Chipotle 2012 Annual Report Download - page 97

PROPOSAL E
PROPOSAL TO APPROVE AMENDMENTS TO OUR AMENDED AND RESTATED CERTIFICATE
OF INCORPORATION TO ELIMINATE THE CLASSIFICATION OF OUR BOARD OF DIRECTORS
We are asking that shareholders approve an amendment to our Amended and Restated Certificate of
Incorporation to eliminate the classification of our Board of Directors over a three year period and provide for an
annual election of all directors beginning with the 2016 annual meeting of shareholders.
Our existing certificate of incorporation provides for our Board to be divided into three classes. Each
director serves a three year term and continues in office until a successor has been elected and qualified, subject
to the director’s earlier resignation, retirement or removal from office. As a result, only one third of the Board
stands for election each year—an arrangement commonly known as a “classified” or “staggered” board.
Although our Board has long believed that a classified Board is in the best interests of Chipotle, its
shareholders and our long-term value creation, in response to a shareholder proposal at the 2012 annual meeting,
our shareholders voted in favor of a resolution encouraging the Board to eliminate the classified Board. In
response, our Board carefully considered the advantages and disadvantages of maintaining a classified Board,
including consideration of the views of shareholders as expressed in the advisory vote at the 2012 annual
meeting, and determined to adopt the proposed certificate of amendment and recommend that shareholders
approve it.
If the proposed amendment to our certificate of incorporation is approved, the classification of our Board
will be phased out beginning with our annual meeting of shareholders in 2014, such that all directors will be
elected to one year terms beginning with our annual meeting of shareholders in 2016. No term of an existing
director would be shortened or otherwise modified as a result of adoption of the proposed amendment. Any
additional director of any class elected to fill a vacancy resulting from an increase in such class will hold office
for the remaining term of that class.
Under Delaware law, unless otherwise provided in a company’s certificate of incorporation, directors
serving on a classified board may only be removed by shareholders for cause, while directors serving on a non-
classified board may be removed by shareholders with or without cause. As a result, approval of the proposed
amendment will also result in the ability of our shareholders to remove a director from the Board with or without
cause from and after the 2016 annual meeting of shareholders. Consistent with our existing certificate of
incorporation, any removal of a director (whether before or after the 2016 annual meeting of shareholders) will
require a vote of not less than 66 and 2/3 percent of the voting power of our outstanding common stock.
If shareholders do not vote to approve the proposed amendment, the Board will remain classified and the
directors will continue to be elected to serve three year terms, subject to their earlier death, resignation or
removal. In addition, removal of directors by the shareholders would continue to be permissible only for cause.
This description of the proposed amendment to our certificate of incorporation is qualified in its entirety by
reference to, and should be read in conjunction with, the full text of our certificate of incorporation, as amended
by the proposed Certificate of Amendment attached to this proxy statement as Annex B.
The Board of Directors recommends a vote FOR the proposed amendment to our Amended and Restated
Certificate of Incorporation.
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Proxy Statement