Chipotle 2008 Annual Report Download - page 84

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Market Data
In December 2007, the committee determined to make compensation decisions by reference in part to a peer
group comprised exclusively of companies in the restaurant industry. Because our management team as well as
the investment community generally assess our performance by reference to other companies in our industry, the
committee believed that setting compensation by reference to that same group would allow for the most
meaningful comparisons of our actual performance against our peers, and therefore would enable the committee
to best structure compensation packages for our executive officers in a manner rewarding superior operating
performance and the creation of shareholder value.
Accordingly, beginning with 2008 the committee selected a restaurant industry peer group to be used to
assess our company performance versus market-wide performance in our industry, and to determine market
levels of pay for each particular executive officer. The restaurant peer group is comprised of all publicly-traded
companies in the Global Industry Classification Standard, or GICS, restaurant industry with annual revenues
greater than $600 million, excluding McDonald’s Corporation due to its substantially greater size than us and
Triarc Companies, Inc. due to its ownership of a significant asset management business in addition to its
restaurant holdings. At the time the committee made its initial executive compensation decisions for 2008 the
companies included in the peer group were as follows: Bob Evans Farms, Inc., Brinker International, Inc., Burger
King Holdings Inc., CBRL Group, Inc., CEC Entertainment, Inc., Centerplate Inc., The Cheesecake Factory
Incorporated, CKE Restaurants, Inc., Darden Restaurants, Inc., Denny’s Corp., Domino’s Pizza Inc., Jack In The
Box Inc., Landry’s Restaurants, Inc., O’Charley’s Inc., P.F. Chang’s China Bistro, Inc., Panera Bread Company,
Papa Johns International Inc., Red Robin Gourmet Burgers, Inc., Ruby Tuesday, Inc., Sonic Corp., Starbucks
Corporation, Steak N Shake Co., Texas Roadhouse Inc., Tim Horton’s Inc., Wendy’s International Inc., and
YUM Brands Inc. The committee reviews the composition of the restaurant industry peer group periodically and
will make adjustments to the peer group in response to changes in the size or business operations of companies in
the peer group, other companies in the GICS restaurant industry the peer group, and us.
Data drawn from the restaurant peer group is adjusted by using regression analysis to eliminate variations in
compensation level attributable to differences in size of the component companies. Compensation Strategies, the
committee’s independent executive compensation consultant, performs this analysis.
Components of Compensation
The committee believes that by including in each executive officer’s compensation package incentive-based
cash bonuses tied to individual performance and our financial and operating performance, as well as equity-based
compensation where the reward to the executive is based on the value of our common stock, it can reward
achievement of our corporate goals and the creation of shareholder value. Accordingly, the elements of our
executive compensation are base salary, annual incentives, long-term incentives, and certain benefits and
perquisites. The committee seeks to allocate compensation among these various components for each executive
officer to emphasize pay-at-risk elements, consistent with market practice, in order to promote our
pay-for-performance philosophy.
Base Salaries
We pay a base salary to compensate our executive officers for services rendered during the year. We do not
have written employment agreements with any of our executive officers providing for any particular level of base
salary. Rather, the committee reviews the base salary of each executive officer at least annually and adjusts
salary levels as the committee deems necessary or appropriate, based on the recommendations of our chief
executive officer for each of the other officers. Base salaries are typically adjusted during the first quarter of each
year. Base salaries are administered in a range around the 50th percentile of the market, while also taking into
account an individual’s performance, experience, development, and internal equity issues. The committee
anticipates that this range could extend from the 25th percentile and below for executive officers newer to their
role, in a developmental period, or not meeting expectations, to the 90th percentile or higher for truly exceptional
world class performers in critical roles who consistently exceed expectations.
21
Proxy Statement