, 2024, and the NEO’s continued employment through the last day of the performance period. Amounts reported in the “Threshold” column represent payout of 40% of target PSUs awarded, and amounts reported in the “Maximum” column represent payout of 200% of the target PSUs awarded.

(7)

Amounts reported in this row and associated with columns (f), (g) and (h) provide the number of ordinary shares of Lavazza Joint Venture that may be received upon vesting of the 2022 Lavazza ESOP Grants granted to each of the NEOs on February 10, 2022. The 2022 Lavazza ESOP Grants granted to the NEOs are subject to both performance-based vesting conditions and the occurrence of a liquidity event, including an initial public offering of the Lavazza Joint Venture, which must occur within seven years of the grant date.

(8)

Amounts reported in this row and associated with column (g) represent the number of shares subject to the 2020 Annual PSUs that were impacted by the modification to the underlying performance measures and the associated incremental fair value related to the modification of the 2020 Annual PSUs, computed in accordance with ASC 718, and does not reflect a new equity grant.

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  53  YUM CHINA– 2023 Proxy Statement

 

 

 

EXECUTIVE COMPENSATION

 

  

 

OUTSTANDING EQUITY AWARDS AT 20172022 YEAR-END

 

 

The following table shows the number of Company shares covered by exercisable and unexercisable SARs, unvested RSUs and RSUsunvested PSUs held by the Company’s NEOs on December 31, 2017.2022. This table excludes any YumYUM shares received by the NEOs upon conversion of their outstanding YUM equity awards in connection with the spin-off. The 2022 Lavazza ESOP Grants are separately reported in Outstanding 2022 Lavazza ESOP Grants at 2022 Year-End table below.

 

     Option/SAR Awards      Stock Awards      Option/SAR Awards      Stock Awards 

Name

 Grant
Date		 Number of
Securities
Underlying
Unexercised
Options/
SARs
(#)
Exercisable		 Number of
Securities
Underlying
Unexercised
Options/ SARs
(#)
Unexercisable(1)		 Option/
SAR
Exercise
Price
($)		 Option/
SAR
Expiration
Date		    Number
of Shares
or Units of
Stock
That Have
Not Vested
(#)(2)		 Market
Value
of Shares
or Units of
Stock
That Have
Not Vested
($)(3)		 Equity
incentive
plan awards:
Number of
unearned
shares, units
or other
rights
that have
not vested
(#)		 Equity
incentive
plan awards:
market or
payout value
of unearned
shares, units
or other
rights
that have
not vested
($)		  Grant
Date		  

Number of
Securities
Underlying
Unexercised
Options/
SARs

(#)
Exercisable

 Number of
Securities
Underlying
Unexercised
Options/ SARs
(#)
Unexercisable(1)		 

Option/
SAR
Exercise
Price

($)

 Option/
SAR
Expiration
Date		      

Number

of Shares
or Units of
Stock
That Have
Not Vested
(#)(2)

 Market
Value
of Shares
or Units of
Stock That
Have
Not Vested
($)(3)		 

Equity
Incentive
Plan Awards:
Number of
Unearned
Shares, Units
or Other
Rights

That Have
Not Vested
(#)(4)

 

Equity
Incentive
Plan Awards:
Market or
Payout Value
of Unearned
Shares, Units
or Other
Rights

That Have
Not Vested
($)(3)

 
(a) (b) (c) (d) (e) (f)   (g) (h) (i) (j)  (b) (c) (d) (e) (f)   (g) (h) (i) (j) 

Mr. Pant

          

Ms. Wat

 2/6/2015  27,063   —  22.32  2/6/2025    —   —   —   — 
 2/5/2009  133,503   —  8.84  2/5/2019    —   —   —   — 
 2/5/2010  113,250   —  9.96  2/5/2020    —   —   —   — 
 2/4/2011  100,468   —  14.88  2/4/2021    —   —   —   — 
 11/18/2011  93,672   —  16.25  11/18/2021    —   —   —   — 
 2/8/2012  114,478   —  19.46  2/8/2022    —   —   —   —  3/25/2015  32,309   —  23.90  3/25/2025    —   —   —   — 
 2/6/2013  89,779   —  19.00  2/6/2023    —   —   —   — 
 2/5/2014  62,703   20,902(i) 21.30  2/5/2024    —   —   —   — 
 2/6/2015  43,980   43,980(ii) 22.32  2/6/2025    —   —   —   — 
 2/5/2016  51,970   155,913(iii) 21.06  2/5/2026    —   —   —   — 
 11/11/2016  36,634   109,904(iv) 26.98  11/11/2026    55,732(i) 2,230,407   —   —  2/5/2016  41,316   —  21.06  2/5/2026    —   —   —   — 
 2/10/2017   —   392,477(v)  26.56  2/10/2027     —   —   —   — 

Mr. Lo

 9/23/2016   —   —   —   —    873(ii)  34,942   —   — 
 2/10/2017   —   20,492(v)  26.56  2/10/2027     —   —   —   — 

Ms. Wat

 2/6/2015  13,531   13,532(ii) 22.32  2/6/2025    —   —   —   — 
 3/25/2015  16,154   16,155(vi) 23.90  3/25/2025    —   —   —   — 
 1/4/2016   —   —   —   —    14,098(iii) 564,211   —   — 
 2/5/2016  10,329   30,987(iii) 21.06  2/5/2026    —   —   —   — 
 11/11/2016  12,211   36,635(iv) 26.98  11/11/2026    18,578(i) 743,496   —   —  11/11/2016  48,846   —  26.98  11/11/2026    —   —   —   — 
 2/10/2017   —   111,774(v)  26.56  2/10/2027     75,485(iv)  3,020,920   —   — 

Ms. Ng

 2/8/2012  5,213   —  19.46  2/8/2022    —   —   —   — 
 2/10/2017  111,774   —  26.56  2/10/2027    —   —   —   — 
 2/9/2018  186,151   —  40.29  2/9/2028    —   —   —   — 
 2/7/2019  139,575  46,525(i)  41.66  2/7/2029    —   —   —   — 
 2/7/2020  93,531  93,532(ii)  42.71  2/7/2030    —   —  156,333(i)  8,543,599 
 2/5/2021  42,997  128,992(iii)  57.39  2/5/2031   44,380(i)  2,425,373  10,262(ii)  560,791 
 5/25/2021   —   —   —   —    —   —  13,069(ii)  714,194 
 2/10/2022   —  208,969(iv)  50.16  2/10/2032    26,183(ii)  1,430,889  57,194(iii)  3,125,652 

Mr. Yeung

Mr. Yeung

Mr. Yeung

Mr. Yeung

 2/7/2020  22,448  22,448(ii)  42.71  2/7/2030    —   —  26,056(i)  1,423,960 
 2/5/2021  10,749  32,249(iii)  57.39  2/5/2031   28,404(i)  1,552,257  2,566(ii)  140,205 
 5/25/2021   —   —   —   —    —   —  3,268(ii)  178,569 
 2/10/2022   —  50,796(iv)  50.16  2/10/2032    6,364(ii)  347,812  13,904(iii)  759,854 

Mr. Chan

Mr. Chan

Mr. Chan

Mr. Chan

 2/7/2020  14,965  14,966(ii)  42.71  2/7/2030    —   —  19,542(i)  1,067,970 
 2/5/2021  8,062  24,186(iii)  57.39  2/5/2031   26,628(i)  1,455,213  1,924(ii)  105,147 
 2/8/2012  13,901   —  19.46  2/8/2022    —   —   —   — 
 2/6/2013  13,467   —  19.00  2/6/2023    —   —   —   — 
 2/5/2014  9,175   3,059(i) 21.30  2/5/2024    —   —   —   —  5/25/2021   —   —   —   —    —   —  2,451(ii)  133,920 
 2/6/2015  5,750   5,752(ii) 22.32  2/6/2025    —   —   —   — 
 1/4/2016   —   —   —   —    14,098(iii) 564,211   —   — 
 2/5/2016  2,926   8,780(iii) 21.06  2/5/2026    —   —   —   — 
 11/11/2016  6,105   18,318(iv) 26.98  11/11/2026    9,290(i) 371,768   —   — 
 2/10/2017   —   37,258(v)  26.56  2/10/2027    —   —   —   —  2/10/2022   —  38,579(iv)  50.16  2/10/2032    4,834(ii)  264,172  10,560(iii)  577,104 
 11/1/2017   —   —   —   —     25,314(v)  1,013,085   —   — 

Mr. Huang

 2/8/2012  8,994   —  19.46  2/8/2022    —   —   —   — 

Mr. Huang

Mr. Huang

Mr. Huang

 2/5/2014  6,797   —  21.30  2/5/2024    —   —   —   — 
 2/6/2013  9,652   —  19.00  2/6/2023    —   —   —   — 
 2/5/2014   —   6,797(vii)  21.30  2/5/2024    —   —   —   — 
 2/5/2014  7,137   2,379(i)  21.30  2/5/2024    —   —   —   — 
 2/6/2015  5,074   5,075(ii)  22.32  2/6/2025    —   —   —   — 
 1/4/2016   —   —   —   —    14,098(iii)  564,211   —   —  2/5/2014  9,516   —  21.30  2/5/2024    —   —   —   — 
 2/5/2016  3,443   10,329(iii)  21.06  2/5/2026    —   —   —   — 
 11/11/2016  6,105   18,318(iv)  26.98  11/11/2026    9,290(i)  371,768   —   — 
 2/10/2017   —   37,258(v)  26.56  2/10/2027    —   —   —   — 
 11/1/2017   —   —   —   —     20,252(vi)  810,492   —   — 

Mr. Stedem

  —   —   —   —   —     —   —   —   — 
 2/6/2015  10,149   —  22.32  2/6/2025    —   —   —   — 
 2/5/2016  13,772   —  21.06  2/5/2026    —   —   —   — 
 11/11/2016  24,423   —  26.98  11/11/2026    —   —   —   — 
 2/10/2017  37,258   —  26.56  2/10/2027    —   —   —   — 
 2/9/2018  32,543   —  40.29  2/9/2028    —   —   —   — 
 2/7/2019  24,565  8,189(i)  41.66  2/7/2029    —   —   —   — 
 2/7/2020  22,448  22,448(ii)  42.71  2/7/2030    —   —  26,056(i)  1,423,960 
 2/5/2021  8,957  26,874(iii)  57.39  2/5/2031    —   —  2,138(ii)  116,842 
 5/25/2021   —   —   —   —    —   —  2,723(ii)  148,812 
 2/10/2022   —  42,759(iv)  50.16  2/10/2032    5,358(ii)  292,825  11,704(iii)  639,624 

