Chipotle 2013 Annual Report Download - page 127

Tax and Other Regulatory Considerations
Code Section 162(m)
Section 162(m) of the Internal Revenue Code provides that compensation of more than $1,000,000 paid to
the chief executive officer or to certain other executive officers of a public company will not be deductible for
federal income tax purposes unless amounts above $1,000,000 qualify for one of several exceptions. The
committee’s primary objective in designing executive compensation programs is to support and encourage the
achievement of our company’s strategic goals and to enhance long-term shareholder value. For these and other
reasons, the committee has determined that it will not necessarily seek to limit executive compensation to the
amount that will be fully deductible under Section 162(m). However, a substantial portion of each covered
executive officer’s compensation remains deductible under Section 162(m).
We have implemented the Amended and Restated 2006 Cash Incentive Plan, and beginning in 2014, the
2014 Cash Incentive Plan, as umbrella plans under which the AIP bonuses are paid in order to ensure that we can
deduct the amount of the payouts from our reported income under Section 162(m). Under the 2006 plan, the
committee sets maximum bonuses for each executive officer and other key employees. If the bonus amount
determined under the AIP for participants in the 2006 plan is lower than the maximum bonus set under the 2006
plan, the committee has historically exercised discretion to pay the lower AIP bonus rather than the maximum
bonus payable under the 2006 plan. In instances where the committee has determined to pay bonuses in excess of
those determined under the AIP, such additional bonuses were paid under the 2006 plan and, in combination with
AIP bonuses, were less than the maximum bonuses fixed under the 2006 plan.
The 2014 Cash Incentive Plan has substantially similar terms to the 2006 plan, and beginning with the 2014
performance year will be used to pay out AIP bonuses rather than the 2006 plan, which was terminated following
payout of 2013 AIP bonuses and is of no further effect.
Accounting Rules
Various rules under generally accepted accounting principles determine the manner in which we account for
equity-based compensation in our financial statements. The committee may consider the accounting treatment
under Financial Accounting Standards Board Accounting Standards Codification Topic 718 (FASB Topic 718)
of alternative grant proposals when determining the form and timing of equity compensation grants to our
executive officers. The accounting treatment of such grants, however, is not generally determinative of the type,
timing, or amount of any particular grant of equity-based compensation the committee determines to make.
COMPENSATION COMMITTEE REPORT
The Compensation Committee reviewed and discussed the Compensation Discussion and Analysis included
in this Proxy Statement with management. Based on such review and discussion, the Compensation Committee
recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy
Statement for filing with the SEC.
The Compensation Committee.
Darlene J. Friedman, Chairperson
Patrick J. Flynn
Jeffrey B. Kindler
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Proxy Statement