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The following is an excerpt from a DEF 14A SEC Filing, filed by YUM BRANDS INC on 3/30/2006.
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YUM BRANDS INC - DEF 14A - 20060330 - STOCKHOLDER_PROPOSALS

ITEM 6: SHAREHOLDER PROPOSAL
Relating to an Animal Welfare Standards Report
(Item 6 on the Proxy Card)

What am I voting on?

People for the Ethical Treatment of Animals and Jana Kohl have advised us that they intend to present the following shareholder proposal at the Annual Meeting. We will furnish the addresses and the share ownership of the proponents upon request.

WHEREAS, Yum! Brands’ Web site proclaims that the KFC Animal Welfare Advisory Council (AWAC) “has been a key factor in formulating our animal welfare program”; and

WHEREAS, when, in March 2005, KFC asked members of its AWAC including Dr. Ian Duncan, North America’s leading expert on poultry welfare to make recommendations to improve the welfare of the more than 850 million birds sold by KFC each year, the advisors made their recommendations, but KFC refused to promise action on a single one; and

WHEREAS, Dr. Duncan has since resigned from the AWAC, joining four other advisors who have also resigned, having told the Guelph Mercury (26 Oct. 2005) that “[p]rogress was extremely slow, which is why I resigned. It was always going to be happening later. They just put off actually creating standards. ... I suspect that upper management didn’t really think that animal welfare was important”; and

WHEREAS, Dr. Adele Douglass, one of the former advisors, was quoted in the Chicago Tribune (6 Aug. 2005) as saying: “[KFC] never had any meetings. They never asked any advice, and then they touted to the press that they had this animal-welfare advisory committee. I felt like I was being used”; and

WHEREAS, scientists now know that chickens are social, intelligent animals who rank higher on cognition tests than do dogs and cats; and

WHEREAS, chickens killed for KFC are treated in ways that would warrant felony cruelty-to-animals charges if they were a different species-they are bred and drugged so that they can’t even walk and are gathered for transport to slaughter in a way that routinely breaks their wings and legs, and they usually have their throats slit or are scalded to death while they are still conscious; and

WHEREAS, implementing the standards recommended by KFC’s former advisors (including requiring that suppliers phase in the USDA-approved controlled-atmosphere killing method of poultry slaughter-the most humane method of poultry slaughter available-which will improve worker safety and product quality and which is touted by Hormel and being implemented by McDonald’s and Burger King, and requiring that suppliers work with breeders to ensure that chickens are bred for increased leg strength and decreased aggression rather than simply for growth, which results in painful and crippling injuries) would significantly decrease animals’ suffering and increase product quality and profits, thus protecting Yum! Brands and KFC’s reputation and its stockholders’ investments;

NOW, THEREFORE, BE IT RESOLVED that shareholders of Yum! Brands request that the Board of Directors issue a report to shareholders by October 2006, prepared at reasonable cost and omitting proprietary information, on the feasibility of Yum! Brands’ requiring that all chickens served in KFC restaurants be raised according to the recommendations made by Drs. Grandin, Douglass, and Duncan on March 11, 2005.

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MANAGEMENT STATEMENT IN OPPOSITION
TO SHAREHOLDER PROPOSAL

What is the recommendation of the Board of Directors?

THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE AGAINST THIS PROPOSAL

What is the Company’s position regarding the review of the Company’s Animal Welfare Standards?

Yum is the owner of restaurant companies and, as such, does not own, raise, or transport animals. However, as a major purchaser of food products, we have the opportunity, and responsibility, to influence the way animals supplied to us are treated. We take that responsibility very seriously, and we are monitoring our suppliers on an ongoing basis to determine whether our suppliers are using humane procedures for caring for and handling animals they supply to us. As a consequence, it is our goal to only deal with suppliers who promise to maintain our standards and share our commitment to animal welfare.

We have a track record of leadership in animal welfare. For example, we have developed the Yum! Brands Animal Welfare Guiding Principles and have expanded the KFC Animal Welfare Advisory Council to provide leadership in the animal welfare area and in our commitment to animal welfare.

To help ensure that our suppliers meet our animal welfare objectives, we adopted the Yum! Brands Animal Welfare Guiding Principles and the KFC Poultry Welfare Guidelines (collectively the Guiding Principles). The Guiding Principles express our goal to deal with suppliers that are committed to the raising, transportation and slaughter of poultry in a manner that is free of cruelty, abuse and neglect.

