Chipotle 2012 Annual Report Download - page 103

approximate market capitalizations of $3.4 billion as of the grant date of SOSARs awarded in 2008, $1.7 billion
as of the grant date of SOSAR awarded in 2009, and $3.3 billion as of the grant date of SOSAR awarded in 2010.
We believe our officers’ collective realization of value representing (on a pre-tax basis) 2.12% of the average
growth in our market capitalization from the grant dates of the exercised awards through the end of 2012
represents appropriate compensation for tremendous performance, irrespective of non-cash accounting values
attributed to the awards and recognized in our financial statements and compensation disclosures. This
realization of value also further illustrates the manner in which our long-term incentive program rewards the
creation of shareholder value.
During 2012, the committee also continued its practice, first initiated in 2011, to include a performance
vesting condition in addition to time-based vesting in half of the SOSARs granted to the executive officers. The
committee believes that the addition of vesting conditions requiring our achievement of stated levels of
cumulative cash flow from operations during the term of the award increases the connection between rewards to
our officers and our company’s business performance, helping to restrict the rewards attributable solely to a
robust stock market if our business performance is lacking. To further bolster the performance-based foundation
of our compensation program, the committee also approved changes to the award agreements for 2012 SOSAR
awards, including those made to the executive officers, to provide for a “clawback” in the event listing standards
applicable to us in the future require the recovery of compensation received in connection with the awards.
Consistent with our intent to maintain a performance-based compensation system for all of our employees,
including our executive officers, the total compensation of each executive officer is weighted heavily towards at-
risk elements of compensation: annual AIP bonuses, SOSAR awards, and performance shares. For 2012, these
performance-based elements accounted for between 80 percent and 93 percent of the total compensation reflected
for each executive officer in the Summary Compensation Table below.
Additional detail regarding our executive compensation programs, policies and procedures, as well as the
actual compensation of our executive officers in 2012, follows.
Compensation Philosophy and Objectives
Our philosophy with regard to the compensation of our employees, including our executive officers, is to
reinforce the importance of performance and accountability at the corporate, regional and individual levels. We
strive to provide our employees with meaningful rewards while maintaining alignment with shareholder interests,
corporate values, and important management initiatives. In setting and overseeing the compensation of our
executive officers, the Compensation Committee believes our compensation philosophy to be best effectuated by
designing compensation programs and policies to achieve the following specific objectives:
• Attracting, motivating, and retaining highly capable executives who are vital to our short- and long-
term success, profitability, and growth;
• Aligning the interests of our executives and shareholders by rewarding executives for the achievement
of strategic and other goals that we believe will enhance shareholder value; and
• Differentiating executive rewards based on actual performance.
The committee believes that these objectives are most effectively advanced when a significant portion of
each executive officer’s overall compensation is in the form of at-risk elements such as incentive bonuses and
long-term incentive-based compensation, which should be structured to closely align compensation with actual
performance and shareholder interests.
The committee’s philosophy in structuring executive compensation rewards is that performance should be
measured by comparing our company performance to market-wide performance in our industry, as well as
subjectively evaluating each executive officer’s performance. See “—Overview of Executive Compensation
Determinations—Market Data” below.
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Proxy Statement