Chipotle 2012 Annual Report Download - page 105

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The restaurant peer group used for these purposes is generally comprised of all publicly-traded companies in
the Global Industry Classification Standard, or GICS, restaurant industry with annual revenues greater than $500
million, excluding McDonald’s Corporation due to its substantially greater size than us. At the time the
committee made its initial executive compensation decisions for 2012, the companies included in the peer group
were as follows: Biglari Holdings, Inc., BJ’s Restaurants, Inc., Bob Evans Farms, Inc., Brinker International,
Inc., Buffalo Wild Wings, Inc., Carrols Restaurant Group, Inc., CEC Entertainment, Inc., The Cheesecake
Factory Incorporated, Cracker Barrel Old Country Store, Inc., Darden Restaurants, Inc., Denny’s Corp.,
DineEquity Inc., Domino’s Pizza Inc., Jack In The Box 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, Texas Roadhouse Inc., The Wendy’s Company 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 Chipotle and of companies in the
peer group, companies in the peer group being acquired or taken private, and other companies in the GICS
restaurant industry becoming public.
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, with reference to 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, and also to
provide them with income regardless of our stock price performance, which helps avoid incentives to create
short-term stock price fluctuations and mitigates the impact of forces beyond our control such as general
economic and stock market conditions. We do not have written employment agreements with any of our
executive officers and therefore do not have contractual commitments to pay 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
performers in critical roles who consistently exceed expectations.
The base salaries set for the executive officers for 2012 are discussed below under “—Discussion of
Executive Officer Compensation Decisions—Base Salaries.”
35
Proxy Statement