The Guiding Principles are applicable to all poultry suppliers across the United States (these are the same suppliers that supply poultry to our competitors). We are also looking into how these principles can be applied internationally.

As stated in the Guiding Principles, the Company, together with the KFC Animal Welfare Advisory Council, works with its suppliers to develop systems to monitor and assess the effectiveness of suppliers’ poultry handling practices. Our program, which has been in place for several years, is growing in scope, and we have made significant progress in our program to monitor and assess the effectiveness of suppliers’ handling practices. In addition, KFC added in 2005 additional external consultants to its Animal Welfare Advisory Council. To further demonstrate its commitment in this area, KFC put in place an industry leading comprehensive Animal Welfare Plan of Action in the Spring of 2005. The Plan of Action lays out detailed steps for enhancing poultry welfare in a number of important areas, involving farm level audits, mechanical catching, use of antibiotics and breeding practices. We operate in over 100 countries and territories, and we comply with all national, state and local laws and regulations regarding the handling of poultry in those countries.

Why does the Company oppose the proposal?

Our commitment, leadership and results are well established, and recognized, within the industry. We work hard to be a good corporate citizen and are strong advocates of good animal handling practices. Our policies are designed to help to achieve humane treatment of animals. We have been, and will continue to be, committed to upholding and abiding by the principles we have set. We monitor our suppliers for compliance and have recently expanded our monitoring efforts through plant and farm level audits. More information regarding our animal welfare program can be found on our Web site at www.yum.com/responsibility/animalwelfare.asp or www.kfc.com/responsibility/animalwelfare_guidelines.htm. We believe that the proposed animal welfare report and review is unnecessary and would not result in any additional benefit to our shareholders or employees. The proposed report would be costly and time-intensive, and is duplicative of many of our existing policies, initiatives and efforts.

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A similar proposal was submitted at our last Annual Meeting. We opposed the proposal last year, and shareholders overwhelmingly rejected the proposal.

FOR THESE REASONS, WE RECOMMEND THAT YOU VOTE AGAINST THIS PROPOSAL

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.

STOCK OWNERSHIP INFORMATION

Who are our largest shareholders?

This table shows ownership information for each Yum shareholder known by our management to be the owner of 5% or more of Yum common stock. This information is presented as of December 31, 2005, and is based on stock ownership reports on Schedule 13G filed by each of these shareholders with the SEC and provided to us.

Name and Address of Beneficial Owner

 

 

 

Number of Shares
Beneficially Owned

 

Percent of
Class

 

Southeastern Asset Management, Inc
6410 Poplar Avenue, Suite 900
Memphis, Tennessee 38119

 

 

23,480,562

(1)

 

 

8.3

%

 

Harris Associates L.P.
Two North LaSalle St. Suite 500
Chicago, Illinois 60602

 

 

19,255,317

(2)

 

 

6.8

%

 


(1)           The filing indicates sole voting power for 9,322,526 shares, shared voting power for 12,298,000 shares, no voting power for 1,860,000 shares, sole dispositive power for 11,168,562 shares, shared dispositive power for 12,298,000 shares and no dispositive power for 14,000 shares.

(2)           The filing indicates sole voting power for 0 shares, shared voting power for 19,255,317 shares, sole dispositive power for 6,774,317 shares and shared dispositive power for 12,481,000 shares.

How much Yum common stock is owned by our directors and executive officers?

This table shows the beneficial ownership of Yum common stock as of December 31, 2005 by

·        each of our continuing directors and nominees for election as directors,

·        each of the executive officers named in the summary compensation table on page 30, and

·        all directors and executive officers as a group.

Unless we note otherwise, each of the following persons and their family members has sole voting and investment power with respect to the shares of common stock beneficially owned by him or her. None of the persons in this table hold in excess of one percent of the outstanding Yum common stock, except for Mr. Novak who beneficially owns just over 1.0%. Directors and executive officers as a group beneficially own approximately 3.0%. Our internal stock ownership guidelines call for the Chairman to own 336,000 shares of Yum common stock (or deferral plan units) and for other executive officers to own 12,000 shares within five years following their appointment to their current position.

The number of shares beneficially owned by each director and executive officer is determined under rules of the SEC, and the information is not necessarily indicative of beneficial ownership for any other

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purpose. Under these rules, beneficial ownership includes any shares as to which the individual has either sole or shared voting power or investment power and also any shares that the individual has the right to acquire within 60 days through the exercise of any stock option or other right. Unless we indicate otherwise, each person has sole voting and investment power (or shares such powers with his or her spouse) with respect to the shares set forth in the following table.

