Chipotle 2008 Annual Report Download - page 87

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Discussion of Executive Officer Compensation Decisions
Assessment of Company Performance
The committee generally sets the base salaries of, and makes long-term incentive awards to, the executive
officers in February of each year. In making these decisions, the committee references our company performance
primarily by comparing our sales growth, net income growth and total shareholder return to those measures for
the restaurant peer group described above under “—Overview of Executive Compensation Determinations—
Market Data.” In February 2008, the committee referred to these performance measures for the preceding two
years (prior to which we were not a publicly-traded company) and determined that our company performance
was outstanding based on each measure. Putting a relative weight of two-thirds on 2007 performance and
one-third on 2006 performance, the committee determined that our sales growth was at the 99th percentile of the
peer group, our growth in net income was at the 85th percentile, and total return to our shareholders was at the
92nd percentile. This assessment of company performance is only one factor used by the committee in making
compensation decisions, as described in more detail below, but does play a significant role in the committee’s
decision-making, consistent with our pay-for-performance philosophy. Because of our strong 2007 performance
relative to market-wide performance in our industry, the committee generally set compensation levels for our
executive officers for 2008 near the top end of the ranges that the committee believed to be appropriate for each
executive officer.
However, 2008 was also marked by a worsening economy in the wake of the housing market downturn and
credit crisis, as well as escalating commodities prices, including prices for a variety of food items. As a result,
over the course of the year an extremely difficult operating environment for retail restaurants developed, and we
were not immune from the difficulties facing our industry. Due primarily to these factors, our growth and
financial performance during 2008 were adversely impacted, and as a result our AIP bonus payouts declined
when compared to 2007 payouts. Total 2008 AIP bonus payouts to the executive officers were approximately 57
to 78 percent of targeted bonuses and 42 to 65 percent of 2007 payouts. The determination of AIP bonuses is
described in more detail below under “—Annual Incentives—2008 AIP Payouts.”
Base Salaries
To set base salary levels for 2008, the committee compared 2006 and 2007 base salary levels and total
compensation for each executive officer to the restaurant peer group. The committee also considered the
contribution level of each officer and each officer’s effectiveness in his role. As a result of our outstanding
performance in 2007 against our internal operating plan and as compared to our peer group as described above
under “Discussion of Executive Officer Compensation Decisions—Assessment of Company Performance,” and
additionally based on the committee’s determinations as to each officer’s performance and our significant
growth, the committee decided to increase each executive’s base salary. The committee also considered the
anticipated promotion in 2008 of Mr. Jones and Mr. Blessing into executive officer roles in determining their
base salaries. The committee set Mr. Ells’s 2008 base salary at $1,000,000, Mr. Moran’s at $600,000,
Mr. Hartung’s at $425,000, Mr. Wilner’s at $325,000, Mr. Blessing’s at $300,000, and Mr. Jones’s at $285,000.
In January 2009, the committee approved a base salary of $300,000 for Mr. Crumpacker when he joined us
as Chief Marketing Officer, based on the recommendations of the Co-Chief Executive Officers and the
committee’s review of market levels of compensation for this role.
The committee met in February 2009 to set base salaries for 2009 for our Co-Chief Executive Officers and
to approve base salaries for 2009 for each other executive officer after considering the recommendations of the
Co-Chief Executive Officers. Following review of the recommendations of the Co-Chief Executive Officers and
their subjective evaluations of each officer’s performance during 2008, each executive officer’s historical
compensation, ranges of market compensation for each officer, and discussions with Compensation Strategies,
the committee approved base salaries for 2009 of $470,000 for Mr. Hartung, $325,000 for Mr. Blessing, and
$300,000 for Mr. Jones. The committee also performed its own evaluation of the Co-Chief Executive Officers’
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Proxy Statement