Chipotle 2012 Annual Report Download - page 108

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Discussion of Executive Officer Compensation Decisions
Assessment of Company Performance
The committee generally sets the base salaries of, and makes long-term incentive awards to, the executive
officers in February of each year. In making these decisions, the committee references our company performance
primarily by comparing our sales growth, net income growth and total shareholder return over the preceding
three-year period to the same measures for the restaurant peer group described above. In February 2012, the
committee referred to these performance measures, as set forth in the “Executive Summary” above. This
assessment of company performance is only one factor used by the committee in making compensation
decisions, as described in more detail below, but does play a significant role in the committee’s decision-making,
consistent with our pay-for-performance philosophy. Because of our strong performance in 2011 and prior years
relative to market-wide performance in our industry, the committee generally set compensation levels for our
executive officers for 2012 in the upper end of the ranges that the committee believed to be appropriate for each
executive officer.
Base Salaries
To set base salary levels for 2012 for our executive officers, the committee considered the existing base
salary of each officer, as well as each officer’s contribution level and effectiveness in his role, and the range of
base salaries at our peer companies. As a result of our strong performance in 2011 and prior years as compared to
the restaurant peer group as described above under “—Assessment of Company Performance,” and additionally
based on the committee’s subjective determinations as to each officer’s individual performance and contribution
to our significant growth, the committee made a determination to increase each executive’s base salary. The
committee set Mr. Ells’s 2012 base salary at $1,400,000, Mr. Moran’s at $1,200,000, Mr. Hartung’s at $606,528,
Mr. Blessing’s at $400,680, and Mr. Crumpacker’s at $359,640. The difference in the base salaries of Mr. Moran
and Mr. Ells is attributable to Mr. Moran serving in the office of Co-Chief Executive Officer only since the
beginning of 2009, whereas Mr. Ells has served as Chief Executive Officer since our inception. The differences
in salary between the Co-Chief Executive Officers and the other executive officers are attributable to the
committee’s belief in the tremendous importance of strong leadership at the chief executive officer level as well
as to the level of impact of the contributions made by the Co-Chief Executive Officers to our success.
Annual Incentives—AIP Structure
The formula to determine payouts under the AIP consists of a company performance factor, a team
performance factor, and an individual performance factor, each stated as a percentage by which an executive
officer’s target payout amount will be adjusted to determine actual cash bonuses. The formula can be expressed
as follows:
(AIP Bonus Target X Company Performance Factor) X 30% X Team Performance Factor +
(AIP Bonus Target X Company Performance Factor) X 70% X Individual Performance Factor
For our development employees (including our Chief Development Officer), the team factor is weighted at
50 percent and the individual factor is weighted at 50 percent.
In most years, each of the company, team and individual performance factors could be adjusted downward
to zero based on company, team or individual performance, which could result in no AIP bonuses being paid or
an individual’s AIP bonus being significantly reduced. While adjustments downward have generally been much
less significant, the potential for one or more factors to be significantly reduced ensures that AIP bonuses will be
significantly reduced or not paid at all if our performance falls far short of our expectations, and enables us to
avoid unduly rewarding employees not contributing to our success.
We include the company performance factor in the calculation to reward participating employees when our
company performs well, which we believe focuses employees on improving corporate performance and aligns
the interests of our employees with those of our shareholders. We include the team performance factor to
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Proxy Statement