 

54  YUM CHINA – 2023 Proxy Statement 

  YUM CHINA– 2018 Proxy Statement  79

 

 

 

EXECUTIVE COMPENSATION

 

    

       Option/SAR Awards      Stock Awards 
Name Grant
Date		  

Number of
Securities
Underlying
Unexercised
Options/
SARs

(#)
Exercisable

  Number of
Securities
Underlying
Unexercised
Options/ SARs
(#)
Unexercisable(1)		  

Option/
SAR
Exercise
Price

($)

  Option/
SAR
Expiration
Date		      

Number

of Shares
or Units of
Stock
That Have
Not Vested
(#)(2)

  Market
Value
of Shares
or Units of
Stock That
Have
Not Vested
($)(3)		  

Equity
Incentive
Plan Awards:
Number of
Unearned
Shares, Units
or Other
Rights

That Have
Not Vested
(#)(4)

  

Equity
Incentive
Plan Awards:
Market or
Payout Value
of Unearned
Shares, Units
or Other
Rights

That Have
Not Vested
($)(3)

 
  (a) (b)  (c)  (d)  (e)  (f)     (g)  (h)  (i)  (j) 

Mr. Yuen

  2/5/2014   3,602   —   21.30   2/5/2024    —   —   —   — 
  2/6/2015   4,060   —   22.32   2/6/2025    —   —   —   — 
  2/6/2015   4,060   —   22.32   2/6/2025    —   —   —   — 
  2/5/2016   4,614   —   21.06   2/5/2026    —   —   —   — 
  2/10/2017   11,364   —   26.56   2/10/2027    —   —   —   — 
  2/9/2018   16,863   —   40.29   2/9/2028    —   —   —   — 
  2/7/2019   12,729   4,244(i)   41.66   2/7/2029    —   —   —   — 
  2/7/2020   12,159   12,160(ii)   42.71   2/7/2030    —   —   19,542(i)   1,067,970 
  2/5/2021   5,016   15,050(iii)   57.39   2/5/2031    —   —   1,198(ii)   65,443 
  5/25/2021   —   —   —   —    —   —   1,525(ii)   83,341 
   2/10/2022   —   24,112(iv)   50.16   2/10/2032       3,022(ii)   165,128   6,600(iii)   360,690 

 

(1)

The actual vesting dates for unexercisable SARs are as follows:

 

 (i)

Remainder of the unexercisable award vested on February 5, 2018.7, 2023.

 

 (ii)

One-half of the unexercisable award vested or will vest on each of February 6, 20187, 2023 and 2019.2024.

 

 (iii)

One-third of the unexercisable award vested or will vest on each of February 5, 2018, 20192023, 2024 and 2020.2025.

 

 (iv)

One-thirdOne-fourth of the unexercisable award will vest on each of November 11, 2018, 2019 and 2020.

(v)

One-fourth of the unexercisable award vested or will vest on each of February 10, 2018, 2019, 20202023, 2024, 2025 and 2021.2026.

 

(vi)

One-half of the unexercisable award will vest on each of March 25, 2018 and 2019.

(vii)

100% of the unexercisable award will vest on February 5, 2018.

(2)

The RSUs reported in this column include additional RSUs received with respect to dividends anddividend equivalents, which remain subject to the same underlying vesting conditions. The actual vesting dates for unvested RSUs are as follows:

 

 (i)

The RSUs will vestone-half in full on each of November 11, 2018 and 2019.February 5, 2024.

 

 (ii)

TheOne-fourth of the RSUs vested or will vestone-half on each of September 23, 2018February 10, 2023, 2024, 2025 and 2019.2026.

 

(iii)

The RSUs vestone-third on January 4, 2018 andtwo-thirds on January 4, 2019.

(iv)

The RSUs vest in full on February 10, 2021.

(v)

The RSUs vestone-fourth on November 1, 2018, 2019, 2020 and 2021.

(vi)

The RSUs vest in full on November 1, 2021.

(3)

The market value of these awards areeach award is calculated by multiplying the number of shares covered by the award by $40.02,$54.65, the closing price of the Company’s stock on the NYSE on December 29, 2017.30, 2022.

 

(4)

The awards reported in this column represent PSU awards granted to the NEOs with the following vesting terms:

(i)

The 2020 Partner PSU Awards that are scheduled to vest based on the absolute Company stock price hurdles, adjusted total revenue growth, adjusted EBITDA growth and transformational objectives, over the January 1, 2020 through December 31, 2023 performance period, subject to the NEO’s continued employment through the last day of the performance period except as otherwise provided for in the underlying equity award agreement upon a qualifying termination of employment. The 2020 Partner PSU Awards are subject to different goals with different levels of projected performance and the amount reported for this award is reported assuming threshold payout. Based on performance, these PSUs will vest in full on December 31, 2023.

YUM CHINA– 2018 Proxy Statement80   

  55  YUM CHINA– 2023 Proxy Statement

 

 

 

EXECUTIVE COMPENSATION

 

  

(ii)

PSU awards that are scheduled to vest based on the Company’s achievement of rTSR performance goals and the Company’s adjusted total revenue growth and adjusted diluted EPS growth, over the January 1, 2021 through December 31, 2023 performance period, subject to the NEO’s continued employment through the last day of the performance period except as otherwise provided for in the underlying equity award agreement upon a qualifying termination of employment. In accordance with SEC disclosure rules, the amount reported for this award is reported assuming threshold payout. Based on performance, these PSUs will vest in full on December 31, 2023.

(iii)

PSU awards that are scheduled to vest based on the Company’s achievement of the rTSR performance goal over the January 1, 2022 through December 31, 2024 performance period, subject to the NEO’s continued employment through the last day of the performance period except as otherwise provided for in the underlying equity award agreement upon a qualifying termination of employment. In accordance with SEC disclosure rules, the amount reported for this award is reported assuming maximum payout. Based on performance, these PSUs will vest in full on December 31, 2024.

YUM CHINA – 2023 Proxy Statement 

  81

EXECUTIVE COMPENSATION   

OUTSTANDING 2022 LAVAZZA ESOP GRANTS AT 2022 YEAR-END

The following table shows the number of the shares of the Lavazza Joint Venture covered by the unvested 2022 Lavazza ESOP Grants held by the Company’s NEOs on December 31, 2022.

Name

    Grant Date     

Number of Lavazza Joint
Venture Shares
That Have Not Vested

(#)(1)

         

Fair Value of Lavazza Joint
Venture Shares
That Have Not Vested

($)(2)

 

(a)

    (b)     (c)        (d) 

Ms. Wat

     2/10/2022      1,000,000      $1,010,000 

Mr. Yeung

     2/10/2022      200,000      $202,000 

Mr. Chan

     2/10/2022      200,000      $202,000 

Mr. Huang

     2/10/2022      200,000      $202,000 

Mr. Yuen

     2/10/2022      200,000         $202,000 

(1)

The 2022 Lavazza ESOP Grants granted to the NEOs are subject to both performance-based vesting conditions and the occurrence of a liquidity event, including an initial public offering of the Lavazza Joint Venture which must occur within seven years of the grant date.

(2)

The per share fair value of the 2022 Lavazza ESOP Grants are based on an external valuation of the total enterprise value of Lavazza Joint Venture as at December 31, 2022 and determined on a diluted basis, taking into account of potential shares to be issued under the Lavazza Equity Plans.

82  

  YUM CHINA– 2023 Proxy Statement

   EXECUTIVE COMPENSATION

 

20172022 OPTION/SAR EXERCISES AND STOCK VESTED

 

 

The table below shows the number of Company shares acquired during 20172022 upon the exercise of Company SAR awards and the vesting of Company stock awards and before payment of applicable withholding taxes and broker commissions. This table does not include any shares acquired upon the exercise or vesting of outstanding YUM equity awards.

 

  Option/SAR Awards       Stock Awards     Option/SAR Awards         Stock Awards 

Name

  Number
of Shares
Acquired on
Exercise
(#)		   Value
Realized
on
Exercise
($)		      Number
of Shares
Acquired on
Vesting
(#)		   Value
Realized on
Vesting
($)		     

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)     (b)     (c)       (d)     (e) 

Mr. Pant

   59,409    2,081,701     —    — 

Mr. Lo

   —    —     434    17,244 

Ms. Wat

   —    —     4,687    124,771 

Ms. Ng

   —    —     4,687    124,771 

Ms. Wat

Ms. Wat

Ms. Wat

     —      —       52,166      2,850,872(1) 

Mr. Yeung

Mr. Yeung

Mr. Yeung

Mr. Yeung

     —      —       20,922      1,046,027(1) 

Mr. Chan

Mr. Chan

Mr. Chan

Mr. Chan

     —      —       11,946      628,244(1) 

Mr. Huang

   —    —     4,687    124,771 

Mr. Stedem

   39,982    1,437,876      —    — 

Mr. Huang

Mr. Huang

Mr. Huang

     6,317      347,472       23,338      1,182,626(1) 

Mr. Yuen

Mr. Yuen

Mr. Yuen

Mr. Yuen

     2,298      121,376        12,387      628,900(1) 

(1)

This amount includes the number of shares acquired upon the vesting of the 2020 Annual PSUs based on performance during the 2020-2022 performance period, with the value realized on vesting determined based on the closing price of our common stock on December 30, 2022. For all NEOs other than Ms. Wat, this amount also includes the number of shares acquired upon vesting of RSU awards, with the value realized on vesting determined based on the closing price of our common stock on the applicable vesting date.

Nonqualified Deferred Compensation

 

During 2017, Messrs. Pant and Stedem were the only NEOs who participated in the YCHLRP, an unfunded, unsecured account-based plan maintained by the Company. In 2017, the YCHLRP provided an annual allocation to the accounts of Messrs. Pant and Stedem equal to 20% and 8%, respectively, of their respective salary plus target bonus.