Name

 

 

 

Number of Shares
Beneficially Owned(1)(5)

 

Deferral
Plans(2)

 

Total

 

David C. Novak

 

 

3,357,738

(3)(4)

 

585,651

 

3,943,389

 

David W. Dorman

 

 

7,454

 

 

0

 

7,454

 

Massimo Ferragamo

 

 

38,111

 

 

19,704

 

57,815

 

J. David Grissom

 

 

37,258

(6)

 

1,027

 

38,285

 

Bonnie G. Hill

 

 

7,588

 

 

5,050

 

12,638

 

Robert Holland, Jr.

 

 

35,620

 

 

9,128

 

44,748

 

Kenneth G. Langone

 

 

321,111

 

 

4,048

 

325,159

 

Jonathan Linen

 

 

7,454

 

 

0

 

7,454

 

Thomas M. Ryan

 

 

12,807

 

 

856

 

13,663

 

Jackie Trujillo

 

 

28,382

 

 

3,620

 

32,002

 

Robert J. Ulrich

 

 

21,109

 

 

19,849

 

40,958

 

Emil J. Brolick

 

 

260,773

 

 

0

 

260,773

 

Gregg Dedrick

 

 

253,505

 

 

0

 

253,505

 

Christian L. Campbell

 

 

293,456

 

 

76,425

 

369,881

 

Graham Allan

 

 

481,149

 

 

38,756

 

519,905

 

All Directors and Executive Officers as a Group (23 persons)  

 

 

7,824,634

(3)

 

866,510

 

8,691,144

 


(1)           The amounts shown for Messrs. Novak, Brolick, Dedrick, Campbell and Allan, non-employee directors and the group of all directors and executive officers include beneficial ownership of the following shares that may be acquired within 60 days pursuant to stock options awarded under our employee/director incentive compensation plans:

 

 

David C.
Novak

 

Emil J.
Brolick

 

Gregg
Dedrick

 

Christian L.
Campbell

 

Graham
Allan

 

Non-
Employee
Directors

 

All Directors
And
Executive
Officers as a
Group

 

Shares which may be acquired within 60 days pursuant to stock options

 

3,316,931

 

260,771

 

253,495

 

 

286,812

 

 

481,147

 

 

141,051

 

 

 

7,324,375

 

 

 

(2)           These amounts reflect units denominated as common stock equivalents held in deferred compensation accounts for each of the named persons under our Directors Deferred Compensation Plan or our Executive Income Deferral Plan. Amounts payable under these plans to the named executive officers and other executive officers will be paid in shares of Yum common stock at termination of employment or within 60 days if the executive so elected or in the case of a non-employee director, when the non-employee director leaves the Board.

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In addition to the amounts reflected in this column, listed below are units denominated as common stock equivalents held in deferred compensation accounts which become payable at a time (a) other than at termination of employment or (b) more than 60 days from the date hereof. Pursuant to the rules of the SEC, these amounts may not be included in the table.


David C.
Novak

 


Emil J.
Brolick

 


Gregg
Dedrick

 


Christian L.
Campbell

 


Graham
Allan

 

All Directors and
Executive Officers
as a Group

 

154,549

 

 

60,883

 

 

 

14,331

 

 

 

16,643

 

 

 

36,652

 

 

 

546,679

 

 

 

(3)           These amounts include the following shares held pursuant to Yum’s 401(k) Plan which will be subject to the voting direction of each named person at the annual meeting:

·        Mr. Novak, 14,360 shares

·        all directors and executive officers as a group, 16,067 shares.

(4)           This amount includes 220 shares held by Mr. Novak’s spouse as custodian for their daughter.

(5)           Thomas C. Nelson, who is being nominated for election as a director for the first time, was first appointed to the Board effective January 26, 2006 and is excluded from this table because this table reports ownership as of December 31, 2005.

(6)           This amount includes 8,000 shares held in IRA accounts.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our directors, executive officers and persons who own more than 10% of the outstanding shares of Yum common stock to file with the SEC reports of their ownership and changes in their ownership of Yum common stock. Directors, executive officers and greater-than-ten percent shareholders are also required to furnish Yum with copies of all ownership reports they file with the SEC. To our knowledge, based solely on a review of the copies of such reports furnished to Yum and representations that no other reports were required, all of our directors and executive officers complied with all Section 16(a) filing requirements during fiscal 2005.

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