Chipotle Mexican Grill (CMG) DEF 14ADefinitive proxy

Only shareholders of record at the close of business on March 23, 2021 are entitled to notice of and to vote at the annual meeting. To participate in the virtual annual meeting, you will need the 16-digit control number that appears on your Notice of Internet Availability of Proxy Materials, proxy card or the instructions that accompanied your proxy materials.

In light of public health concerns regarding the novel coronavirus (COVID-19) pandemic and related travel restrictions, the Board of Directors has determined that it is prudent that this year’s annual meeting be held in a virtual-only format via live audio webcast.

To attend the virtual annual meeting, you must be a shareholder on the record date of March 23, 2021. Shareholders may attend the virtual annual meeting at http://www.virtualshareholdermeeting.com/CMG2021. The meeting will only be conducted via webcast; there will be no physical meeting location. To participate in the virtual annual meeting, shareholders will need the 16-digit control number that appears on your Notice of Internet Availability of Proxy Materials, proxy card or the instructions that accompanied the proxy materials. If you would like to attend the virtual meeting and you have your control number, please go to www.virtualshareholdermeeting.com/CMG2021 around 15 minutes prior to the start of the meeting to log in. If you came through your brokerage firm’s website and do not have your control number, you can gain access to the meeting by logging into your brokerage firm’s website 15 minutes prior to the meeting start, selecting the shareholder communications mailbox to link through to the meeting and the control number will automatically populate. For optimal viewing and usage, this site is best viewed with a screen resolution of 1024x768 and above.

Beginning 15 minutes prior to the meeting start, technicians will be available to assist you with any technical difficulties you may have accessing the meeting. If you encounter any difficulties accessing the annual meeting or during the meeting time, please call the technical support number that will be posted on the meeting website.

Shareholders will have the ability to submit questions during the annual meeting via the annual meeting website at www.virtualshareholdermeeting.com/CMG2021. As part of the annual meeting, we will hold a question and answer session, during which we intend to answer questions submitted during the meeting that are pertinent to Chipotle and the meeting matters, as time permits.

If you were a shareholder of record of our common stock on March 23, 2021, you are entitled to vote at the annual meeting, or at any postponement or adjournment of the annual meeting using the 16-digit control number that appears on the Notice of Internet Availability of Proxy Materials, proxy card or the instructions that accompanied the proxy materials. On each matter to be voted on, you may cast one vote for each share of common stock you hold. As of March 23, 2021, there were 28,182,443 shares of common stock outstanding and entitled to vote.

A list of shareholders entitled to vote at the annual meeting will be available to stockholders for examination 10 days prior to the annual meeting. To review the list of shareholders, please contact Chipotle investor relations at ir@chipotle.com. The shareholder list will also be available during the annual meeting on the meeting website.

If you hold your shares through a broker, bank or other nominee in “street name,” you need to submit voting instructions to your broker, bank or other nominee to cast your vote. In most instances you can do this over the Internet. The Notice of Internet Availability of Proxy Materials that was provided to you has specific instructions for how to submit your vote, or if you have received or request a hard copy of this proxy statement you may mark, sign, date and mail the accompanying voting instruction form in the postage-paid envelope provided. Your vote is revocable by following the procedures outlined in this proxy statement.

Under the rules of the New York Stock Exchange, or NYSE, on voting matters that the NYSE characterizes as “routine,” NYSE member firms have the discretionary authority to vote shares for which their customers do not provide voting instructions. On non-routine proposals, such “uninstructed shares” may not be voted by your broker. Only the proposal to ratify the appointment of our independent registered public accounting firm is considered a routine matter for this purpose. None of the other proposals presented in this proxy statement are considered routine matters. Accordingly, if you hold your shares through a brokerage firm and do not provide timely voting instructions, your shares will be voted, if at all, only on Proposal 3. We strongly encourage you to exercise your right to vote in the election of directors and other matters to be voted on at the annual meeting.

If you are a shareholder of record, you can vote your shares in advance of the meeting over the Internet as described in the Notice of Internet Availability of Proxy Materials that was provided to you, or if you have received or requested a hard copy of this proxy statement and accompanying form of proxy card you may vote in advance of the meeting by telephone as described on the proxy card, or by mail by marking, signing, dating and mailing your proxy card in the postage-paid envelope provided. Your designation of a proxy is revocable by following the procedures outlined in this proxy statement. The method by which you vote will not limit your right to vote online at the virtual annual meeting. Instructions for voting online at the virtual annual meeting are available at www.virtualshareholdermeeting.com/CMG2021.

If you receive hard copy materials and sign and return your proxy card without specifying choices, your shares will be voted as recommended by the Board of Directors.

A quorum is necessary to conduct business at the annual meeting. At any meeting of our shareholders, the holders of a majority in voting power of our outstanding shares of common stock entitled to vote at the meeting, present via webcast or by proxy, constitutes a quorum for all purposes. You are part of the quorum if you have voted by proxy. Abstentions and broker non-votes count as “shares present” at the meeting for purposes of determining whether a quorum exists.

A broker non-vote occurs when a broker, bank or other nominee who holds shares for another does not vote on a particular item because the nominee has not received instructions from the owner of the shares and does not have discretionary voting authority for that item. See “Voting by Beneficial Owners” above for more information.

Because the say on pay vote (Proposal 2) and the shareholder proposal (Proposal 4) are advisory, they will not be binding on the Board or the company. However, the Board will review the voting results and take them into consideration when making future decisions regarding executive compensation and the subject matter of the shareholder proposal. Ratification of our appointment of independent registered public accountants is not required and therefore the vote on Proposal 3 is also advisory only. See Proposal 3 for additional information about the effect of the voting outcome on this proposal.

Any director who does not receive at least a majority of votes cast would be required to submit an irrevocable resignation to the Nominating and Governance Committee of the Board, and the Committee would make a recommendation to the Board as to whether to accept or reject the resignation or whether other action should be taken. The Board would then act on the resignation, considering the Committee’s recommendation, and publicly disclose (by a press release and filing an appropriate disclosure with the SEC) its decision regarding the resignation, and if such resignation is rejected the rationale behind the decision, within 90 days following certification of the election results. The Committee in making its recommendation and the Board in making its decision each may consider any factors and other information that they consider appropriate and relevant.

We have elected to deliver our proxy materials electronically over the Internet as permitted by rules of the Securities and Exchange Commission, or SEC. As required by those rules, we are distributing to our shareholders of record and beneficial owners as of the close of business on March 23, 2021 a Notice of Internet Availability of Proxy Materials. On the date of distribution of the notice, all shareholders and beneficial owners will have the ability to access all of the proxy materials at the URL address included in the notice. These proxy materials are also available free of charge upon request at 1-800-690-6903, or by e-mail at sendmaterial@proxyvote.com, or by writing to Chipotle Mexican Grill, Inc., c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. Requests by e-mail or in writing should include the control number included on the notice you received. If you would like to receive the Notice of Internet Availability of Proxy Materials via e-mail rather than regular mail in future years, please follow the instructions on the notice, or enroll on the Investors page of our website at ir.chipotle.com. Delivering future notices by e-mail will help us reduce the cost and environmental impact of our annual meeting.