The YCHLRP provides an annual earnings credit to each participant’s account based on the value of the participant’s account at the end of each year. Under the YCHLRP, Messrs. Pant and Stedem each received an annual earnings credit equal to 5% of their account balances. The Company’s contributions for 2017 were equal to 20% and 8%, respectively, of Messrs. Pant and Stedem’s salaries plus target bonuses.

Under the YCHLRP, 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 YCHLRP benefit, combined with any other deferred compensation benefits

covered under Code Section 409A exceeding $15,000, will not receive a distribution until the calendar quarter following the participant’s 55th birthday.

The Company offers certain executives working in China retirement benefits under the Bai Sheng Restaurants (Hong Kong) Limited Retirement Scheme.BSRCHLRS. Under this program, executives may make personal contributions and the Company provides a company fundedcompany-funded contribution ranging from 5% to 10% of an executive’s base salary. The Company’s contributionscontribution for 2017 were2022 was equal to 5% of salary for each of Mr. LoMessrs. Yeung and Ms. WatChan, and 10% of salary for each of Ms. NgWat and Mr. Huang.Messrs. Huang and Yuen. Participants may elect a variety of mutual funds in which

to invest their account balances under the plan. Additionally, upon termination, participants receive a lump sum equal to a percentage of the Company’s contributions, including investment returns. This percentage is based on a vesting schedule that provides participants with a vested 30% interest upon completion of a minimum of three years of service, and an additional 10% vested interest for each additional completed year, up to a maximum of 100%. Participants may elect a variety of mutual funds in which to invest their account balances under the plan.

 

 

56  YUM CHINA – 2023 Proxy Statement 

  YUM CHINA– 2018 Proxy Statement  83

 

 

 

EXECUTIVE COMPENSATION

 

    

 

20172022 NONQUALIFIED DEFERRED COMPENSATION TABLE

 

 

 

Name

  

Executive

Contributions

in Last Fiscal
Year

($)

   

Registrant

Contributions

in Last Fiscal
Year

($)(1)

   

Aggregate

Earnings in

Last Fiscal
Year

($)(2)

   

Aggregate

Withdrawals/

Distributions

($)

   

Aggregate

Balance at

Last
Fiscal
Year End

($)(3)

 
   (a)   (b)   (c)   (d)   (e) 

Mr. Pant

   —    521,857    168,745    —    4,033,796 

Mr. Lo

   —    20,396    —    —    26,234(4) 

Ms. Wat

   —    36,975    —    —    106,085(4) 

Ms. Ng

   —    39,606    —    —    491,642(4) 

Mr. Huang

   —    44,307    —    —    216,366(4) 

Mr. Stedem

   —    40,411    1,875    —    77,835 

Name

 

Executive

Contributions

in Last Fiscal
Year

($)

  

Registrant

Contributions

in Last Fiscal
Year

($)(1)

  

Aggregate

Earnings in

Last Fiscal
Year

($)(2)

  

Aggregate

Withdrawals/

Distributions

($)

  

Aggregate

Balance at

Last
Fiscal
Year End

($)(3)

 
  (a)  (b)  (c)  (d)  (e) 

Ms. Wat

  —   141,897   —   —   720,206(4) 

Mr. Yeung

  —   41,840   —   —   125,114(4) 

Mr. Chan

  —   31,380   —   —   102,094(4) 

Mr. Huang

  —   76,046   —   —   571,977(4) 

Mr. Yuen

  —   62,107   —   —   407,461(4) 

 

(1)

Amounts in this column primarily reflect allocations to the YCHLRP for Messrs. Pant and Stedem and allocations to the Bai Sheng Restaurants (Hong Kong) Limited Retirement Scheme for Mr. Lo, Ms. Wat, Ms. Ng and Mr. Huang.

(2)

Amounts in this column reflect earnings duringregistrant contributions to the last fiscal year on amounts deferred underBSRCHLRS for the YCHLRP. All earnings for Messrs. PantNEOs and Stedemwhich are based on the earnings credit provided under the YCHLRP describedreflected in the narrative above this table. For Messrs. Pant and Stedem, of the earnings reflected in this column, $62,098 and $690, respectively, was deemed above-market earnings accruing to their accounts under the YCHLRP. For above-market earnings on nonqualified deferred compensation, see the “Change in Pension Value and Nonqualified Deferred Compensation Earnings” column of the 20172022 Summary Compensation Table.

(2)

Under the Hong Kong Data Privacy Act, the administrator of the Bai Sheng Restaurants (Hong Kong) Limited Retirement SchemeBSRCHLRS is restricted from disclosing individual account balances under that planthe BSRCHLRS, and accordingly, the Company is unable to compile earnings information with respect to this plan.the BSRCHLRS. Under the terms of the plan,BSRCHLRS, participants may elect a variety of mutual funds in which to invest their account balances under the plan.BSRCHLRS.

 

(3)

The amounts reflected in this column arethe estimated year-end balances for Messrs. Pant and Stedemthe NEOs under the YCHLRPBSRCHLRS. Amounts in this column include the following amounts that were previously reported in the Summary Compensation Table in 2021 and theestimated year-end balances for Mr. Lo,2020: Ms. Wat, Ms. Ng$582,608 in 2021, $444,920 in 2020; Mr. Yeung, $83,893 in 2021, $43,972 in 2020; Mr. Chan, $71,240 in 2021; Mr. Huang, $499,617 in 2021, $422,252 in 2020; and Mr. Huang under the Bai Sheng Restaurants (Hong Kong) Limited Retirement Scheme.Yuen, $347,921 in 2021, $286,095 in 2020.

 

(4)

This amount represents the aggregate amount of the Company’sCompany contributions, excluding investment returns. See note (2)(3) to this table for further information regarding investment returns with respect to the Bai Sheng Restaurants (Hong Kong) Limited Retirement Scheme.BSRCHLRS. This amount was denominated in Hong Kong dollars and was converted to U.S. dollars using an exchange rate of 7.79237.83 Hong Kong dollars to U.S. dollars for disclosure purposes.

Potential Payments upon a Termination or a Change in Control

 

YCHLRP. UnderTermination of Employment without a Change in Control. As noted in the YCHLRP, participants age 55 are entitledCD&A, the Company maintains the Executive Severance Plan, which provides severance benefits to a lump sum distribution of their account balance following theirour NEOs upon termination of employment by the Company without cause or, for participants subject to PRC law, termination for any delay requiredstatutory reason and subject to complyseverance pay under PRC law (each, an “Executive Severance Plan Qualifying Termination”). In the event of an Executive Severance Plan Qualifying Termination, the NEO would receive, in lieu of any severance benefits under any other arrangement with applicable law. Participants under age 55 who terminate with more than fivethe participant (including, without limitation, the Restrictive Covenant Letter

yearsAgreements and the Company’s change in control severance plan, provided that in the event of service will receive their account balance at their 55th birthday. As of December 31, 2017, Mr. Pant and Mr. Stedem each had balancesa qualifying termination under the YCHLRPchange in control severance plan, the terms of $4,033,796 and $77,835, respectively.the change in control severance plan will govern), the following severance benefits:

•

Cash severance benefits consisting of the greater of (i) the sum of statutory severance payable under PRC law and an amount equal to five times the participant’s average monthly salary in the 12 months prior to the Executive Severance Plan Qualifying Termination as consideration for compliance with certain restrictive

 

 

YUM CHINA– 2018 Proxy Statement84   

  57  YUM CHINA– 2023 Proxy Statement

 

 

 

EXECUTIVE COMPENSATION

 

  

 

covenants, including covenants relating to non-competition as further described below and (ii) the sum of the participant’s monthly base salary plus 1/12 of the participant’s target annual bonus, multiplied by a severance multiple of 24, in the case of the CEO, and 12 for all other participants;

•

Any accrued, but unpaid as of the date of the Executive Severance Plan Qualifying Termination, annual cash bonus for any completed fiscal year preceding an Executive Severance Plan Qualifying Termination; and

•

If the Executive Severance Plan Qualifying Termination occurs on or after June 30, a pro-rated annual bonus for the year of the Executive Severance Plan Qualifying Termination based on actual performance and pro-rated for the employment period during the year.

In the event of a participant’s material breach of a material obligation to the Company pursuant to any award or agreement between the participant and the Company, including a material breach of the restrictive covenants set forth in any offer letter, restrictive covenant or other agreement entered into by the participant with the Company or a determination that an event constituting “cause” has occurred, then the Compensation Committee may (i) terminate the participant’s right to receive payments under the Executive Severance Plan and Change(ii) seek the recoupment of any payments previously made to the participant under the Executive Severance Plan, including through exercising rights of set-off, forfeiture or cancellation, to the full extent permitted by law, with respect to any other awards, benefits or payments otherwise due to the participant from the Company or any of its affiliates.

The Company is party to Restrictive Covenant Letter Agreements with each NEO. The Restrictive Covenant Letter Agreements include restrictive covenants relating to non-disclosure, non-competition, non-solicitation and non-disparagement, as well as cooperation in Control Arrangements.investigations and litigation clauses. As consideration for the restrictive covenants, the Company is obligated to pay an amount equivalent to five times the NEO’s average monthly salary upon a termination of employment, other than in the case of a change-in-control-related termination or the NEO’s death. Such amount would be offset by amounts otherwise owed under any other termination-related agreement between the employee and the Company (including the Executive Severance Plan) so that there is no duplication of payments.

The Company’s equity awards provide for pro-rata vesting for terminations due to death, retirement (age 55 and ten years of service or age 65 and five years of service) or involuntary termination by the Company without cause, with PSUs determined based on actual performance. Outstanding equity awards are forfeited upon a termination for cause. If the NEOs’ employment had terminated as of December 31, 2022 without cause or due to death or retirement, they would have been entitled to pro-rata vesting of their outstanding RSUs, SARs and PSUs as follows: Ms. Wat, $18,533,042; Mr. Yeung, $3,993,474; Mr. Chan, $3,173,260; Mr. Huang, $2,986,041 and Mr. Yuen, $2,082,191, assuming target performance for purposes of this disclosure. As of December 31, 2017, Ms. Wat was2022, Messrs. Huang and Yuen were retirement eligible.

The below table shows the only executive with whommaximum amount of payments and other benefits that each NEO would have received upon a qualifying termination under the Executive Severance Plan on December 31, 2022 and the Company’s equity award agreements, excluding the 2022 Lavazza ESOP Grants, assuming target performance of the PSUs for purposes of this disclosure.

