Chipotle 2008 Annual Report Download - page 88

performance during 2008, and based on those evaluations and the other considerations set forth above set base
salaries for 2009 of $1,100,000 for Mr. Ells and $850,000 for Mr. Moran. The difference in the base salaries of
Mr. Moran and Mr. Ells is attributable to Mr. Moran’s recent promotion to the office of Co-Chief Executive
Officer, whereas Mr. Ells has served as Chief Executive Officer since our inception.
Annual Incentives—AIP Structure
The formula to determine payouts under the AIP consists of a company performance factor, a team
performance factor, and an individual performance factor, each stated as a percentage by which an executive
officer’s target payout amount will be adjusted to determine actual cash bonuses. In most years, each of the
company, team and individual performance factors could be adjusted downward to zero based on company, team
or individual performance, which could result in no AIP bonuses being paid or an individual’s AIP bonus being
significantly reduced. This ensures that AIP bonuses are not paid if our performance falls far short of our
expectations, and avoids unduly rewarding employees not contributing to our success.
We include the company performance factor in the calculation to reward participating employees when our
company performs well, which we believe focuses employees on improving corporate performance and aligns
the interests of our employees with those of our shareholders. We include the team performance factor to
promote teamwork and to provide rewards based on the areas of the company in which a participant can make the
most impact. We include the individual performance factor to emphasize individual performance and
accountability. Each of these components can reduce award levels when we, one of our “team” units, or an
employee participating in the AIP don’t perform well, which further promotes accountability. We believe that as
a whole, this structure results in the AIP rewarding our top performers, consistent with our goal of building
shareholder value.
To determine the company and team performance factors for each year, during the first quarter of the year
the committee approves targeted performance levels for a number of financial or operating measures (on a
company-wide basis for the company performance factor and for each of our operating regions for the team
performance factor), and key initiatives for improving our company during the year. The AIP formulas are
structured so that achievement of the targeted financial and operating measures and achievement (as determined
by the committee) of the key initiatives would result in company and team performance factors that would result
in payout at the targeted bonus levels. Achievement above or below the targeted financial and operating
measures, and over- or under-achievement of the key initiatives as determined by the committee, would result in
company and team performance factors that would increase or decrease the executive officer’s target bonus
based on a scale for each measure approved by the committee at the beginning of the year. The company and
team performance factors to determine AIP payouts are calculated after the conclusion of the year by referencing
actual company and regional performance on each of the relevant financial and operating measures, and on the
key initiatives, to the scales approved by the committee, with any adjustments that the committee deems to be
appropriate to account for unforeseen factors during the year. The team performance factor for corporate-level
employees is the average of the regional team performance factors, subject to adjustment based on other
variables considered by the committee relating to our corporate employees.
The individual performance factor is a function of the individual employee’s performance rating for the
year. The precise individual performance factor is set following completion of the employee’s performance
review, within a range of percentages associated with the employee’s performance rating. The committee
evaluates the Chief Executive Officer’s performance, and approves individual performance factors for each other
executive officer after considering recommendations from the Chief Executive Officer, in each case based on a
subjective review of each officer’s performance for the year. Beginning in 2009, the committee will directly
evaluate each of Mr. Ells and Mr. Moran, who were appointed Co-Chief Executive Officers as of January 1,
2009.
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Proxy Statement