Chipotle 2012 Annual Report Download - page 109

promote teamwork and to provide rewards based on the areas of the company in which a participant can make the
most impact. We include the individual performance factor to emphasize individual performance and
accountability. Each of these components can reduce award levels when we, one of our “team” units, or an
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 at the targeted level of each financial and operating measure and achievement (as
determined subjectively by the committee) of the key initiatives would result in company and team performance
factors that would result in payout at 100 percent—in other words, at target. Achievement above or below the
targeted financial and operating measures, and over- or under-achievement of the key initiatives as determined
subjectively by the committee, results in adjustments upward or downward to the company and team
performance factors, 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 company performance factor and
the team performance factor for most corporate-level employees, including the executive officers other than the
Chief Development Officer, are capped at 150 percent. 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 from zero to 130 percent 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.
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.
Annual Incentives—2012 AIP Payouts
The committee set the target annual AIP payouts for each executive officer during the first quarter of 2012,
based in part by reference to the historical compensation of each officer, each officer’s performance during the
year, and median target bonuses for comparable positions within the restaurant industry peer group. While the
AIP parameters 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. Blessing), place a
greater weight on team performance and allow for a higher team performance factor. The committee approved
this plan design in recognition of the coordinated group effort needed to effectively drive strong new restaurant
openings, and as a result, the maximum AIP payout to development employees (including Mr. Blessing) is 248
percent of the target award.
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Proxy Statement