We will bear the cost of preparing, assembling and mailing the Notice of Internet Availability of Proxy Materials; of making these proxy materials available on the Internet and providing hard copies of the materials to shareholders who request them; and of reimbursing brokers, nominees, fiduciaries and other custodians for the out-of-pocket and clerical expenses of transmitting copies of the Notice of Internet Availability of Proxy Materials and the proxy materials themselves to beneficial owners of our shares. A few of our directors, officers and employees may participate in the solicitation of proxies, without additional compensation, by telephone, e-mail or other electronic means or in person. We have also engaged Alliance Advisors, LLC to assist us in the solicitation of proxies, for which we have agreed to pay a fee of $23,000 plus reimbursement of customary expenses.

The number of shares beneficially owned by each shareholder is determined under SEC rules and generally includes shares for which the holder has voting or investment power. The information does not necessarily indicate beneficial ownership for any other purpose. The percentage of beneficial ownership shown in the following tables is based on 28,182,443 outstanding shares of common stock as of March 23, 2021. For purposes of calculating each person’s or group’s percentage ownership, shares of common stock issuable pursuant to the terms of stock options, stock appreciation rights or restricted stock units exercisable or vesting within 60 days after March 23, 2021 are included as outstanding and beneficially owned for that person or group, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person or group.

Our Board of Directors currently has eleven members, with each director serving for a one-year term. At the annual meeting, shareholders will vote on the eleven nominees named below, each of whom is an incumbent member of the Board.

Each of the director nominees was elected at the 2020 annual meeting of shareholders, except for Gregg Engles and Mary Winston, who were elected to the Board in July 2020, and Matthew Carey and Mauricio Gutierrez, who were elected to the Board in March 2021. Mr. Engles initially was recommended to our Board by one of our incumbent directors; Ms. Winston and Messrs. Carey and Gutierrez initially were recommended to our Board by an executive recruiting firm retained by the Board to assist in identifying, evaluating and conducting due diligence on potential director candidates. Each of the director nominees was nominated for re-election by the Board upon the recommendation of the Nominating and Corporate Governance Committee, and each director nominee has consented to serve if elected. If any nominee is unable to serve or will not serve for any reason, the persons designated on the accompanying form of proxy will vote for other candidates in accordance with their judgment or the directors may decide to reduce the size of the Board. We are not aware of any reason the nominees would not be able to serve if elected.

Re-election of each nominee for director requires that such nominee receive a majority of the votes cast FOR his or her election. Abstentions and broker non-votes are not counted as votes cast and will have no effect on the outcome of the election of directors.

The following is biographical information about each nominee, including a description of the experience, qualifications and skills that have led the Board to determine that each nominee should serve on the Board. The current terms of all directors expire as of the date of next year’s annual meeting of shareholders. Each director will hold office until their successors are elected and have qualified or their earlier resignation or removal. The age of each director is as of May 18, 2021, the date of the annual meeting.

In evaluating current and prospective directors, our Board strives for a highly independent, well-qualified directors, with the diversity, experience and background to be effective and to provide strong oversight and thought leadership to management. In addition to the specific qualifications, skills and experience described above, each director is expected to possess personal traits such as candor, integrity and professionalism and to commit to devote significant time to oversight of the company.

The Board of Directors held nine meetings in 2020. Each director who served in 2020 attended at least 75% of the meetings of the Board and of Committees of which he or she was a member during the time in which they served as a member of the Board in 2020. The Board has requested that each of its members attend our annual shareholder meetings absent extenuating circumstances, and all directors serving on the Board following the date of the 2020 annual meeting attended the meeting.

Assuming all directors standing for re-election are elected at the annual meeting, the average age of our directors will be 57, and the Board will possess the skills, experiences and attributes reflected in the following table. We believe these skills, experiences and attributes are relevant and important to the company’s achievement of its strategic goals, including making our brand culturally relevant and engaging, digitizing and modernizing the restaurant experience, continuing to ensure a culture of accountability and creativity throughout our organization, and enhancing our economic model to benefit our shareholders.

We seek to strike the right balance between retaining directors with deep knowledge of the company and adding directors who bring a fresh perspective. In the last two years, we have added four new directors to the Board, and three directors have rotated off the Board. Of the directors standing for re-election, two have served on the board for over 10 years, three have served for three to five years and six have served for two years or less. From time to time the Board retains an executive recruiting firm to assist in identifying, evaluating and conducting due diligence on potential director candidates. The Board is committed to actively seeking to include highly qualified women and individuals from minority groups in the pool from which new director candidates are selected. Each recruiting firm retained by the Board is instructed to specifically focus on identifying candidates who, in addition to having particular skills and experience, also would add to the gender and diversity of the Board.

Our Board of Directors, under direction of the Nominating and Corporate Governance Committee, reviews the independence of our directors to determine whether any relationships, transactions or arrangements involving any director or any family member or affiliate of a director may be deemed to compromise the director’s independence from us, including under the independence standards contained in the rules of the NYSE. Based on that review, in March 2021 the Board determined that none of our directors who served on the Board in 2020 has any relationships, transactions or arrangements that would compromise his or her independence, except the following directors who were or are employed by us: Steve Ells, who ceased to be a director in March 2020, and Brian Niccol. In making its determination as to the independence of members of the Board, the Board determined that the following transactions do not constitute relationships that would create material conflicts of interest or otherwise compromise the independence of the directors in attending to their duties as Board members: (i) the registration rights granted to Mr. Baldocchi as described below under “Certain Relationships and Related Party Transactions;” and (ii) our agreements with Pershing Square Capital Management, L.P., in which Mr. Namvar was an employee until April 1, 2018, and for which he currently serves on the advisory board. Accordingly, the Board concluded that each director who served on the Board during 2020, other than Mr. Niccol, qualifies as independent.

Our Board of Directors has three standing committees: (1) Audit & Risk Committee, (2) Compensation Committee, and (3) Nominating and Corporate Governance Committee, and each is composed entirely of persons the Board has determined to be independent as described above. Each member of the Audit & Risk Committee has also been determined by the Board to be independent under the definition included in SEC Rule 10A-3(b)(1) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and each member of the Compensation Committee has been determined to be independent under NYSE Rule 303A.02(a)(ii) and Rule 10C-1 of the Exchange Act. Each Committee operates pursuant to a written charter adopted by our Board of Directors, which sets forth the Committee’s role and responsibilities and provides for an annual evaluation of its performance. The charters of all three standing committees are available on the Investors page of our corporate website at ir.chipotle.com under the Corporate Governance link.

In accordance with its charter, the Audit & Risk Committee acts to oversee the integrity of our financial statements and system of internal controls; the annual independent audit of our financial statements; the performance of our internal audit function (including review of audit plans, budget and staffing); the implementation and effectiveness of our risk assessment and risk management policies and procedures; our compliance with legal and regulatory requirements and our response to actual and alleged violations, including claims of harassment, discrimination or alleged violations of applicable employment laws; and the implementation and effectiveness of our disclosure controls and procedures. In performing its functions, the Audit & Risk Committee acts only in an oversight capacity and necessarily relies on the work and assurance of the company’s management and independent registered public accountants which, in their reports, express opinions on the fair presentation of the company’s financial statements and the effectiveness of the company’s internal controls over financial reporting. The Audit & Risk Committee’s responsibilities also include review of the qualifications, independence and performance of the independent registered public accountants, who report directly to the Audit & Risk Committee. The Committee regularly holds executive sessions with the audit partner for continued assessment of the performance, effectiveness and independence of the independent audit firm. The Audit & Risk Committee also retains, determines the compensation of, evaluates and, when appropriate, replaces our independent registered public accountants and pre-approves audit and permitted non-audit services provided by our independent registered public accountants. The Audit & Risk Committee has adopted the “Policy Relating to Pre-Approval of Audit and Permitted Non-Audit Services” under which audit and non-audit services to be provided to us by our independent registered public accountants are pre-approved. This policy is summarized beginning on page 36 of this proxy statement. The Committee determined that the fees paid to the independent registered public accountants in 2020, including in connection with non-audit services, were appropriate, necessary and cost-efficient in the management of our business, and did not present a risk of compromising the auditor’s independence. The Audit & Risk Committee also has adopted and annually reviews compliance with the company’s Hiring Policy for Former Employees of Independent Auditor Firm, which further ensures that the independence of the independent registered public accounting firm is not impaired.