   

Wat

$

 

 

   

Yeung

$

 

 

   

Chan

$

 

 

   

Huang

$

 

 

   

Yuen

$

 

 

Cash Severance

   8,550,000    1,680,000    1,134,000    1,524,400    1,071,000 

Release Payment

   1,488    1,488    1,488    1,488    1,488 

Pro-rata Vesting of SARs

   1,280,870    175,114    121,595    264,351    141,891 

Pro-rata Vesting of RSUs

   1,877,460    1,071,440    990,280    67,088    37,850 

Pro-rata Vesting of PSUs

   15,374,712    2,746,920    2,061,386    2,654,602    1,902,449 
  

 

 

 

TOTAL

   27,084,530    5,674,962    4,308,749    4,511,929    3,154,678 
  

 

 

 

YUM CHINA – 2023 Proxy Statement

  85

EXECUTIVE COMPENSATION   

Termination of Employment Following a Change in Control. As noted in the CD&A, the Company had an agreement that provided for severance payments upon termination of employment. However, Ms. Wat’s agreement did not provide for any enhancement of severance in connection withmaintains a change in control nor was the Company a party to any other severance or change in control agreements that would entitle any of the NEOs toplan, which provides severance benefits uponto our NEOs in the event of a termination or a change in control. Under the terms of Ms. Wat’s letter agreement, if Ms. Wat’s employment is terminated by the Company without “cause” prioror by the NEO due to March 1, 2021, then Ms. Wat will be entitled to a severance payment, payable in monthly installments, equal to two times her base salary and annual bonus target ($5,060,000), subject to Ms. Wat’s execution of a post-termination agreement that includes restrictive covenants relating tonon-solicitation,non-competition andnon-disclosure.

In addition, Mr. Pant is subject to a letter of understanding with the Company that specifies thatany post-spin-off equity awards from the Company will be eligible for continued vesting upon retirement, provided Mr. Pant (i) is actively employed for at least one year following the grant date, (ii) provides at least six months notification of intention to retire, and (iii) signsnon-solicitation andnon-compete agreements. The letter of understanding also provides that Mr. Pant’s unvested awards from YUM will continue to vest during his employment with the Company and, upon his separation from the Company, Mr. Pant will be treated as a retiree from YUM, his vested SARs can be held until the term expires, and he willreceive pro-rated vesting of his unvested SARs. In connection with his stepping down as CEO and assuming the position of Senior Advisor effective March 1, 2018, the outstanding equity awards of Mr. Pant will be allowed to continue to vest under the terms of his letter of under-

standing dated October 28, 2016 and his transition agreement dated September 29, 2017 (estimated value of Company SARs of $10,841,731, YUM SARs of $6,905,175 and Company RSUs of $2,230,407,“good reason,” in each case based onwithin 24 months following a change in control (a “CIC Qualifying Termination”). Each NEO has executed a participation and restrictive covenant agreement to participate in the closing priceChange in Control Severance Plan, which contains restrictive covenants in favor of the Company relating to non-competition, non-solicitation, non-disclosure, and non-disparagement. In the event of a Company or YUM share, as applicable, as reported on December 29, 2017).CIC Qualifying Termination under the Change in Control Severance Plan, the NEO would receive, in lieu of any severance benefits under any other arrangement with the participant, the following severance benefits:

In connection with Mr. Stedem’s separation from the Company, the Compensation Committee approved the payment of a pro rata 2017 annual cash bonus to Mr. Stedem, for his period of service from January 1, 2017 to June 1, 2017, subject to the achievement of at least target Company performance for 2017 and with such payment to be made on the same terms and at the same time as annual bonuses are payable to the Company’s other executive officers. For 2017, Mr. Stedem received a prorated annual bonus of $286,571. The Compensation Committee also approved the reimbursement of air travel for Mr. Stedem and his family to the United States and certain relocation expenses in connection with Mr. Stedem’s relocation to the United States of $35,775. In consideration for such payments, Mr. Stedem will be bound by certain confidentiality,non-disparagement,non-solicitation andnon-competition covenants.

•

An amount equal to the “Severance Multiple” multiplied by the sum of (x) such NEO’s monthly base salary in effect immediately prior to a CIC Qualifying Termination (or prior to any reduction for purposes of good reason) and (y) 1/12 of the greater of such NEO’s annual target cash bonus for the calendar year in which the CIC Qualifying Termination occurs and the most recent annual cash bonus paid to the NEO, with such amounts payable over the 12-month period following the NEO’s termination of employment. The Severance Multiple is 30 for the CEO and 24 for each of the other participating NEOs.

•

Any accrued, but unpaid as of the date of the CIC Qualifying Termination, annual cash bonus for any completed fiscal year preceding a CIC Qualifying Termination, to be paid within 60 days of the CIC Qualifying Termination.

•

Accrued benefits under any retirement plan or health or welfare plan.

•

If permitted by the terms of the Company’s health plan and applicable law, continued health insurance cover-

age, subsidized by the Company at active employee rates, through the earlier of the one-year anniversary of the participant’s termination of employment and the participant becoming eligible for health insurance coverage under another employer’s plan.

•

Outplacement services, in an aggregate cost to the Company not to exceed $25,000, for a one-year period (or, if earlier, until the NEO accepts an offer of employment).

Under the terms of our equity agreements, all outstanding stock options and/or SARs and RSUs would fully and immediately vest following a change in control of the Company if the executiveNEO is employed on the date of the change in control of the Company and is involuntarily terminated (other than for cause) on or within two years following the change in control. Under the terms of the outstanding PSU awards, if the NEO is employed on the date of the change in control and resigns for good reason or is involuntarily terminated other than for cause within two years following a change in control, then vesting shall be measured based on the greater of (i) actual performance for the performance period through the date of termination of employment and (ii) target performance (provided, however, that if the change in control and termination of employment occur during the first year of the performance period, then performance will be measured based on target performance). In addition, beginning with the 2020 equity awards, if awards are not effectively assumed in a change in control of the Company, then the awards will vest in full upon such change in control with any stock price performance goal vesting based on the per share transaction price in such change in control and the other performance goals vesting at the greater of actual performance through the date of the change in control and target performance (provided, however, if the change in control occurs during the first year of the performance period, then performance will be measured based on target performance).

86  

  YUM CHINA– 2023 Proxy Statement

   EXECUTIVE COMPENSATION

The below table shows the maximum amount of payments and other benefits that each NEO would have received upon a change in control and involuntaryqualifying termination on December 31, 2017.

   

Pant

$

   

Lo

$

   

Wat

$

   

Ng

$

   

Huang

$

 

Accelerated Vesting of SARs

   10,841,731    275,822    3,069,647    1,065,903    1,197,799 

Accelerated Vesting of RSUs

   2,230,407    34,942    4,328,627    1,949,064    1,746,471 
  

 

 

 

TOTAL

   13,072,138    310,765    7,398,274    3,014,967    2,944,270 
  

 

 

 

In addition, if a2022 under the terms of the change in control severance plan and the Company’s equity award agreements, excluding the Lavazza ESOP Grants, assuming target performance of the Company hadPSUs for purposes of this disclosure.

   

Wat

$

 

 

   

Yeung

$

 

 

   

Chan

$

 

 

   

Huang

$

 

 

   

Yuen

$

 

 

Cash Severance

   12,580,615    3,744,328    2,499,934    3,219,282    2,355,812 

Continued Health Insurance Coverage

   18,123    11,053    17,053    11,053    12,943 

Outplacement Services

   25,000    25,000    25,000    25,000    25,000 

Accelerated Vesting of SARs

   2,659,403    496,103    351,914    566,392    308,583 

Accelerated Vesting of RSUs

   3,856,262    1,900,069    1,719,385    292,825    165,128 

Accelerated Vesting of PSUs

   21,665,049    3,947,875    2,964,522    3,779,033    2,671,460 
  

 

 

 

TOTAL

   40,804,452    10,124,428    7,577,808    7,893,585    5,538,926 
  

 

 

 

2022 Lavazza ESOP Grants

As noted in the CD&A, during 2022, the NEOs received one-time PSUs under the Lavazza JV Equity Plan. Under the terms of the award agreements, in the event the NEO’s employment is terminated following the achievement of the underlying performance goals but prior to the occurrence of a liquidity event, which includes the occurrence of an initial public offering, with respect to the Lavazza Joint Venture by reason of death, disability, retirement, or termination without cause, then the portion of the award

associated with the achieved performance goals would remain outstanding and would vest in the event a liquidity event, which includes the occurrence of an initial public offering, with respect to the Lavazza Joint Venture occurs within seven years of the grant date. Assuming that the underlying performance goals and a liquidity event with respect to the Lavazza Joint Venture occurred as of December 31, 2017,2022, the NEOs would have been entitled to receiveestimated value of the accelerated vesting of their equity awards with respect to YUM, with the value of

such awards2022 Lavazza ESOP Grants was as follows: for Mr. Pant, $6,905,175; for Ms. Wat, $1,787,567; for Ms. Ng, $542,676; and for$1,010,000; Mr. Yeung, $202,000; Mr. Chan, $202,000; Mr. Huang, $764,313.$202,000; and Mr. Yuen, $202,000.

 

 

58  

  YUM CHINA– 2018 Proxy Statement

   EXECUTIVE COMPENSATION

PAY RATIO DISCLOSURE

 

 

 

As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Company is providing the following disclosure about the relationship of the annual total compensation of our employees to the annual total compensation of Mr. Pant, our CEO during 2017.Ms. Wat.

Identification of Median Pay Employee

The Company employed over 450,000 personshad more than 400,000 employees as of year-end 2017, 2022, and substantially all of them are based in China. Given the nature of its operations, approximately 91%89% of the Company’s employees were restaurant crewmembers. More than 60%Approximately 72% of the 364,000 crewmembers many attendingworked part-time, approximately 37% of whom attended university at the same time, worked part-time and were paid on an hourly basis. Our wage rates for crewmembers are determined based on a number of factors, including but not limited to cost of living, labor supply and demand, and

competitive market pay rates in the city in which the crewmember works.

