Chipotle 2009 Annual Report Download - page 86

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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., 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, 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 Co-Chief
Executive Officers 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 potential, 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.
The base salaries set for the executive officers for 2009 are discussed below under “—Discussion of
Executive Officer Compensation Decisions—Base Salaries.”
Annual Incentives
We have designed, and the Compensation Committee oversees, an annual performance-based cash bonus
program for all of our full-time regional and corporate employees, including our executive officers. We call this
program our “Annual Incentive Plan,” or “AIP.” Bonuses under the AIP are based on the achievement of
pre-established performance measures that the committee determines to be important to the success of our
operations and financial performance, and therefore to the creation of shareholder value.
Early in each year, we set a target AIP bonus for each eligible employee, including approval by the
committee of targets for each executive officer. Consistent with our overall compensation policies and
philosophy, target AIP bonuses as a percent of each executive officer’s base salary are set in a range around the
50th percentile of the market. Individual targeted amounts can also be increased or decreased based on individual
considerations such as level of responsibility, experience and internal equity issues.
Following completion of our year-end financial statements and each executive officer’s annual performance
evaluation, actual bonuses are determined by applying to each executive officer’s target bonus a formula that
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Proxy Statement