The Compensation Committee oversees our executive compensation policies and programs. In accordance with its charter, the Committee determines the compensation of our Chief Executive Officer based on an evaluation of his performance and approves the compensation level of our other executive officers following an evaluation of their performance and recommendation by the Chief Executive Officer. The manner in which the Committee makes determinations as to the compensation of our executive officers is described in more detail below under “Executive Officers and Compensation – Compensation Discussion and Analysis.”

The Compensation Committee charter also grants the Committee the authority to: review and make recommendations to the Board with respect to the establishment and terms of all new incentive compensation and equity-based plans; review and approve the terms of written employment agreements and post-service arrangements for executive officers; review our compensation programs generally to ensure they support the company’s overall business strategy and don’t create undue risk; recommend compensation to be paid to our outside directors; review and advise the Board on executive compensation-related disclosures to be filed with the SEC and distributed to our shareholders; oversee our management of and response to human capital matters, including diversity and inclusion programs and initiatives, recruitment and retention of employees, gender and racial/ethnic pay equity and relative compensation and benefits offered to employees across the company; with the full Board, review the succession planning process relating to executive officer positions; assist the Board with its responsibilities for our compensation and benefits programs generally; and other administrative matters relating to our compensation programs and policies. The Committee may delegate any of its responsibilities to a subcommittee comprised of one or more members of the Committee, except where such delegation is not allowed by legal or regulatory requirements.

The Compensation Committee has also been appointed by the Board to administer our Amended and Restated 2011 Stock Incentive Plan and to make awards under the plan, including as described below under “Executive Officers and Compensation – Compensation Discussion and Analysis – 2020 Compensation Program – Fiscal 2020 Annual LTI Awards.” The Committee annually delegates its authority under the plan to several executive officers to grant equity awards to non-executive officer level employees, within limitations specified by the Committee in its delegation of authority.

The Compensation Committee retained Frederic W. Cook & Co., Inc. (FW Cook), an independent executive compensation consulting firm, to advise the Committee regarding compensation matters for 2020 and for the equity compensation awards made to our executive officers in February 2020. All of the fees paid to FW Cook during 2020 were in connection with the firm’s work on executive and director compensation matters on behalf of the Committee; no fees were paid to the firm for any other work. FW Cook was retained pursuant to an engagement letter with the Compensation Committee, and the Committee determined that the firm’s service to Chipotle did not and does not give rise to any conflict of interest, and considers FW Cook to have sufficient independence from our company and executive officers to allow it to offer objective advice.

The Compensation Committee held 15 meetings in 2020, which included additional meetings to evaluate and discuss the impact of COVID-19 on the company’s incentive compensation programs. Additionally, members of the Committee held a number of discussions with shareholders regarding executive compensation and related matters. A report of the Committee is found under the heading “Executive Officers and Compensation – Compensation Discussion and Analysis – Compensation Committee Report” on page 59.

The members of the Compensation Committee are Messrs. Flanzraich (Chairperson), Engles, Gutierrez and Namvar, and Ms. Fili-Krushel. There are no relationships between the members of the Committee and our executive officers of the type contemplated in the SEC’s rules requiring disclosure of “compensation committee interlocks.” None of the members of the Compensation Committee is our employee and no member has been an officer of our company at any time. The Board has determined that each member of the Committee qualifies as a “Non-Employee Director” under SEC Rule16b-3, and that each member satisfies the standards of NYSE Rule 303A.02(a)(ii) regarding independence of compensation committee members. No member of the Committee nor any organization of which any member of the Committee is an officer or director received any payments from us during 2020, other than the payments disclosed under “– Director Compensation” below.

The responsibilities of the Nominating and Corporate Governance Committee include reviewing, at least annually, the adequacy of our corporate governance principles and recommending to the Board any changes to such principles as deemed appropriate, and recommending to the Board appropriate guidelines and criteria to determine the qualifications to serve and continue to serve as a director. The Nominating and Corporate Governance Committee identifies and reviews the qualifications of, and recommends to the Board, (i) individuals to be nominated by the Board for election to the Board at each annual meeting, (ii) individuals to be nominated and elected to fill any vacancy on the Board which occurs for any reason (including increasing the size of the Board) and (iii) appointments to committees of the Board. The Committee, at least annually, reviews the size, composition and organization of the Board and its committees and recommends any policies, changes or other action it deems necessary or appropriate, including recommendations to the Board regarding retirement age, resignation or removal of a director, independence requirements, frequency of Board meetings and terms of directors. A number of these matters are covered in our Corporate Governance Guidelines, which the Committee reviews at least annually. The Committee also reviews any potential director candidates recommended by our shareholders if such nominations are within the time limits and meet other requirements established by our bylaws. The Committee oversees the annual evaluation of the performance of the Board and its committees.

The Nominating and Corporate Governance Committee held seven meetings in 2020. The members of the Committee are Ms. Hickenlooper (Chairperson) and Messrs. Flanzraich and Namvar.

The Compensation Committee of the Board reviews and makes recommendations to the full Board on compensation provided to non-employee directors at least biennially, as required by its charter. Below is a description of the compensation program for our non-employee directors, which did not change as compared to the 2019 non-employee director compensation program. Directors who are employees of Chipotle do not receive compensation for their services as directors. Accordingly, neither Mr. Niccol nor Steve Ells, who stepped off the Board in March 2020, received additional compensation for service on the Board in 2020. We also reimburse directors for expenses incurred in connection with their service as directors, including travel expenses for meetings.

Under our stock ownership requirements for our directors, each non-employee director is required to own Chipotle common stock with a market value of five times the annual cash retainer within five years of the director’s election to the Board. RSUs count as shares owned for purposes of the stock ownership requirements. All of our non-employee directors who were serving for more than one year as of December 31, 2020 either met or were on track to meet this requirement.

Our Board of Directors has adopted a number of policies to support our values and provide for good corporate governance, including our Corporate Governance Guidelines, which set forth our principles of corporate governance; our Board committee charters; the Chipotle Mexican Grill, Inc. Code of Ethics, which applies to all Chipotle directors, officers and employees; and separate Codes of Ethics for our directors, our Chief Executive Officer and our Chief Financial Officer/principal accounting officer. The Corporate Governance Guidelines and each of the Codes are available on the Investors page of our corporate website at ir.chipotle.com under the Corporate Governance link.

If we make any substantive amendment to, or grant a waiver from, a provision of the Code of Ethics or our Codes of Ethics that apply to our executive officers, we intend to satisfy the applicable SEC disclosure requirement by promptly disclosing the nature of the amendment or waiver on the Investors page of our corporate website at ir.chipotle.com under the Corporate Governance link.

