Chipotle 2013 Annual Report Download - page 92

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PROPOSAL B
AN ADVISORY VOTE TO APPROVE THE COMPENSATION
OF OUR EXECUTIVE OFFICERS AS DISCLOSED IN THIS PROXY STATEMENT
As required by Section 14A of the Securities Exchange Act of 1934, we are asking shareholders to cast an
advisory vote to approve the compensation of our executive officers as disclosed in this proxy statement. This
proposal, commonly known as a “say-on-pay” proposal, gives shareholders the opportunity to endorse or not
endorse our executive compensation programs and policies and the compensation paid to our executive officers.
We have committed to holding say on pay votes at each year’s annual meeting, until at least the annual meeting
to occur in 2017.
The say-on-pay vote is advisory and therefore will not be binding on the Compensation Committee, the
Board of Directors, or Chipotle. However, the Compensation Committee and Board will review the voting results
and take them into consideration when making future decisions regarding executive compensation.
Please read the “Executive Officers and Compensation” section of this proxy statement before determining
how to vote on this proposal. As described in more detail in that section, and particularly under the heading
“—Compensation Discussion and Analysis,” we believe our compensation programs emphasize performance and
accountability while maintaining alignment with shareholder interests.
Our Compensation Committee, which is advised by Compensation Strategies, an independent compensation
consultant that did not perform other work for Chipotle during 2013, has structured and implemented executive
compensation programs that encourage long-term shareholder value creation. During 2013, we once again grew
significantly and met or exceeded all of the operating and financial performance guidance we announced prior to
the beginning of the year. And importantly, we achieved these results without raising menu prices, which likely
would have contributed to even more robust sales and profit growth. For more detail regarding our business
performance and creation of shareholder value, see “Compensation Discussion and Analysis—Overview of the
Performance Based Nature of our Executive Compensation” beginning on page 42 below. Almost every
significant development with respect to the compensation of our executive officers in 2013 was driven by or in
recognition of this strong performance.
In reviewing our executive compensation, it is important to recognize that the amounts reflected in the
Summary Compensation Table appearing on page 56 do not reflect compensation actually realized by each
officer. Rather, the vast majority of the “Total Compensation” reflected in the table for each executive officer in
2011 and 2012 was attributable to the economic value computed for SOSARs awarded in those years.
Additionally, the increase in “Total Compensation” from 2012 to 2013 for each officer is attributable primarily to
the award of performance shares during 2013, which are intended to serve as compensation for performance over
a three year period, and in Mr. Crumpacker’s case was also attributable to an additional SOSAR grant in
recognition of Mr. Crumpacker taking on the Chief Development Officer role in addition to serving as Chief
Marketing Officer.
The economic value of SOSARs as reflected in the table does not reflect amounts actually realized by the
recipients. Instead, amounts will only be realizable in respect of those awards following a vesting period, and
only if our stock price increases from the grant date to the date of exercise. Our Compensation Committee
believes that this allows the recipients of SOSARs, including our executive officers, to share in the value created
for shareholders and makes stock appreciation rights an inherently performance-based form of compensation.
Furthermore, half of the SOSARs granted in each year reflected in the table will vest only if we meet or exceed
performance goals based on continued increases in our adjusted cash flow from operations over the performance
vesting period. Therefore, consistent with our pay-for-performance philosophy, the committee has made these
awards one of the principal foundations of the compensation of our executive officers.
20
Proxy Statement