Chipotle 2008 Annual Report Download - page 92

cumulative operating income required for these awards to vest would subject us to competitive harm. The
committee set the performance target at a level that it believes would reward the executive officers for
maintaining the existing strength of our business. The performance target for these awards is not as aggressive as
the target for the performance shares described above, due to the nature of the performance-contingent restricted
stock award, which was designed primarily to comply with Section 162(m) of the tax code and related rules
relating to deductibility of the compensation expense attributable to the awards. Achievement of the performance
target for this award is uncertain, but does not require the significant growth of our business that will be
necessary for the performance shares to vest.
In connection with our hiring of Mr. Crumpacker as our Chief Marketing Officer in January 2009, he was
awarded 13,600 performance shares with terms similar to the performance share awards described above, except
that the performance target and performance period were adjusted to reflect the date he joined us.
Executive Stock Ownership Guidelines
In May 2008 our Board of Directors adopted stock ownership guidelines for our executive officers. These
guidelines are intended to ensure that our executive officers retain ownership of a sufficient amount of Chipotle
stock to align their interests in a meaningful way with those of our shareholders. Alignment of our employees’
interests with those of our shareholders is a principal purpose of the equity component of our compensation
program.
The ownership guidelines were adjusted in February 2009 to account for changes in our executive officers.
The adjusted ownership guidelines, reflected as a targeted number of shares to be owned, are presented in the
table below. The guidelines are reviewed for possible adjustment each year and may be adjusted by the
committee at any time.
Position # of shares
Chairman and Co-Chief Executive Officer .............................. 50,000
President and Co-Chief Operating Officer ............................... 50,000
Chief Financial Officer .............................................. 10,625
Other executive officers ............................................. 6,000
Shares underlying unvested restricted or performance stock count towards satisfaction of the guidelines.
Executive officers who do not meet the guidelines are allowed five years to acquire the requisite number of
shares to comply.
Tax and Other Regulatory Considerations
Code Section 162(m)
Section 162(m) of the Internal Revenue Code provides that compensation of more than $1,000,000 paid to
the chief executive officer or to any of the three other most highly compensated executive officers of a public
company, other than the chief financial officer, will not be deductible for federal income tax purposes unless
amounts above $1,000,000 qualify for one of several exceptions. The committee typically attempts to structure
the compensation of our executive officers such that compensation paid will be tax deductible to us. The
deductibility of some types of compensation payments, however, can depend upon interpretations of and changes
in applicable tax laws and regulations, as well as other factors beyond our control. In addition, the committee’s
primary objective in designing executive compensation programs is to support and encourage the achievement of
our company’s strategic goals and to enhance long-term shareholder value. For these and other reasons, the
committee has determined that it will not necessarily seek to limit executive compensation to the amount that
will be fully deductible under Section 162(m).
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Proxy Statement