In March 2020, the Board appointed Brian Niccol, our Chief Executive Officer, to the additional position of Chairman of the Board. The Chairman of the Board presides at meetings of the Board and exercises and performs such other powers and duties as may be periodically assigned to him in that capacity by the Board or prescribed by our bylaws. We believe it is appropriate at this time in our company’s growth for Mr. Niccol to serve as Chairman because his strong operational experience, extensive knowledge of the restaurant industry, and visionary and leadership skills both empower the company to execute its strategy and also focus our directors’ attention on the most critical business matters facing the company. The Board annually appoints a Lead Independent Director, whose role is described below. In addition, all Board committees are led by independent directors, executive sessions of the directors are held at each regular Board meeting and all directors are actively engaged in oversight of the company. We believe that having independent directors hold key leadership roles provides appropriate safeguards to the combined Chairman and Chief Executive Officer role.

Although we believe that combining the roles of Chairman and Chief Executive Officer is the best structure for our shareholders and the company now, if our Board (particularly the Lead Independent Director and the chairperson of the Nominating and Corporate Governance Committee) believed that a different leadership structure would be better based on the challenges and needs of the business, we would change the structure.

Mr. Flanzraich was appointed Lead Independent Director in September 2014. The Board believes that maintaining a Lead Independent Director position held by an independent director ensures that our outside directors remain independent of management and provide objective oversight of our business and strategy. The responsibilities of the Lead Independent Director are contained in our Corporate Governance Guidelines and include: (1) presiding at meetings of the Board at which the Chairman is not present, including executive sessions of the independent directors; (2) approving information sent to the Board; (3) approving the scheduling of Board meetings and the agenda and materials for each meeting and executive session of the independent directors to provide that there is sufficient time for discussion of all agenda items; (4) serving as liaison between the Chairman and the independent directors; (5) if requested by major shareholders, being available for periodic consultation and direct communication with major shareholders; (6) with the Chairman and the Nominating and Corporate Governance Committee, evaluating all Director candidates and making recommendations to the Nominating and Corporate Governance Committee; (7) collaborating with the Chair of the Nominating and Corporate Governance Committee to complete the annual Board performance self-evaluation process; and (8) with the Chair of the Compensation Committee, leading the annual performance evaluation of the Chief Executive Officer.

In consultation with the Lead Independent Director, the Chairman of the Nominating and Corporate Governance Committee oversees annual Board and committee self-evaluations. The directors’ self-evaluation process includes a written questionnaire soliciting input on topics such as the overall effectiveness of the Board and its committees in performing their oversight responsibilities, the composition of the Board and each committee, the quality, rigor and effectiveness of meetings, the qualifications and effectiveness of incumbent directors, and whether the Board and each committee possess members with the right skills and experience to fulfill their responsibilities. The questionnaire is supplemented by candid, one-on-one discussions between the Committee Chair and independent directors on similar topics. Responses and observations from this process are discussed by the full Board and form the basis for process changes and setting future agendas. The Nominating and Corporate Governance Committee believes that this self-evaluation process best generates candid and real-time feedback on the efficacy of the Board and its relationship with management and considers each year whether changes in the process would be advisable.

Any shareholder or other interested party may contact the Board of Directors, including the Lead Independent Director or the non-employee directors as a group, or any individual director or directors, by writing to the intended recipient in care of Chipotle Mexican Grill, Inc., 610 Newport Center Dr., Suite 1400, Newport Beach, CA 92660, Attention: Corporate Secretary. Any communication to report potential issues regarding accounting, internal controls and other auditing matters will be directed to the Audit & Risk Committee. Our Corporate Secretary or general counsel, or their designees, will review and sort communications before forwarding them to the addressee, although communications that do not, in the opinion of the Corporate Secretary, our general counsel or their designees, deal with the functions of the Board or a Committee or do not otherwise warrant the attention of the addressees may not be forwarded.

Our independent directors met in executive session without management present at the end of each regularly scheduled Board meeting during 2020. The Lead Independent Director chaired the non-employee executive sessions of the Board held during 2020. The Board expects to continue to conduct executive sessions of the independent directors at each regularly scheduled Board meeting during 2021, and independent directors may schedule additional sessions at their discretion.

At regularly-scheduled meetings of the Audit & Risk Committee, Compensation Committee and Nominating and Corporate Governance Committee, executive sessions are scheduled at the end of each meeting, with only the Committee members or the Committee members and their advisors present, to discuss any topics the Committee members deem necessary or appropriate.

The Nominating and Corporate Governance Committee is responsible for establishing criteria for nominees to serve on our Board, screening candidates, and recommending for approval by the full Board candidates for vacant Board positions and for election at each annual meeting of shareholders. The Committee’s policies and procedures for consideration of Board candidates are described below. All eleven incumbent members of the Board are nominees for election as a director at this year’s annual meeting. Each nominee was recommended to the Board by the Nominating and Corporate Governance Committee.

The Committee considers candidates suggested by its members, other directors, senior management and shareholders. The Committee’s charter also authorizes it to retain, at our expense, search firms, consultants, and any other advisors it may deem appropriate to identify and screen potential candidates. The Committee may also retain a search firm to evaluate and perform background reviews on director candidates, including those recommended by shareholders. Any advisors retained by the Committee report directly to the Committee.

The Committee seeks to identify candidates of high integrity who have a strong record of accomplishment and who display the independence of mind and strength of character necessary to make an effective contribution to the Board and to represent the interests of all shareholders. Candidates are selected for their ability to exercise good judgment and to provide practical insights and diverse perspectives. In addition to considering the Board’s and Chipotle’s needs at the time a particular candidate is being considered, the committee considers candidates in light of the entirety of their credentials, including each candidate’s:

These factors may be weighted differently depending on the individual being considered and the needs of the Board at the time. We do not have a particular policy regarding the diversity of nominees or Board members; however, the Board believes that diverse membership with varying perspectives and breadth of experience is an important attribute of a well-functioning Board. Accordingly, diversity (whether based on factors commonly associated with diversity such as race, gender, national origin, religion, or sexual orientation or identity, as well as on broader principles such as diversity of perspective and experience) is one

of many elements that will be considered in evaluating a particular candidate. Search firms with which we work to identify potential Board nominees have been instructed to specifically identify candidates who, in addition to bringing particular skills and experience to the Board, also would add to the gender and/or ethnic diversity of the Board.

Shareholders wishing to recommend candidates to be considered by the Nominating and Corporate Governance Committee must submit to our Corporate Secretary the following information: a recommendation identifying the candidate, including the candidate’s contact information; a detailed resume of the candidate and an autobiographical statement explaining the candidate’s interest in serving on our Board; and a statement of whether the candidate meets applicable law and listing requirements pertaining to director independence. Candidates recommended by shareholders for consideration will be evaluated in the same manner as any other candidates, as described below under “– Candidate Evaluation Process,” and in view of the qualifications and factors identified above under “– Candidate Qualifications and Considerations.”

Under our bylaws, shareholders also may nominate candidates for election as a director at our annual meeting. To do so, a shareholder must comply with the provisions of our bylaws regarding shareholder nomination of directors, including compliance with the deadlines described under “Other Business and Miscellaneous – Shareholder Proposals and Nominations for 2022 Annual Meeting – Bylaw Requirements for Shareholder Submission of Nominations and Proposals” on page 72. Our bylaws also permit qualified shareholders or groups of shareholders to include nominations for election as a director in our proxy materials. To do so, a shareholder must comply with the proxy access provisions in our bylaws. These provisions are described under “Other Business and Miscellaneous – Shareholder Proposals and Nominations for 2022 Annual Meeting – Inclusion of Director Nominations in Our Proxy Statement and Proxy Card under our Proxy Access Bylaws” on page 72.