We selected December31, 2017,December 31, 2022, as the date on which to determine our median employee. For purposes of identifying the median employee from the employee population base (excluding Ms. Wat), we considered the total compensation of all of our employees, as compiled from our payroll records. In addition, we measured compensation for purposes of determining the median employee using December 20172022 payroll records. Compensation paid in foreign currencies was converted to U.S. dollars based on a weighted average exchange rate for the relevant period.

Using this methodology, our median employee other than Mr. Pant, was identified as a part-time crewmember located in a second tiersecond-tier city in China.

Ratio

YUM CHINA – 2023 Proxy Statement

  87

For 2017,

EXECUTIVE COMPENSATION   

 

The annual total compensation of the median employee, as identified above, was $3,396.Ratio

For 2022:

 

Mr. Pant’s annual total compensation, as reported in the Total column of the 2017 Summary Compensation Table, was $9,571,017.

•

The annual total compensation of the median employee, as identified above, was $6,359.

 

•

Ms. Wat’s annual total compensation, as reported in the Total column of the 2022 Summary Compensation Table, was $15,892,879.

Based on this information, the ratio of the annual total compensation of Mr. Pant to the median of the annual total compensation of all employees is estimated to be 2,818 to 1.

•

Based on this information, the ratio of the annual total compensation of Ms. Wat to the median of the annual total compensation of all employees is approximately 2,499 to 1.

Accordingly,In fact, our pay ratio is significantly impacted by the fact that substantially all of our employees are based in China, approximately 60%72% of our over 420,000364,000 crewmembers are employed on a part-time and hourly basis, and wage variation occurs based ontypical hourly wages vary between the cities in which our restaurants are located.

The above ratio and annual total compensation amount of the median employee are reasonable estimates that have been calculated using methodologies and assumptions permitted by SEC rules. The Company notes that its ratio and annual total compensation amount may not be directly comparable to those of other companies because the methodologies and assumptions used to identify the median employee may vary significantly among companies.

To provide supplemental disclosure and not as a substitute for the pay ratio calculated in accordance with SEC executive compensation disclosure rules, we also reviewed the CEO pay ratio excluding the incremental fair value associated with the modification of 2020 Annual PSUs. Excluding such awards and modification, the CEO’s 2022 annual total compensation would have been $13,107,839 and the CEO pay ratio for fiscal 2022 would have been 2,061 to 1.

 

 

YUM CHINA– 2018 Proxy Statement88   

  59  YUM CHINA– 2023 Proxy Statement

 PAY VERSUS PERFORMANCE
Year
(1)
 
Summary
Compensation
Table Total for
PEO
($)
(2)
  
Compensation
Actually Paid
(CAP) to PEO
($)
(3)
  
Average
Summary
Compensation
Table Total for
Non-PEO NEOs
($)
(2)
  
Average
Compensation
Actually (CAP)
Paid to Non-PEO

NEOs ($)
(3)
  
Value of Initial Fixed $100
Investment Based on:
(4)
  
Net
Income
($ in
millions)
  
R-TSR

against
Constituents
of MSCI
China Index
(%)
(6)
 
 
Total
Shareholder
Return ($)
  
MSCI China
Consumer
Discretionary
Index Total
Shareholder
Return ($)
(5)
 
(a)
 
(b)
  
(c)
  
(d)
  
(e)
  
(f)
  
(g)
  
(h)
  
(i)
 
         
2022
  15,892,879   18,178,125   3,577,110   3,947,038   116.42   74.02   442   93.65% 
         
2021
  16,555,672   6,689,317   3,737,910   2,243,769   105.25   96.60   990   33.06% 
         
2020
  21,171,578   36,083,539   4,236,753   6,197,764   119.41   150.25   784   57.03% 
(1)
As required by Section 953 (a) of the Dodd-Frank Wall Street Reform and Consumer
Protection
Act, and Item 402 (v) of Regulation
S-K,
we are providing the following information about the relationship between executive compensation actually paid and certain financial performance of the Company. For further information concerning
the
Company’s variable
pay-for-performance
philosophy and how the Company’s executive compensation aligns with the Company’s performance, refer to “Executive Compensation – Compensation Discussion and Analysis.” Ms. Wat served as the Company’s principal executive o
fficer (“
PEO
”) for the entirety of 202
0, 2021 and 2022 and the Company’s other NEOs for the applicable years were as follows:
–2022: Andy Yeung, Joseph Chan, Johnson Huang and Aiken Yuen.
–2021: Andy Yeung, Johnson Huang, Joseph Chan, Aiken Yuen and Danny Tan.
–2020: Andy Yeung, Johnson Huang, Danny Tan and Aiken Yuen.
(2)
Amounts reported in this column represent (i) the total compensation reported in the Summary
Compensation
Table for the applicable year in the case of Ms. Wat and (ii) the average of the total compensation reported in the Summary Compensation Table for the applicable year for the Company’s NEOs reported for the applicable year other than Ms. Wat.
(3)
To calculate compensation actually paid, adjustments were made to the amounts reported in the Summary Compensation Table for the applicable year. The dollar amounts do not reflect the actual amount of compensation earned by or paid to Ms. Wat during the applicable year, nor the actual average amount of compensation earned by or paid to the
NEOs
as a group (excluding Ms. Wat) during the applicable year. A reconciliation of the adjustments for Ms. Wat and for the average of the other NEOs is set forth following the footnotes to this table.
(4)For each fiscal year, the amount included in the table is the cumulative total shareholder return as of the end of that year, assuming that the value of the investment in our common stock and peer group was $100 on December 31, 2019 and that all dividends were reinvested. Historic stock price performance is not necessarily indicative of future stock price performance.
(5)
The TSR Peer Group consists of the MSCI China Consumer Discretionary Index, which is a free-float adjusted market cap weighted gross total return index, based on MSCI’s Global Investable Market Indexes Methodology, which is the same industry index used for purposes of our Annual Report on Form 10-K.
(6)
As noted in the CD&A, for 2022, our
r-TSR
percentile ranking against the constituents of the MSCI China Index was utilized as a component in both the 2022 annual performance-based cash bonus plan and the 2022 Annual PSU Awards, and is viewed as the most important measure by the Company to link pay and performance.
YUM CHINA
– 2023 Proxy Statement
  8
9
Table of Contents
EXECUTIVE COMPENSATION   

Compensation Actually Paid Adjustments
(a)
 
Year
 
Summary
Compensation
Table (SCT)
Total
($)
(b)
  
Minus
Value of
Stock
Option/
SAR and
Stock
Awards
Reported
in SCT
($)
(c)
  
Plus
Fair Value at
Fiscal
Year-End of

Outstanding
and Unvested
Stock
Option/SAR
and Stock
Awards
Granted in
Fiscal Year
($)
(d)
  
Plus/(Minus)
Change in
Fair Value of
Outstanding
and
Unvested
Stock
Option/SAR
and Stock
Awards
Granted in
Prior Fiscal
Years
($)
(e)
  
Plus
Fair Value at
Vesting of
Stock Option/
SAR and Stock
Awards
Granted in
Fiscal Year that
Vested During
Fiscal Year
($)
(f)
  
Plus/(Minus)
Change in
Fair Value as
of Vesting
Date of
Stock
Option/SAR
and Stock
Awards
Granted in
Prior Fiscal
Years for
which
Applicable
Vesting
Conditions
Were
Satisfied
During Fiscal
Year
($)
(g)
  
Minus
Fair Value
as of Prior
Fiscal
Year-End

of Stock
Option/
SAR and
Stock
Awards
Granted in
Prior
Fiscal
Years that
Failed to
Meet
Applicable
Vesting
Conditions
During
Fiscal
Year
($)
(h)
  
Equals
Compensation
Actually Paid
($)
 
 
Joey Wat
 
2022
  15,892,879   9,285,127   8,595,753   2,864,570   —   110,050   —   18,178,125 
         
2021
  16,555,672   8,703,924   6,661,504   (7,555,976)   —   (267,959)   —   6,689,317 
         
2020
  21,171,578   17,000,087   27,272,183   3,144,165   —   1,495,700   —   36,083,539 
 
Other NEOs
(i)
 
         
2022
  3,577,110   1,751,225   1,606,822   500,217   —   14,114   —   3,947,038 
         
2021
  3,737,910   1,772,973   1,374,102   (1,160,113)   —   64,843   —   2,243,769 
         
2020
  4,236,753   2,750,073   4,376,554   366,674   —   (32,144)   —   6,197,764 
(a)
This table excludes any YUM shares received by the NEOs upon conversion of their outstanding YUM equity awards in connection with the
spin-off.
(b)
Represents Total Compensation as reported in the Summary Compensation Table for the indicated fiscal year. With respect to the other NEOs, amounts shown represent averages.
(c)
Represents the grant date fair value of the stock option/SAR awards and stock awards granted during the indicated fiscal year, computed in accordance with ASC 718. See Note 15 to the Company’s Audited Financial Statements for further discussion of the relevant assumptions used in calculating these amounts. For 2022, the amount also includes the fair value of the 2020 Annual PSUs as of the date of its modifications by the Compensation Committee in December 2022.
(d)
Represents the fair value as of the indicated fiscal
year-end
of the outstanding and unvested stock option/SAR awards and stock awards granted during such fiscal year, computed in accordance with ASC 718 and, for awards subject to performance-based vesting conditions, based on the probable outcome of such performance-based vesting conditions as of the last day of the fiscal year. Methodology adopted in calculating the fair value as of the indicated fiscal year-end is consistent with those used in calculating the grant date fair value and the relevant assumptions reflect the Company’s estimates based on historical data existing on each valuation date.
(e)Represents the change in fair value during the indicated fiscal year of each stock option/SAR award and stock award that was granted in prior fiscal years and that remained outstanding and unvested as of the last day of the indicated fiscal year, computed in accordance with ASC 718 and, for awards subject to performance-based vesting conditions, based on the probable outcome of such performance-based vesting conditions as of the last day of the fiscal year. Methodology adopted in calculating the fair value as of the indicated fiscal year-end is consistent with those used in calculating the grant date fair value and the relevant assumptions reflect the Company’s estimates based on historical data existing on each valuation date.
9
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  YUM CHINA
– 2023 Proxy Statement
Table of Contents
   EXECUTIVE COMPENSATION
(f)
Represents the fair value at vesting of the stock option/SAR awards and stock awards that were granted and vested during the indicated fiscal year, computed in accordance with ASC 718. See Note 15 to the Company’s Audited Financial Statements for further discussion of the relevant assumptions used in calculating these amounts.
(g)
Represents the change in fair value, measured from the prior fiscal
year-end
to the vesting date, of each stock option/SAR award and stock award that was granted in prior fiscal years and which vested during the indicated fiscal year, computed in accordance with ASC 718. For 2022, the amount also includes the fair value of the 2020 Annual PSUs as of the date of its modifications by the Compensation Committee in December 2022.
(h)
Represents the fair value as of the last day of the prior fiscal year of the stock option/SAR awards and stock awards that were granted in prior fiscal years which failed to meet the applicable vesting conditions in the indicated fiscal year, computed in accordance with ASC 718.
(i)
See footnote 1 above for the
non-PEO
NEOs included in the average for each fiscal year.
Relationship
Between Pay and
Performance
A
s described in more detail in the section “Executive Compensation – Compensation Discussion and Analysis,” the Company’s executive compensation program reflects a variable pay-for-performance philosophy. A significant portion of the Company’s executive compensation program consists of equity awards, including PSUs, SARs and RSUs. The fair value of equity awards, in particular the PSUs, as of the grant date and each fiscal year-end is heavily impacted by the Company’s stock price as of the same date, thereby impacting the compensation actually paid as reported. In addition, the Company granted the 2020 Partner PSU Awards, a special PSU award, resulting in a higher Summary Compensation Table total amount reported in 2020
.
The following graph demonstrates the relationship between compensation actually paid over the period to the PEO and other NEOs, and each of the Company cumulative TSR and Peer Group cumulative TSR.

