Chipotle 2009 Annual Report Download - page 90

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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 subjectively determined by the committee,
results in company and team performance factors that increase or decrease actual bonuses as compared to target,
on a scale for each measure approved by the committee at the beginning of the year. The company and team
performance factors to determine 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 most corporate-
level employees, including the executive officers other than the Chief Development Officer, 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 team performance factor for our Chief Development Officer is based on
company-wide measures established specifically for the development department.
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 performance of the Co-Chief Executive Officers to determine each of their individual performance
factors, and approves individual performance factors for each other executive officer after considering
recommendations from the Co-Chief Executive Officers, in each case based on a subjective review of each
officer’s performance for the year.
The committee also sets maximums each year for the company, team and individual performance factors,
except that no maximum is set for the team performance factor for development employees. The committee may,
in its discretion, authorize a deviation from the parameters set for any particular performance factor in order to
account for exceptional circumstances and ensure that AIP bonuses further the objectives of our compensation
programs. The committee exercised this discretion to authorize deviations from the terms of the AIP for 2008 and
2007 as described in footnote 1 to the Summary Compensation Table below.
Annual Incentives—2009 AIP Payouts & Discretionary Bonuses
The committee set the target annual AIP payouts during the first quarter of 2009, based in part by reference
to the historical compensation of each executive officer, each officer’s performance during the year, and median
target bonuses for comparable positions within the restaurant industry peer group. The AIP parameters were set
to generally allow for maximum payouts equal to 204 percent of the target award, which the committee believes
is adequate to reward achievement of outstanding results and motivate our employees to drive superior
performance. The AIP parameters for development employees (including Mr. Jones), which place a greater
weight on team performance and allow for a higher team performance factor in recognition of the coordinated
group effort needed to effectively drive strong new restaurant openings, were set to allow a maximum payout to
Mr. Jones of 313 percent of his target award.
For 2009, as with past years, the four measures the committee selected to be used in determining the
company and team performance factors were income from operations (prior to accrual for AIP payouts), new
26
Proxy Statement