The Nominating and Corporate Governance Committee initially evaluates candidates in view of the qualifications and factors identified above under “– Candidate Qualifications and Considerations,” and in doing so may consult with the Chairman, the Lead Independent Director, other directors, senior management or outside advisors regarding a particular candidate. The Committee also considers the results of recent Board and Board Committee self-evaluations and the current size and composition of the Board, including expected retirements and anticipated vacancies. In the course of this evaluation, some candidates may be eliminated from further consideration because of conflicts of interest, unavailability to attend Board or Committee meetings or other reasons. Following the initial evaluation, the Committee would arrange for interviews of candidates deemed appropriate for further consideration. To the extent feasible, candidates are interviewed by the Chairman, the Lead Independent Director, and the members of the Nominating and Corporate Governance Committee, and potentially other directors as well. The results of these interviews would be considered by the Committee in its decision to recommend a candidate to the Board. Those candidates approved by the Board as nominees are named in the proxy statement for election by the shareholders at the annual meeting (or, if between annual meetings, one or more nominees may be elected by the Board itself if needed to fill vacancies, including vacancies resulting from an increase in the number of directors).

On December 14, 2016, we and Pershing Square Capital Management, L.P. (together with funds it advises, “Pershing Square”) entered into a letter of agreement (which we refer to as the “Investor Agreement”) regarding nominations to the Board and a number of related matters. The Investor Agreement provided for the nomination of Ali Namvar for election to Chipotle’s Board at the 2017 and 2018 annual meetings of shareholders, a procedure for replacing Mr. Namvar with a successor director in certain cases, and specified voting obligations of Pershing Square with respect to Chipotle’s annual shareholder meetings. Pershing Square further agreed to cause the resignation of Mr. Namvar from Chipotle’s Board in the event Pershing Square’s ownership of Chipotle’s outstanding common stock falls below 5%, which occurred in February 2020. Notwithstanding Pershing Square’s reduced ownership, the Board decided to nominate Mr. Namvar for re-election to the Board at the annual meeting.

Under the Investor Agreement, Pershing Square is also subject to specified standstill restrictions lasting generally until a specified period after Pershing Square ceases to have any representatives serving on Chipotle’s Board. For further details regarding the Investor Agreement and related agreements, see “Certain Relationships and Related Party Transactions.”

Our management and directors actively engage with shareholders to seek their input on emerging issues and to address shareholder questions and concerns. As in prior years, during 2020 we conducted outreach calls with our largest shareholders. Before we filed our proxy statement for our 2020 annual meeting, we reached out to shareholders holding over 51% of our outstanding common stock to solicit their feedback generally and, after we filed our proxy statement, we reached out again to shareholders holding almost 50% of our outstanding common stock. We also reached out to all of our shareholders that presented proposals for consideration at the annual meeting to discuss their proposals and our existing policies and practices and

our investor relations team reached out to the investment managers of our largest shareholders. During these discussions, we discussed a wide range of topics including, among others, sustainability and corporate social responsibility, executive compensation, diversity, corporate governance, business strategy and historical financial performance. Overall, these exchanges were candid and constructive. Most of our engagement has been in person or via telephone, and Chipotle participants varied depending on the topics the shareholders wanted to discuss and included directors and members of our executive leadership team. The Board or members of the appropriate Committee were updated about the discussions and considered any actions to be taken in response. The table below generally summarizes our engagement process.

At our 2020 annual meeting, a shareholder proposal was presented requesting that we report to shareholders regarding the use of contractual provisions requiring our employees to arbitrate employment-related claims, which proposal received the affirmative vote of a majority of the voting power present at the annual meeting. In response to this proposal, we posted on the Investors page of our website at ir.chipotle.com, under Corporate Governance, an “Employment-Related Arbitration Report.” We strive to be responsive to input and feedback of our shareholders and other stakeholders as expressed through our active engagement and annual meeting processes.

We recognize that transactions in which our executive officers, directors or principal shareholders, or family members or other associates of our executive officers, directors or principal shareholders, have an interest may raise questions as to whether those transactions are consistent with the best interests of Chipotle and our shareholders. Accordingly, our Board has adopted written policies and procedures requiring the Audit & Risk Committee to approve in advance, with limited exceptions, any transactions in which any person or entity in the categories named above has any material interest, whether direct or indirect, unless the value of all such transactions in which a related party has an interest during a year total less than $10,000. We refer to such transactions as “related person transactions.” Current related person transactions to which we are a party are described on page 71.

A related person transaction will only be approved by the Audit & Risk Committee if the Committee determines that the related person transaction is beneficial to us and the terms of the related person transaction are fair to us. No member of the Audit & Risk Committee may participate in the review, consideration or approval of any related person transaction with respect to which such member or any of his or her immediate family members is the related person.

While our executive officers and various other members of management are responsible for the day-to-day management of risk, the Board of Directors and its standing Committees exercise an oversight role with respect to risk issues facing our company. The responsibility for overseeing risks related to the following topical areas has been allocated to the Board and its Committees as follows:

Our Board receives regular reports on the most significant risks facing our business and are promptly informed regarding developments in our risk profile. For example, our Board receives quarterly reports from our food safety and quality assurance teams, which establish and monitor our quality and food safety programs and work closely with suppliers to ensure our high standards are met throughout the supply chain. Our Board also has access to our Food Safety Advisory Council, which is an advisory board of independent, highly respected experts in the food industry that meets quarterly to discuss and review our company-wide food safety program and any food safety related issues.

In addition, our Audit & Risk Committee receives quarterly reports on our information security and cyber fraud prevention programs. Similar to most organizations, we are susceptible to information security breaches and cybersecurity-related incidents, and we are committed to protecting and consistently enhancing the security of our systems, networks and general technology environment. We have established a Cybersecurity Program, which includes appropriate security risk assessments, security monitoring, incident response, policies, operating standards, global regulatory compliance and employee training. We continually invest in enhancing our preventive and defensive capabilities in alignment with globally recognized information security standards, maintaining appropriate information security risk insurance policies, and implementing other measures to mitigate or minimize the impacts from potential threats.

Our current Board leadership structure consists of a combined Chairman of the Board and Chief Executive Officer, an independent director serving as Lead Independent Director, Board committees led by independent directors, executive sessions of the directors at each regular Board meeting and active engagement by all directors. We believe that having independent directors hold key leadership roles provides appropriate safeguards to the combined Chairman and Chief Executive Officer role and facilitates the oversight of risk by combining independent leadership with an experienced Chairman who has intimate knowledge of our business, industry and challenges. The experience and operating expertise that our Chairman and Chief Executive Officer brings to the Board, combined with the independent leadership of our Lead Independent Director, allow the Board to promptly identify and raise key risks, hold special meetings of the Board when necessary to address critical issues, and focus management’s attention on areas of concern. Additionally, the Board’s independent committees, or the independent directors as a whole, can objectively assess the risks identified by the Board or by management, as well as management’s effectiveness in managing such risks.

The health and well-being of our employees and guests has always been and continues to be our top priority. Over the past few years we made significant investments to strengthen our food safety practices, which investments benefitted us during the unprecedented COVID-19 pandemic. These investments include installing advanced air filtration systems, sanitizers in our restaurants, employee wellness protocols and improved handwashing requirements. In addition, we implemented the COVID-19 recommendations of the CDC and local health departments, including social distancing, wearing face masks and tamper evident packaging seals for all digital orders, and we created a new steward role to sanitize high-traffic areas. Collectively, these efforts give our employees and guests confidence that Chipotle is committed to keeping them safe at all times. To ensure the health and well-being of all of our employees, we also provided the following incremental COVID-19 benefits:

Due to these incremental actions and investments we made over the past few years to strengthen our food safety practices, we only were required to close a small number of restaurants and furlough less than 2% of our employees due to the COVID-19 pandemic.