YUM CHINA
– 2023 Proxy Statement
9
1
Table of Contents
EXECUTIVE COMPENSATION   
The following graph demonstrates the relationship between compensation actually paid over the period to the PEO and other NEOs and rTSR percentile ranking against the constituents of the MSCI China Index.

The following graph demonstrates the relationship between compensation actually paid over the period to the PEO and other NEOs and Net Income.

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– 2023 Proxy Statement
Table of Contents
   EXECUTIVE COMPENSATION

Performance Measures Used to Link Company Performance and Compensation Actually Paid to the NEOs
Below is a list of performance measures, which in the Company’s assessment represent the most important performance measures used by the Company to link compensation actually paid to the NEOs for 2022 to the Company’s performance. As described in greater detail in “Executive Compensation – Compensation Discussion and Analysis,” the Company’s executive compensation program reflects a variable
pay-for-performance
philosophy. The metrics that the Company uses for both our long-term and short-term incentive awards are selected based on an objective of incentivizing our NEOs to increase the value of the Company for our shareholders.
Most Important Financial Performance Measures
●
R-TSR
against the constituents of the MSCI China Index
●
Same Store Sales Growth
●
Adjusted Operating Profit Growth
●
System Net New Builds
YUM CHINA
– 2023 Proxy Statement
9
3

 

 2017 2022 DIRECTOR COMPENSATION

 

 

The Company primarily uses stock-based compensation to attract and retain qualified candidates to serve on the Board. In setting director compensation, the Board 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 Nominating and Governance Committee of the Board considers advice from the compensation consultant and reviews and makes recommendations to the Board with respect to the compensation and benefits of directors. No changes have been made to our director compensation program since it was approved by the Board in December 2017 and became effective in June 2018. The Company’s director compensation structure for 2022 is discussed below.

Employee Directors. Employee directors do not receive additional compensation for serving on an annual basis.the Board of Directors. Please see the 2022 Summary Compensation Table for the compensation received by Ms. Wat during 2022 for her role as CEO of the Company.

Non-Employee Directors Retainer.Ournon-employee directors were each compensated in 2017 with aan annual retainer

equal to $225,000,$275,000, payable in Company common stock or, if requested by a director, upto one-half in cash. TheseThe annual retainers were paid in late 2017June 2022 to compensate the directors for their serviceservices from NovemberJune 1, 2017, through October2022 to May 31, 2018.2023.

Chairman and Committee Chairperson Retainer. In 2017, in addition to the annual retainer paid toall non-employee directors, the Chairman of the Board (Dr. Hu) received an additional annual cash retainer of $225,000. The Chairperson of the Audit Committee (Mr. Hsieh)Bassi) received an additional $20,000stock$30,000 stock retainer, the Chairperson of the Compensation Committee (Mr. Ettedgui)(Ms. Lu) received an additional $15,000$20,000 stock retainer, and the Chairperson of the Nominating and Governance Committee (Dr. Hu) received an additional $10,000$15,000 stock retainer, and the Chairperson of the Food Safety and Sustainability Committee (Mr. Shao) received an additional $15,000 stock retainer. TheseAll such retainers were paid in late 2017June 2022 to compensate the directors for their serviceservices from November 1, 2017, through October 31, 2018.

Employee Directors. Employee directors do not receive additional compensation for serving on the Board of Directors.

Changes to Director Compensation.The Company’s 2017 and earlier director compensation structure had been determined by the board of directors of YUM prior to thespin-off. After considering the advice of the compensation consultant, the Company adjusted its director compensation structure in December 2017, effective June 1, 2018, to better reflect the fact that the Company’s directors require knowledge, expertise, time and efforts beyond what is typical of directors of peer companies due to the Company’s demands in areas of both U.S. and China regulatory regimes and business practices.

Effective June 1, 2018,our non-employee directors will each be compensated with an annual retainer equal to $275,000, payable in Company common stock or, if requested by a director, upto one-half in cash. In addition to the annual retainer paid toall non-employee directors, the Chairman of the Board will receive an additional annual cash retainer of $225,000, the Chairperson of the Audit Committee will receive an additional $30,000stock retainer annually, the Chairperson of the Compensation Committee will receive an additional $20,000 stock retainer annually, and the Chairperson of the Nominating and Governance Committee will receive an additional $15,000 stock retainer annually.

In December 2017, the Board also established a Food Safety Committee. The Board approved annual stock retainer for the Chairperson of the Food Safety Committee of $10,000 (prorated for the period from January 1, 20182022 to May 31, 2018) and $15,000 (effective June 1, 2018).

The Nominating and Governance Committee of the Board will continue to consider advice from the Compensation Committee’s independent compensation consultant and review and make recommendations to the Board with respect to the compensation and benefits of directors on an annual basis.2023.

 

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  YUM CHINA– 2018 Proxy Statement

   2017 DIRECTOR COMPENSATION

 

The table below summarizes cash compensation paidearned by and stock retainers granted toeach non-employee director during 2017.2022.

 

Name  

Fees Earned or

Paid in Cash($)(1)

   

Stock Awards

($)(2)

   

Option/SAR

Awards

($)(3)

   

Total

($)

     

Fees Earned or

Paid in Cash($)

   

Stock Awards

($)(3)

     

All Other

Compensation

($)

   

Total

($)

 

(a)

    (b)   (c)     (d)   (e) 

Peter A. Bassi

   112,510    112,490    —    225,000 

Christian L. Campbell

   20    224,980    —    225,000 

EdYiu-Cheong Chan

   20    224,980    —    225,000 

Peter A. Bassi

Peter A. Bassi

Peter A. Bassi

     137,500(1)    167,500      25,000(4)    330,000 

Edouard Ettedgui

   22    239,978    —    240,000 

Edouard Ettedgui

Edouard Ettedgui

Edouard Ettedgui

     —    275,000      —    275,000 

Cyril Han

Cyril Han

Cyril Han

Cyril Han

     —    275,000      —    275,000 

Louis T. Hsieh

   36    244,964    —    245,000 

Louis T. Hsieh

Louis T. Hsieh

Louis T. Hsieh

     137,500(1)    137,500      —    275,000 

Fred Hu

   225,008    234,992    —    460,000 

Jonathan S. Linen

   20    224,980    —    225,000 

Fred Hu

Fred Hu

Fred Hu

     225,000(2)    290,000      —    515,000 

Ruby Lu

   20    224,980    —    225,000 

Ruby Lu

Ruby Lu

Ruby Lu

     —    295,000      —    295,000 

Zili Shao

   20    224,980    —    225,000 

Zili Shao

Zili Shao

Zili Shao

     —    290,000      —    290,000 

William Wang

   33    299,967    —    300,000 

William Wang

William Wang

William Wang

     —    275,000      —    275,000 

Min (Jenny) Zhang

Min (Jenny) Zhang

Min (Jenny) Zhang

Min (Jenny) Zhang

     137,500(1)    137,500      —    275,000 

 

(1)

Represents the portion of the annual retainer that the directorMessrs. Bassi and Hsieh and Ms. Zhang elected to receive in cash rather than equity with respect to Mr. Bassi, cash fees received in lieu of fractional shares by Messrs. Campbell, Chan, Ettedgui, Hsieh, Linen, Shao and Wang and Ms. Lu andequity.

(2)

Represents the annual cash retainer paid to Dr. Hu as Chairman of the Board.

 

(2)
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  YUM CHINA– 2023 Proxy Statement

   EXECUTIVE COMPENSATION

(3)

Represents the grant date fair value for annual stock retainer awards granted in 2017.2022. Each director received shares of Company common stock determined by dividing the applicable annual retainer by the closing market price of a share of Company common stock on the date of grant, with any fractional shares paid in cash rather than equity. In connection with his appointment to the Board in July 2017, Mr. Wang also received an equity award based on the annual grant value of $225,000, prorated for his service on the Board in 2017.

 

(3)(4)

At December 31, 2017, the aggregate number of Company SARs outstanding foreach non-employee director are set forthRepresents an award in the following table. These SARs were received byamount of $25,000 for Mr. Bassi’s contribution to a project in 2022 at theapplicable non-employee directors request of the Board, payable in connection with the adjustment of their outstanding YUM equity awards.2023.

NameSARs

Peter A. Bassi

—

Christian L. Campbell

167,415

EdYiu-Cheong Chan

—

Edouard Ettedgui

—

Louis T. Hsieh

—

Fred Hu

—

Jonathan S. Linen

—

Ruby Lu

22,943

Zili Shao

—

William Wang

—

 

Stock Ownership Requirements. Although our directors are not subject to the Stock Ownership Guidelines, which apply to management, we nevertheless expect our directors to own a meaningful number of shares of Company common stock, and we do have a share retention policy in

place for directors. PursuantPursu-

ant to thisthe share retention policy, no director may sell any shares received as director compensation until at least 12 months following the director’s retirement or departure from the Board.

