Chipotle 2008 Annual Report Download - page 91

Annual Incentives—2009 AIP Structure
At its meeting on February 16, 2009, the committee approved the parameters of the AIP for 2009, with the
structure of the 2009 AIP remaining substantially the same as described above. The operating and financial
performance targets and key initiatives to be used to determine the company and team performance factors for
2009 were set at or above the levels included in the internal projections we relied on in issuing publicly-stated
guidance regarding our company performance expectations for 2009.
In addition, the committee reconfirmed the target AIP bonus for 2009 at 100 percent of base salary for
Mr. Ells, 50 percent of base salary for Mr. Blessing, and 50 percent of base salary for Mr. Jones. In recognition of
his promotion to Co-Chief Executive Officer, the committee set the target AIP bonus for Mr. Moran for 2009 at
100 percent of his base salary. In recognition of Mr. Hartung’s outstanding performance during the year and to
ensure that his bonus target is competitive with market levels, the committee increased his target AIP bonus for
2009 to 75 percent of his base salary. The committee had approved a 2009 AIP bonus target of 50 percent of base
salary for Mr. Crumpacker at the time he joined us in January 2009.
Long-Term Incentives—Option, Performance Share and Performance-Contingent Restricted Stock Grants
during 2008
On February 20, 2008, the committee granted SOSARs to the executive officers, subject to shareholder
approval of amendments to the 2006 Stock Incentive Plan, which were approved at our Annual Meeting of
Shareholders on May 21, 2008. The base price of the SOSARs is $102.65, the closing price of our Class A
common stock on the date the committee approved the grants, and the SOSARs are subject to three-year cliff
vesting. The committee based the number of SOSARs awarded to each executive officer on our outperformance
of substantially all of the companies in the restaurant industry peer group on both an operating and total
shareholder return basis, as well as on the committee’s review of each executive officer’s performance. The
number of SOSARs granted to each executive officer was based on the economic value of the awards, with the
precise award levels varying to take into account the committee’s review of each executive officer’s performance
for the prior year, the individual’s position, and the survey data on competitive market practice.
Also on February 20, 2008, in order to include a longer-term incentive-based element to the executive
officers’ compensation packages, the committee awarded performance shares to each executive officer, subject to
shareholder approval of the amendments to the 2006 Stock Incentive Plan that were approved on May 21, 2008.
The performance shares represent a right to be issued shares of our Class A common stock, subject to our
achievement of a specified aggregate amount of cumulative operating income prior to expiration of the
performance shares. The terms of the performance share awards are described in more detail below under
“Grants of Plan-Based Awards in 2008—Terms of 2008 Equity-Based Awards—Performance Shares.”
Disclosure of the level of cumulative operating income required for the performance share awards to vest would
subject us to competitive harm. The committee set the performance target at a level that it believes represents a
challenging goal for the executive officers, in that achievement of the performance target prior to expiration of
the awards would require significant growth in operating income from the level achieved in 2007. Achieving this
level of growth will require continued strong execution of our long-term growth plans, while preserving the
profitability of our existing restaurants.
Following approval by our shareholders on May 21, 2008 of our Amended and Restated 2006 Stock
Incentive Plan, the committee also authorized the cancellation of shares of restricted Class A common stock
awarded to the executive officers in February 2007, in consideration of the grant of an equal number of shares of
performance-contingent restricted stock. The shares of performance-contingent restricted stock represent a right
to be issued shares of our Class A common stock, subject to satisfaction of a specified level of cumulative
aggregate operating income prior to the expiration date of the award. The terms of the performance-contingent
restricted stock awards are described in more detail below under “Grants of Plan-Based Awards in 2008—Terms
of 2008 Equity-Based Awards—Performance-Contingent Restricted Stock.” Disclosure of the level of
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Proxy Statement