Chipotle’s sustainability efforts are in focused in three key areas: Food & Animals, People and the Environment. In each of these three areas, we have goals that we publish in our Sustainability Reports. Below is a summary of some of our 2020 initiatives in each of these areas.

Food & Animals are at the core of our business and, therefore, our sustainability efforts. We believe that the way food is grown and raised matters, and we focused significant efforts and progress around this important area in 2020. Below are a few examples of our initiatives:

In October 2020, we launched a feature to showcase how simple decisions like what ingredients go into your meal can affect the world. Our “Real Foodprint” tracker allows guests to view the cumulative potential impact of their Chipotle orders, as compared to orders using conventional ingredients, against five key metrics including: Less Carbon in the Atmosphere, Gallons of Water Saved, Improved Soil Health, Organic Land Supported, and Antibiotics Avoided. Chipotle is the first brand to provide detailed impact data about its ingredients for guests, holding the brand accountable for cultivating a better world.

A unique and impactful part of our sustainability strategy is to continue to source both organic and local ingredients. In 2020, 11% of all of our produce was locally sourced, which equates to 31 million pounds from 54 unique local farmers. In 2020, we purchased 28.1 million pounds of organic and transitional ingredients, including 7.4 million pounds of black beans, 4.7 million pounds of cilantro, 4.2 million pounds of tofu and 3.4 million pounds of avocado. Organic growing practices help the health of the soil by creating a thriving ecosystem from natural, not synthetic, fertilizers which can harm the soil. 100% of the soybeans for tofu that we use in our Sofritas are grown organically.

We are also committed to supporting farmers. Since 2019, Chipotle has pledged to help reinvigorate the fading farming industry for future generations. Some of our programs include:

Chipotle strives to be at the forefront of positively impacting the communities where we live and work. This year we added a Round Up For Real Change feature on our mobile app and chipotle.com that allows customers to round up their bill to the next highest dollar amount, with the extra amount contributed to various organizations whose missions are aligned with Cultivating a Better World. In 2020, nearly $4.0 million was donated through this feature.

Diversity and inclusion are core to our ethos as a company. In support of our ongoing commitment to building equity and addressing racial injustice, we enabled positive change externally and internally. We pledged $1.0 million in support of organizations advocating against systemic racism in our society, of which $500,000 was awarded to the National Urban League and $250,000 was directed through Community Outreach Grants to 232 local, non-profit organizations that were nominated by our General Managers. We also expanded our listening sessions with employees and supported the formation of a new employee resource group, UNIFIED (United Network of Influencers Furthering Inclusion and Ethnic Diversity) to learn how we can further evolve as a company and provide equal access to opportunities to all our employees. We are committed to continuing to expand our diversity, equity, and inclusion efforts for both our employees and our communities.

Environmental sustainability is a key driving force in our mission to Cultivate a Better World. We acknowledge climate change and the risk it poses to our business, and we acknowledge the need for all businesses, including our own, to take responsibility and action towards reducing their carbon impact. We are committed to addressing our contribution to climate change in ways that are consistent with the recommendations of the global climate science community. This includes an intention to set emissions reduction targets for our full carbon footprint, and adopt new initiatives, as well as continue existing initiatives to reduce the carbon intensity of our supply chain. In an effort to increasingly mitigate our climate impact, we have committed to set company-wide emissions targets in line with climate science. Additionally, the Energy Management System that we have installed at over 97% of our locations has avoided over 53,000 metric tons of CO2e emissions since the launch of the system.

Beyond energy efficiency and emissions, we are committed to managing our products’ end of life. We are working diligently to divert our restaurants’ waste away from landfill. In 2020, we achieved our 50% diversion goal - meaning half of our restaurants’ waste was diverted away from the landfill via recycling, compost waste to energy and other innovative solutions.

One of our core values is to “foster a culture that values and champions our diversity, while leveraging the individual talents of all team members to grow our business and cultivate a better world.” In 2020, we retained an independent DE&I consulting firm to assess our company to understand our current state and areas for continued focus. The assessment revealed that our “culture is a strategic differentiator and enabler… that sets Chipotle apart from competitors” and that “the fundamental underpinning of the culture is the organization’s values, all of which guide the organization’s strategic priorities and delivery of the mission.” We are proud of our culture, which champions diversity, ensures equity, and celebrates inclusion. As of December 31, 2020, more than 50% of our U.S.-based employee population is female and approximately 66% of our U.S based employee population is comprised of racial and ethnic minorities.

We are committed to ensuring pay equity for all employees. In 2020, we retained a third-party consulting firm to conduct an independent pay equity analysis of our U.S. workforce to identify risks and unexplained base pay gaps in our organization by gender and race/ethnicity. The consultant ran statistical models for distinct segments of our workforce to determine the factors of pay (e.g., grade level, tenure in role, most recent promotion) and external market conditions, such as geographic location, and to normalize pay based on these factors. The results of this analysis did not identify preferential treatment to any class of employee, which supports our commitment to ensuring we pay our employees equally across gender and race/ethnicity.

We prohibit our directors, executive officers and certain employees who have access to material, nonpublic information about our business, from hedging any shares of Chipotle stock, holding shares of Chipotle stock in a margin account or otherwise pledging shares of Chipotle stock as collateral for loans, and engaging in put options, call options, covered call options or other derivative securities in Chipotle common stock on an exchange or in any other organized market.

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 next shareholder vote on the frequency of say on pay votes in 2023.

Detailed discussion and analysis of our executive compensation begins on page 41. See, in particular, the disclosures under “Executive Officers and Compensation – Compensation Discussion and Analysis – 2020 Advisory “Say on Pay” Vote on Executive Compensation and Shareholder Outreach” for a concise description of shareholder outreach in which we’ve engaged in regards to the compensation of our executive officers, compensation decisions the Compensation Committee made for 2020, and measures we’ve taken to ensure that executive compensation is aligned with company performance and the creation of shareholder value.

The Compensation Committee of our Board of Directors believes that our executive compensation programs continue to emphasize performance-oriented components that encourage and reward strong operating and financial performance and stock price gains, and that have aligned the interests of our officer team with those of shareholders. Accordingly, our Board asks that you vote in favor of the following shareholder resolution:

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.

The Audit & Risk Committee, which is responsible for the appointment, compensation and oversight of our independent registered public accountants, has engaged Ernst & Young LLP as independent registered public accountants to audit our consolidated financial statements for the year ending December 31, 2021 and to perform other permissible, pre-approved services. As a matter of good corporate governance, we are requesting that shareholders ratify the Committee’s appointment of Ernst & Young as independent registered public accountants. If shareholders do not ratify the appointment of Ernst & Young, the Committee will reevaluate the appointment. Even if the selection is ratified, the Committee in its discretion may select a different independent registered public accounting firm at any time during fiscal 2021 if it determines that such a change would be in the best interests of Chipotle and our shareholders.

The Audit & Risk Committee annually evaluates the performance of our independent registered public accounting firm, including the senior audit engagement team, and determines whether to reengage the current independent registered public accountants or consider other audit firms. Factors considered by the Committee in deciding whether to retain include:

Based on this evaluation, the Audit & Risk Committee and the Board believe that retaining Ernst & Young to serve as our independent registered public accounting firm for the fiscal year ending December 31, 2021, is in the best interests of Chipotle and our shareholders.