 

 

YUM CHINA– 20182023 Proxy Statement 

  61  95

 

 EQUITY COMPENSATION PLANPLANS INFORMATION

 

The following table summarizes, as of December 31, 2017,2022, the equity compensation we may issue to our directors, officers, employees and other persons under (i) the Company’s Long Term Incentive Plan (the “2016 LTIP,”), which was approved by YUM as the Company’s sole stockholder prior to the spin-off.Company’s spin-off from YUM; and (ii) the Company’s 2022 Long Term Incentive Plan approved by its stockholders in 2022 (the “2022 LTIP”).

 

Plan Category

  Number of Securities to
be Issued Upon
Exercise of Outstanding
Options, Warrants and
Rights		 Weighted-
Average
Exercise Price
of  Outstanding
Options,
Warrants and
Rights		 Number of Securities
Remaining Available
For Future Issuance
Under Equity
Compensation Plans
(Excluding Securities
Reflected in
Column (a))		   Number of Securities to
be Issued Upon
Exercise of Outstanding
Options, Warrants and
Rights		 Weighted-
Average
Exercise Price
of Outstanding
Options,
Warrants and
Rights		 

Number of Securities

Remaining Available

For Future Issuance

Under Equity

Compensation Plans

(Excluding Securities

Reflected in

Column (a))

 
  (a) (b) (c)   (a) (b) (c) 

Equity compensation plans approved by security holders

   23,565,936(1)   18.96(2)   14,651,155(3) 

Equity compensation plans approved by security holders

Equity compensation plans approved by security holders

Equity compensation plans approved by security holders

   11,730,923(1)  34.71(2)  30,706,464(3) 

Equity compensation plans not approved by security holders

Equity compensation plans not approved by security holders

Equity compensation plans not approved by security holders

Equity compensation plans not approved by security holders

   —   —   —    —   —   — 
  

 

 

 

 

 

 

TOTAL

TOTAL

TOTAL

TOTAL

   23,565,936  18.96  14,651,155    11,730,923    30,706,464 
  

 

 

 

 

 

 

 

(1)

Includes 1,970,2872,126,112 shares issuable in respect of restricted stock unitsRSUs and executive income deferral awards.PSUs.

 

(2)

Restricted stock unitsRSUs and executive income deferral awardsPSUs do not have an exercise price. Accordingly, this amount represents the weighted-average exercise price of outstanding SARs and stock appreciation rights.options.

 

(3)

AfterWhile certain equity awards remain outstanding under the spin-off, fullCompany’s 2016 LTIP, no future equity awards may be granted under such plan. The number represents the number of Company common stock remaining available for future grants under the 2022 LTIP only. Full value awards granted to the Company’s employees under the 2022 LTIP, including restricted stock unitsRSUs and performance stock units,PSUs, will reduce the number of shares available for issuance by two shares. Stock appreciation rightsSARs granted to the Company’s employees under the 2022 LTIP will reduce the number of shares available for issuance only by one share.

 

62  96   

  YUM CHINA– 20182023 Proxy Statement

 

 AUDIT COMMITTEE REPORT

 

Who serves on the Audit Committee of the Board of Directors?

 

 

 

The members of the Audit Committee are Peter A. Bassi (Chair), Cyril Han, Louis T. Hsieh, (Chair), Peter A. Bassi, EdYiu-Cheong ChanZili Shao and Ruby Lu. The BoardMin (Jenny) Zhang, each of Directors has determined that all of the members of the Audit Committeewhom are independent within the meaning of applicable SEC regulations, and the listing standardsstan-

dards of the NYSE and that Mr. Hsieh, the ChairpersonHong Kong Listing Rules. For additional information about the members of the Audit Committee, is qualified as an audit com-

mittee financial expert within the meaning of SEC regulations. The Board has also determined that Mr. Hsieh has accounting and related financial management expertise within the meaningsee “Governance of the listing standardsCompany—What are the Committees of the NYSE and that each member of the Audit Committee is financially literate within the meaning of the NYSE listing standards.Board?”

 

 

What document governs the activities of the Audit Committee?

 

 

 

The Audit Committee operates under a written charter adopted by the Board of Directors. The Audit Committee’s responsibilities are set forth in the charter. The Audit Committee annually reviews and reassesses the adequacy

of its charter and recommends any proposed changes to the Board for approval. The charter is available on our website atir.yumchina.com.

 

 

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 auditor’sauditors’ qualifications and independence and the performance of the Company’s internal audit function and independent auditor.auditors. The Audit Committee has the authority to obtain advice and assistance from independent legal, accounting or other advisors as the Audit Committee deems necessary or appropriate to carry out its duties and receive appropriate funding, as determined by the Audit Committee, from the Company for such advice and assistance.

The Audit Committee has sole authority to appoint determine funding for orand replace the independent auditorauditors, and is directly responsible for the compensation of the independent auditors, subject to stockholder approval. The Audit Committee manages the Company’s relationship with its independent auditor,auditors, which reports directly to the Audit Committee.

Each year, the Audit Committee evaluates the performance, qualifications and independence of the independent auditor.auditors. In doing so, the Audit Committee considers whether the independent auditor’sauditors’ quality controls are adequate and the provision of permittednon-audit services is compatible with maintaining the auditor’s independence, taking into account the opinions of management and internal auditor.

The members of the Audit Committee meet periodically in separate executive sessions with management (including the Company’s Chief Financial Officer, Chief Legal Officer and Principal Accounting Officer), the internal auditors and the independent auditor,auditors, and have such other direct and independent interaction with such persons from time to time as the members of the Audit Committee deem appropriate. The Audit Committee may request any officer or employee of the Company or the Company’s outside counsel or independent auditorauditors to attend a meeting of the Audit Committee or to meet with any members of, or consultants to, the Audit Committee.

 

 

YUM CHINA– 20182023 Proxy Statement 

  63  97

 

 

 

AUDIT COMMITTEE REPORT   

 

    

 

What matters have members of the Audit Committee discussed with management and the independent auditor?auditors?

 

 

 

As part of its oversight of the Company’s financial statements, the Audit Committee reviews and discusses with both management and the Company’s independent auditorauditors all annual and quarterly financial statements prior to their issuance. During 2017,2022, management advised the Audit Committee that each set of financial statements reviewed had been prepared in accordance with accounting principles generally accepted in the U.S. and reviewed significant accounting and disclosure issues with the Audit Committee. These reviews included discussions with the independent auditorauditors of matters required to be discussed pursuant to applicable requirements of the PCAOB and the SEC, including the quality (not merely the acceptability) of the Company’s accounting principles, the reasonableness of significant judgments, the clarity of disclosures in the financial statements, and disclosures related to critical accounting practices.practices, and critical audit matters during the course of the audit. The Audit Committee has also discussed with KPMG matters relating to itstheir independence, including a review of audit andnon-audit fees and the written disclosures and letter received from KPMG required by applicable requirementsrequire-

ments of the PCAOB regarding KPMG’s communica-

tionscommunications with the Audit Committee concerning independence. The Audit Committee also considered whethernon-audit services provided by the independent auditorauditors are compatible with the independent auditor’sauditors’ independence. The Audit 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 Audit 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 Audit Committee monitored 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 Audit Committee also reviewed and discussed legal and compliance matters with management, and, as necessary or advisable, the Company’s independent auditor.

 

 

Has the Audit Committee made a recommendation regarding the audited financial statements for fiscal 2017?2022?

 

 

 

Based on the Audit Committee’s discussions with management and the independent auditorauditors and the Audit Committee’s review of the representations of management and the report of the independent auditorauditors to the Board of Directors, and subject to the limitations on the Audit Committee’s role and responsibilities referred to above

and in the Audit Committee Charter, the Audit

Committee recommended to the Board of Directors that it include the audited consolidated financial statements in the Company’s Annual Report on Form10-K for the fiscal year ended December 31, 20172022 for filing with the SEC.SEC and the Company’s Annual Report for the year ended December 31, 2022 to be filed with the HKEX.

 

 

98  

  YUM CHINA– 2023 Proxy Statement

   AUDIT COMMITTEE REPORT

Who prepared this report?

 

 

This report has been furnished by the members of the Audit Committee:

Peter A. Bassi, Chair

Cyril Han

Louis T. HsiehChair

Peter A. BassiZili Shao

EdYiu-Cheong Chan

Ruby LuMin (Jenny) Zhang

 

64  YUM CHINA – 2023 Proxy Statement 

  YUM CHINA– 2018 Proxy Statement  99

 

 ADDITIONAL INFORMATION

 

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. We have retained Georgeson Inc. to act as a proxy solicitor for a fee estimated to be $9,500,$10,000, plus reimbursement ofout-of-pocket expenses. 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 shares of Company common stock.

 

 

How may I elect to receive stockholder materials electronically and discontinue my receipt of paper copies?materials?

 

 

 

For stockholders of our common stock registered on our U.S. register

Stockholders with shares registered directly in their name who received stockholder 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 stockholders with added convenience, to reduce our environmental impact and to reduce annual report printing and mailing costs.

To elect this option, go towww.amstock.comwww.computershare.com, click on Stockholder Account Access,Login to Investor Center, log in and locate the option to receive Company mailings viae-mail. Stockholders 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, American Stock Transfer andComputershare Trust Company, LLC, 6201 15th Avenue, Brooklyn, NY 11219N.A., P.O. Box 43078, Providence, RI 02940-3078, or by logging onto our transfer agent’s website atwww.amstock.comwww.computershare.com and following the applicable instructions. Also, while this consent is in effect, if you decide you would like to receive a paperhard copy of the proxy materials, you may call, write ore-mail American Stock Transfer and Computershare Trust Company, LLC or Yum China Holdings, Inc., 7100 Corporate Drive, Plano, Texas 75024, or Yum China Holdings, Inc., Yum China Building, 20 Tian Yao Qiao Road, Shanghai 200030, People’s RepublicN.A.

For stockholders of China, Attention: Corporate Secretary.our common stock registered on our Hong Kong register

We publish annual reports and proxy statements on our website and on HKEX’s website in English and Chinese. We will provide printed copies of proxy materials in English and Chinese.

