Chipotle 2013 Annual Report Download - page 118

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Officer and our Director of Compensation & Benefits held discussions during 2013 with a number of our largest
shareholders regarding the say-on-pay vote, and found that several of them do support our executive
compensation program and did not suggest that we make any changes. Furthermore, at least one of our top five
shareholders expressed its disapproval of our executive compensation based solely on numerical compensation
thresholds and without regard to our performance, an approach with which we disagree in a number of respects.
Accordingly, following the discussions between our management and significant investors, as well as continued
review and consultation of our compensation programs, market practice, our company performance, the
shareholder value we have created, and the input of an independent compensation consultant, the committee
determined that the say-on-pay vote did not warrant significant changes to our executive compensation programs.
The Compensation Committee believes that the support of the holders of nearly three-quarters of our outstanding
common stock continues to indicate shareholder support for our compensation programs. Moreover, the
committee recognizes that some shareholders will favor a compensation program that is more tightly tied to
market benchmarks, strict numerical limits, or other approaches that do not offer the same rewards for superior
performance that are offered by our program. The committee believes that, for the reasons set forth elsewhere in
this section, our approach is best for our company and its shareholders. The committee will continue to consider
the outcome of our future say-on-pay votes when making compensation decisions for the named executive
officers.
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 2013 are discussed below under “—Discussion of
Executive Officer Compensation Decisions—Base Salaries.”
Annual Incentives
We have designed, and the Compensation Committee oversees, an annual performance-based cash bonus
program for all of our full-time regional and corporate employees, including our executive officers. We call this
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Proxy Statement