The Audit & Risk Committee also oversees the process for, and ultimately approves, the selection of our independent registered public accounting firm’s lead engagement partner at the five-year mandatory rotation period. Prior to the mandatory rotation period, at the Committee’s instruction, Ernst & Young will select candidates to be considered for the lead engagement partner role, who are then interviewed by members of our management. After considering the candidates recommended by Ernst & Young, management makes a recommendation to the Committee regarding the new lead engagement partner. After discussing the qualifications of the proposed lead engagement partner with the current lead engagement partner, the members of the Committee, individually and/or as a group, will interview the leading candidate, and the Committee then considers the appointment and approves the selection as a Committee. A new lead engagement partner was appointed for the 2020 audit and the next change in lead engagement partner after the current five-year rotation period is expected to occur for the 2024 audit.

The Audit & Risk Committee has adopted a policy which sets out procedures that the company must follow when retaining the independent registered public accountants to perform audit, review and attest engagements and any engagements for permitted non-audit services. This policy is summarized below under “– Policy for Pre-Approval of Audit and Permitted Non-Audit Services” and will be reviewed by the Committee periodically, but no less frequently than annually, for purposes of assuring continuing compliance with applicable law. All services performed by Ernst & Young for the years ended December 31, 2020 and 2019 were pre-approved by the Audit & Risk Committee in accordance with this policy, following a determination by the Committee that the fees to be paid to Ernst & Young in each year, including in connection with non-audit services, were appropriate, necessary and cost-efficient in the management of our business, and did not present a risk of compromising the independence of Ernst & Young as our independent registered public accountants. Ernst & Young has served as our independent registered public accountants since 1997. Representatives of Ernst & Young are expected to attend the virtual annual meeting and will have an opportunity to make a statement if they desire to do so, and to be available to respond to appropriate questions.

The aggregate fees and related reimbursable expenses for professional services provided by Ernst & Young for the years ended December 31, 2020 and 2019 were:

With regard to the fiscal year ended December 31, 2020, the Audit & Risk Committee (i) reviewed and discussed with management our audited consolidated financial statements as of December 31, 2020 and for the year then ended; (ii) discussed with Ernst & Young LLP, the independent registered public accountants, the matters required by Auditing Standards 1301, Communication with Audit & Risk Committees and matters required by applicable requirements of the PCAOB and SEC; (iii) received the written disclosures and the letter from Ernst & Young LLP required by applicable requirements of the PCAOB regarding Ernst & Young LLP’s communications with the Audit & Risk Committee regarding independence; and (iv) discussed with Ernst & Young LLP their independence.

Based on the review and discussions described above, the Audit & Risk Committee recommended to our Board of Directors that our audited consolidated financial statements be included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 for filing with the SEC.

The Board of Directors has adopted a policy for the pre-approval of all audit and permitted non-audit services proposed to be provided to Chipotle by its independent registered public accountants. This policy requires the Audit & Risk Committee to pre-approve all audit, review and attest engagements, either on a case-by-case basis or on a class basis if the relevant services are predictable and recurring. Any internal control-related service may not be approved on a class basis, but must be individually pre-approved by the Committee. The policy prohibits the provision of any services that the auditor is prohibited from providing under applicable law or the standards of the PCAOB.

Pre-approvals on a class basis for specified predictable and recurring services are granted annually at or about the start of each fiscal year. In considering all pre-approvals, the Committee may consider whether the level of non-audit services, even if permissible under applicable law, is appropriate in light of the independence of the auditor. The Committee reviews the scope of services to be provided within each class of services and imposes fee limitations and budgetary guidelines in appropriate cases. The Committee may pre-approve a class of services for the entire fiscal year. Pre-approval on an individual service basis may be given or effective only up to six months prior to commencement of the services.

The Committee periodically reviews a schedule of fees paid and payable to the independent registered public accountants by type of covered service being performed or expected to be provided. Our Chief Financial Officer is also required to report to the Committee any non-compliance with this policy of which he becomes aware. The Committee may delegate pre-approval authority for individual services or a class of services to any one of its members, provided that delegation is not allowed in the case of a class of services where the aggregate estimated fees for all future and current periods would exceed $500,000. Any class of services projected to exceed this limit or individual service that would cause the limit to be exceeded must be pre-approved by the full Committee. The individual member of the Committee to whom pre-approval authorization is delegated reports the grant of any pre-approval by the individual member at the next scheduled meeting of the Committee.

A shareholder has submitted the following proposal, which will be voted on at our annual meeting if properly presented by the shareholder proponent or by a qualified representative on behalf of the shareholder proponent. In accordance with SEC rules, we are reprinting the proposal and supporting statement in this proxy statement as it was submitted to us. We do not believe that certain assertions in these shareholder proposals about Chipotle are correct, but we have not attempted to refute all of these inaccuracies. Our Board of Directors has recommended a vote AGAINST this proposal for the reasons set forth following the proposal.

James McRitchie has notified us that he beneficially owns 10 shares of our common stock and that he intends to submit the following proposal at the annual meeting. We will provide his address promptly upon a shareholder’s oral or written request. We are not responsible for the accuracy or content of the proposal, which is presented as received from the proponent in accordance with SEC rules. As explained below, our board unanimously recommends that you vote “AGAINST” this shareholder proposal.

Shareholders of Chipotle Mexican Grill Inc (CMG) request that our board of directors take such steps as may be necessary to permit written consent by shareholders entitled to cast the minimum number of votes that would be necessary to authorize the action at a meeting at which all shareholders entitled to vote thereon are present and voting. This includes shareholder ability to initiate any appropriate topic for written consent.

This proposal topic won 95%-support at a Dover Corporation shareholder meeting and 88%- support at an AT&T shareholder meeting. And that was before the shareholder ability to call a special in-person shareholder meeting was essentially eliminated by the 2020 pandemic.

This proposal topic won 41.5% support at our 2020 annual meeting, despite the pandemic. The 2020 proposal did not point out that our management ignored the fact that written consent can be structured so that all shareholders get notice of a proposed action. Plus, in 2020 CMG management also ignored the fact that winning written consent would require 60%-approval of shares voted at a typical CMG annual meeting, since many shareholders do not vote.

With the near universal use of online annual shareholder meetings, which can last only 10-minutes, the shareholder right to call a special meeting has been severely reduced in value. Shareholders can be restricted in making their views known at online shareholder meetings because constructive questions and comments can be easily screened out by the incumbent management and board.

For example, the 2020 Goodyear shareholder meeting was spoiled for shareholders by a trigger-happy management mute button. (Goodyear's virtual meeting creates issues with shareholder, https://www.crainscleveland.com/manufacturing/

The Bank of New York Mellon Corporation (BK) said it adopted written consent in 2019 after 45%- support for a written consent shareholder proposal. This compares to the 41.5% CMG vote in 2020. BK’s action was taken a year before the pandemic put an end to the vast majority of in- person shareholder meetings – perhaps forever.

Now more than ever shareholders need to have the option to take action outside of a shareholder meeting and send a wake-up call to management, if need be, since tightly controlled online shareholder meetings have the potential to dramatically reduce shareholder engagement and management transparency.

The Board of Directors recommends a vote AGAINST this proposal because it believes matters that are important enough to require shareholder approval should be communicated in advance and that all shareholders should have the opportunity to consider and vote on them.

