Chipotle 2012 Annual Report Download - page 111

With regard to the team performance factor, exceptionally strong regional performance in most regions
offset only moderate results in two regions, leading to a team performance factor of 144 percent for corporate
employees (including each executive officer other than Mr. Blessing), and our strong performance with respect to
new restaurant sales and new restaurant reinvestment costs led to a team performance factor of 118 percent for
corporate employees in our development group (including Mr. Blessing).
The committee determined the individual performance factor for each executive officer in view of the
performance we achieved versus our targets and relative to our peers during 2012, and taking into account our
strong restaurant growth and continued profitability growth even as our size has increased substantially in recent
years. Using its subjective assessment of each executive’s performance and overall contributions to our results
and to positioning us for continued success, the committee arrived at individual performance factors that were
used to calculate the final AIP payouts.
As a result of the plan design and performance determinations described above, total 2012 AIP bonus
payouts to the executive officers were 143 to 172 percent of targeted bonuses. The actual bonuses paid to the
executive officers under the AIP are reflected in the “Non-Equity Incentive Plan Compensation” column of the
Summary Compensation Table below.
Long-Term Incentives—SOSAR Grants During 2012
On February 6, 2012, the committee approved annual SOSAR grants to the executive officers as well as a
broader population of key employees and top performers. The exercise price of the SOSARs is $371.63, the
closing price of our common stock on the date the committee approved the grants.
The committee based the number of SOSARs awarded to each executive officer on its determination of
company performance and each officer’s individual performance, as well as the size of SOSAR awards made to
each executive officer in past years. In evaluating company performance, the committee considered our
outperformance of substantially all of the companies in the restaurant industry peer group on the basis of sales
growth and total shareholder return for 2011, as well as on our extremely strong performance as compared to the
peer group with respect to net income growth for 2011. Evaluation of each officer’s individual performance
involved a subjective assessment by the committee of each executive officer’s impact on and value to our
business, as well as the individual’s position and length of tenure.
Based on these determinations, and taking into consideration the number of SOSARs awarded to each
officer in recent years, the committee made a subjective determination to grant the same number of SOSARs to
each officer as in past years, except that Mr. Crumpacker’s award size was increased by 2,000 shares in
recognition of his continued growth in his role and his increased contributions to the officer team. In arriving at
the size of SOSAR awards for 2012, the committee considered in particular that the economic value computed
for these awards, which is used for the accounting expense to be recognized and the amount of compensation to
be reported under the SEC’s rules in connection with the awards, would be above the top end of our restaurant
industry peer group. The committee believed that to be appropriate in light of the remarkable period of profitable
growth over which our executive officers have presided, and the committee’s belief that that growth was
attributable substantially to the contributions of the officers. Moreover, rather than considering the value of these
awards solely on the basis of the computed economic value for accounting and SEC reporting purposes (which
has nothing to do with the amount of reward actually realized from the award), it is also important to consider
that SOSARs reserve for the recipients a portion of the shareholder value created subsequent to receipt of the
award. Because rewards from SOSARs will only be received if the stock price appreciates, they only result in
realized rewards if shareholder value is created. The awards to each executive equate to the potential for each
executive to share in between 0.48% (for our co-CEO’s) and 0.05% (for our Chief Development Officer and
Chief Marketing Officer) of the overall value created over the term of the award, based on the percentage of total
outstanding shares of common stock represented by each SOSAR award. We believe that this is an appropriate
allocation of shareholder value creation as between our overall shareholder base and the executive officer team.
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