 

 

YUM CHINA– 2018 Proxy Statement100   

  65  YUM CHINA– 2023 Proxy Statement

 

 

 

ADDITIONAL INFORMATION

 

  

 

I share an address with another stockholder, 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 the annual report, to multiple stockholders sharing an address unless contrary instructions have been received from the affected stockholders or they participate in electronic delivery of proxy materials.

Stockholders 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 China Holdings, Inc., 7100 Corporate Drive,101 East Park Boulevard, Suite 805, Plano, Texas 75024,75074, or to Yum China Holdings, Inc., Yum China Building, 20 Tian Yao Qiao Road, Shanghai 200030 People’s Republic of China, Attention: Investor Relations.

 

 

May I propose actions for consideration at next year’s annual meeting of the Company’s stockholders or nominate individuals to serve as directors?

 

 

 

Under the rules of the SEC, if a stockholder wants us to include a proposal in our proxy statement and proxy card for presentation at the 20192024 annual meeting of the Company’s stockholders, the proposal must be received by our Corporate Secretary at our principal executive offices, Yum China Holdings, Inc., 7100 Corporate Drive,101 East Park Boulevard, Suite 805, Plano, Texas 75024,75074, or Yum China Holdings, Inc., Yum China Building, 20 Tian Yao Qiao Road, Shanghai 200030, People’s Republic of China, by November 30, 2018.December 14, 2023. We strongly encourage any stockholder interested in submitting a proposal to contact our Chief Legal Officer in advance of this deadline to discuss the proposal. Stockholders may want to consult knowledgeable counsel with regard to the detailed requirements of applicable securities laws. Submitting a proposal does not guarantee that we will include it in our proxy statement.

In addition, our Bylaws include provisions permitting, subject to certain terms and conditions, stockholders owning at least 3% of the outstanding shares of Company

common stock for at least three consecutive years to use our annual meeting proxy statement to nominate a number of director candidates not to exceed 20% of the number of directors in office, subject to reduction in certain circumstances (the “Proxy Access”). Pursuant to our Proxy Access bylaw, stockholder nomination of directors to be included in our proxy statement and proxy card for the 2024 annual meeting of the Company’s stockholders must be received by our Corporate Secretary no earlier than November 14, 2023 and no later than December 14, 2023. Stockholders must also satisfy the other requirements specified in our Bylaws. You may contact the Company’s Corporate Secretary at the addresses mentioned above for a copy of the relevant bylaw provisions regarding the requirements for nominating director candidates pursuant to Proxy Access.

Under our amended and restated bylaws,Bylaws, stockholders may also nominate persons for election as directors at an annual meeting or introduce an item of business that is not included in our proxy statement. These procedures provide that nominationsnomina-

YUM CHINA – 2023 Proxy Statement

  101

ADDITIONAL INFORMATION   

tions for director nominees and/or an item of business to be introduced at an annual meeting

must be submitted in writing to our Corporate Secretary at our principal executive offices, and the stockholder submitting any such nomination or item of business must include information set forth in our amended and restated bylaws.Bylaws. For the 20192024 annual meeting of the Company’s stockholders, we must receive the notice of your intention to introduce a nomination or to propose an item of business no earlier than January 11, 201926, 2024 and no later than February 10, 2019,25, 2024, unless we hold the 20192024 annual meeting before April 11, 201925, 2024 or after June 10, 2019,25, 2024, in which case notice must be received no later than 10 days after notice of the date of the annual meeting is mailed or public disclosure of the date of the annual meeting is made, whichever first occurs. Stockholders must

also satisfy the other requirements specified in our amended and restated bylaws.Bylaws. You may contact the Company’s Corporate Secretary at the addressaddresses mentioned above for a copy of the relevant bylaw provisions regarding the requirements for making stockholder proposals and nominating director candidates.

In addition to satisfying the foregoing requirements under our Bylaws, to comply with the universal proxy rules, stockholders who intend to solicit proxies in support of director nominees other than our nominees must provide notice that sets forth the information required by Rule 14a-19 under the Securities Exchange Act of 1934, as amended, no later than March 26, 2024.

 

 

66  

  YUM CHINA– 2018 Proxy Statement

   ADDITIONAL INFORMATION

Is any other business expected to be conducted at the Annual Meeting?

 

 

 

The Board is not aware of any matters that are expected to come before the Annual Meeting other than those referred to in this proxy statement. If any other matter should come before the Annual Meeting, the individuals named on the form of proxy intend to vote the proxies in accordance with their best judgment.

 

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.

 

 

Forward-Looking Statements

This proxy statement contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. We intend all forward-looking statements to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements generally can be identified by the fact that they do not relate strictly to historical or current facts and by the use of forward-looking words such as “expect,” “expectation,” “believe,” “anticipate,” “may,” “could,” “intend,” “belief,” “plan,” “estimate,” “target,” “predict,” “project,” “likely,” “will,” “continue,” “should,” “forecast,” “outlook,” “commit” or similar terminology. These statements are based on current estimates and assumptions made by us in light of our

experience and perception of historical trends, current conditions and expected future developments, as well as other factors that we believe are appropriate and reasonable under the circumstances, but there can be no assurance that such estimates and assumptions will prove to be correct. Forward-looking statements include, without limitation, statements regarding the future strategies, growth and business plans of Yum China, including Yum China’s sustainability goals. Forward-looking statements are not guarantees of performance and are inherently subject to known and unknown risks and uncertainties that are difficult to predict and could cause our actual results or events to differ materially from those indicated by those statements. We cannot assure you that any of our expectations, estimates or assumptions will be achieved. The

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   ADDITIONAL INFORMATION

forward-looking statements included in this proxy statement are only made as of the date of this proxy statement, and we disclaim any obligation to publicly update any forward-looking statement to reflect subsequent events or circumstances, except as required by law. Numerous factors could cause our actual results or events to differ materially from those expressed or implied by forward-looking statements, including, without limitation: whether we are able to achieve development goals at the times and in the amounts currently anticipated, if at all, the success of our marketing campaigns and product innovation, our ability to maintain food safety and quality control systems, changes in public health conditions, including the COVID-19 pandemic and regional outbreaks caused by existing or new COVID-19 variants, our ability to control

costs and expenses, including tax costs, as well as changes in political, economic and regulatory conditions in China. In addition, other risks and uncertainties not presently known to us or that we currently believe to be immaterial could affect the accuracy of any such forward-looking statements. All forward-looking statements should be evaluated with the understanding of their inherent uncertainty. You should consult our filings with the SEC (including the information set forth under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2022) for additional detail about factors that could affect our financial and other results.

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SCAN TO YUM CHINA HOLDINGS, INC. VIEW MATERIALS & VOTE w 101 EAST PARK BOULEVARD, SUITE 805 PLANO, TX 75074 VOTE BY INTERNET -Go to www.proxyvote.com or scan the QR Barcode above Use the Internet to transmit your voting instructions and for electronic delivery of information up until at 11:59 PM (local time) the day before the meeting date.a.m. on May 24, 2023 Beijing/Hong Kong time / 11:59 p.m. on May 23, 2023 U.S. Eastern time. Have your proxy card in hand when you access the web sitewebsite and follow the instructions to obtain your records and to create an electronic voting instruction form. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 a.m. on May 24, 2023 Beijing/Hong Kong time / 11:59 p.m. on May 23, 2023 U.S. Eastern time. 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, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. 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. TO VOTE, BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. (local time) the day before the 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, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. YUM CHINA HOLDINGS, INC. 7100 CORPORATE DRIVE PLANO, TX 75024 E42343-P02209MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: V05307-P91490 THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY YUM CHINA HOLDINGS, INC. The Board of Directors recommends the following: Election of Directors Nominees: 1a. Fred Hu 1b. Joey Wat 1c. Peter A. Bassi 1d. Edouard Ettedgui 1e. Ruby Lu 1f. Zili Shao 1g. William Wang 1h. Min (Jenny) Zhang 1i. Christina Xiaojing Zhu you vote FOR the following: 1. Election of Directors For Against Abstain Nominees: ! ! ! 1a. Louis T. Hsieh ! ! ! 1b. Jonathan S. Linen ! ! ! 1c. Muktesh “Micky” Pant ! ! ! 1d. William Wang For Against Abstain The Board of Directors recommends you vote FOR For Against Abstain proposals 2 and 3. ! ! ! 2. Approval and Ratification of the Appointment of ! ! ! KPMG Huazhen LLP and KPMG as the Company’s Independent AuditorAuditors for 2023 ! ! ! 3. Advisory Vote to Approve Executive Compensation ! ! ! ! ! ! The Board of Directors recommends you vote 1 Year 2 Years 3 Years Abstain 1 YEAR on the following proposal: ! ! ! 4. Advisory Vote on Executive Vote on the Compensation Frequency of the Advisory ! ! ! ! ! ! ! The Board of Directors recommends you vote FOR For Against Abstain proposals 5 and 6. ! ! ! 5. Vote to Authorize the Board of Directors to Issue Shares ! ! ! up to 20% of Outstanding Shares ! ! ! 6. Vote to Authorize the Board of Directors to Repurchase ! ! ! Shares up to 10% of Outstanding Shares ! ! ! NOTE: The proxies are authorized to vote in their discretion upon such other business as may properly come before the meeting or any adjournment or postponement thereof. Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date

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Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:The Notice and Proxy Statement and Form 10-K are available at www.proxyvote.com. E42344-P02209V05308-P91490 YUM CHINA HOLDINGS, INC. Annual Meeting of Stockholders May 11, 201825, 2023 8:30 AM00 a.m. (local time) This proxy is solicited by the Board of Directors The undersigned stockholder(s) hereby appoint(s) Shella NgAndy Yeung and Jacky Lo,Joseph Chan, or either of them, as proxies, each with the power to appoint his/herhis substitute, revoking all proxies previously given, and hereby authorize(s) them to represent and to vote, as designated on the reverse side of this proxy, all of the shares of common stock of Yum China Holdings, Inc. that the stockholder(s) is/are entitled to vote at the Annual Meeting of Stockholders to be held at 8:3000 a.m. local time, on May 11, 2018, atthe25, 2023, at Mandarin Oriental Hong Kong, 5 Connaught Road, Central, Hong Kong, and any adjournment or postponement thereof. This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be voted in accordance with the Board of Directors’ recommendations. Continued and to be signed on reverse side