The Board believes that action presented for a vote at an annual or special meeting advances the interests of shareholders more than action by written consent because meetings offer important protections and advantages that are absent from the written consent process, including:

Adoption of the proposal would make it possible for shareholders owning slightly over 50% of our outstanding common stock to take significant corporate action without any prior notice to the Board or other shareholders, and without giving all shareholders an opportunity to consider, discuss and vote on the actions – actions that may have important ramifications for both the company and its shareholders. Even if shareholders get notice of a proposed action by shareholders, notice is not the same as being engaged in the discussion and being able to hear all sides of an issue. A written consent could effectively disenfranchise any shareholders who do not have, or are not given, the opportunity to participate in the written consent process. We believe that shareholders should have an opportunity for fair discussion and to exchange views with the Board before shareholder action is taken.

We also believe shareholders already have effective avenues to voice their concerns and opinions, which makes this proposal unnecessary:

In addition, our strong corporate governance practices enhance Board accountability and protect the rights of shareholders, including:

In summary, our Board believes that the implementation of this proposal is not in the best interests of shareholders nor of the company and is unnecessary, given the ability of shareholders to call special meetings and the company’s strong corporate governance practices and policies. In addition, if adopted this proposal would circumvent the protections, procedural safeguards and advantages provided to all shareholders by shareholder meetings.

In addition to Brian Niccol, our Chief Executive Officer, whose biography is included in Proposal 1 under the heading “Information Regarding the Board of Directors,” our executive officers as of April 5, 2021, are as follows:

Chipotle embarked on a major business turnaround at the start of 2018, following the appointment of Brian Niccol as CEO, who revamped the company’s strategy and addressed food-safety issues with a largely new leadership team. The results have been overwhelmingly successful.

Over the three-year period from 2018 through 2020, Chipotle’s market-capitalization value grew by over $30.6 billion, representing an increase of approximately 475%. Compared to the S&P 500, the company’s three-year relative total shareholder return was at the 99th percentile. More impressively, roughly half of the increased market-capitalization value is attributable to 2020 when the common share price increased by 65.7% against severe headwinds caused by the COVID-19 pandemic that required Chipotle to close some restaurants, eliminate in-restaurant dining and offer takeout and delivery only. The effects of the global pandemic also caused some staffing shortages, which forced restaurant closures, limited service options or modified operating hours.

Pay delivery from Chipotle’s 2020 annual incentive plan and 2018-20 performance share unit plan was determined based on financial operating performance measured against aggressive metrics that were set before the impact of COVID-19 was known. In the view of the Compensation Committee of the Board, financial metrics under these plans should be adjusted to reduce the unplanned impact of the pandemic to fairly reward the leadership team’s extraordinary success in developing and executing the turnaround strategy that has benefited employees and restaurant guests as well as shareholders.

Chipotle’s top-of-the market shareholder returns were largely propelled by rapidly expanding digital capabilities that are scalable and sustainable and that positioned us well to adapt to the COVID-19 operating environment. Additionally, the organization ensured that the safety and well-being of employees and guests always remained the top priority, even being recognized as the top restaurant for COVID-19 safety measures in June 2020, according to data by Ipsos’ Consumer Health and Safety Index. Culture was a key driver of the company’s performance, and notable initiatives during the year included:

In the Compensation Discussion and Analysis section that follows, we provide further details about Chipotle’s compensation philosophy and decisions, which the Compensation Committee believes clearly link executive pay delivery to performance, support continued future growth and align the interests of our leaders with our employees, restaurant guests and shareholders. Our say on pay proposal is Proposal 2, and our Board strongly recommends that you vote “FOR” this proposal. We hope you will support this recommendation.

This Compensation Discussion and Analysis (CD&A) describes the objectives and principles underlying our executive compensation program, outlines the material elements of the compensation of our Chief Executive Officer (CEO), Chief Financial Officer (CFO) and our three other most highly compensated executive officers for the year ended December 31, 2020 (the “named executive officers” or “NEOs”), and explains the Compensation Committee’s determinations as to the compensation of our NEOs for 2020. In addition, this CD&A is intended to put into perspective the tables and related narratives regarding the compensation of our NEOs that appear after the narrative section.

Our current leadership team was largely installed in early 2018 and has since achieved monumental turnaround performance, with market cap growing from $8.2 billion at the start of 2018 to $38.8 billion at the end of 2020 (+$30.6 billion). For perspective, this represents a total shareholder return (TSR) of +380%, which is at the 99^th percentile of S&P 500 companies for the period.

These exceptional results were delivered despite the challenges created by the COVID-19 pandemic that began in early 2020, which created operational headwinds including the government-mandated closure of many of our in-store dining rooms for extended portions of the year. Our leadership team responded to these challenges by accelerating digital-transformation efforts that supported continued profitable growth and scaling our restaurant footprint across the U.S. Cost-savings initiatives allowed us to maintain a strong liquidity position without significant employee layoffs and furloughs. We kept the health and well-being of our employees and guests our top priority and provided additional COVID-19 employees benefits, including expanded paid emergency leave for employees directly affected by COVID-19, 30-day personal leave with automatic approval for any COVID-19 related reason, extended access to telemedicine coverage to employees and their families, expanded Employee Assistance Program coverage and Concierge Service for employees and their families, and hourly assistance pay and discretionary bonuses for our restaurant employees.

Our performance-based annual and long-term incentive compensation plans were designed with high upside leverage and corresponding downside performance risk to drive our aggressive turnaround strategy. Financial goals for performance periods ending in 2020 were approved before the onset of the pandemic and set at levels designed to drive the types of returns ultimately delivered to our shareholders. COVID-19 negatively impacted the achievement of the financial metrics that determine executive pay delivery under the plans. This included the effect of government restrictions imposed as a result of the pandemic, where we were required to completely close some of our restaurants, close many of our dining rooms and offer only takeout and delivery, and/or implement modified work hours. Staffing shortages caused by COVID-19 also forced us to close additional

The Compensation Committee also considered that actions taken by the leadership team since 2018, including successfully executing a digital transformation strategy, strengthening food safety and quality and building brand loyalty, transformed Chipotle’s business and enabled it to succeed during the unprecedented COVID-19 pandemic compared to its peers, as evidenced by the chart below:

After engaging with five of our top shareholders with combined ownership of approximately 34.2% of our common stock to understand how to help ensure fair alignment for our leadership team, the Compensation Committee approved the following modifications to the 2020 annual incentive plan and 2018-20 long-term performance share units (“PSUs”):

To support shareholder alignment and retention the Compensation Committee also imposed additional vesting requirements on the incremental shares earned as a result of the modifications, which shares will vest over two years subject to the executive officer’s continued employment with Chipotle. The Committee did not modify any other outstanding incentive awards (2019-21 PSUs or 2020-22 PSUs).

Every year we provide our shareholders with the opportunity to cast an advisory vote to approve the compensation of our NEOs. At our 2020 annual meeting of shareholders, 95.3% of the votes cast in the “say on pay” advisory vote were “FOR” approval of our NEO compensation program. We believe this high favorable vote demonstrates widespread confidence that our executive pay program meaningfully links the compensation of our executives to the delivery of strong performance results and promotes the creation of shareholder value. The Compensation Committee evaluated the results of the 2020 advisory vote, together with the other factors and data discussed in this CD&A, in evaluating and approving our executive compensation policies and decisions. Based on the results of the 2020 “say on pay” advisory vote, shareholder feedback and input from our independent compensation consultant, the Compensation Committee determined that our executive compensation program is aligned with our compensation philosophy and company strategy and decided not to make any material changes to the structure or principles of the ongoing pay programs in response to such vote.

We value the opinions of our shareholders and regularly solicit their feedback as part of our outreach efforts. The feedback we received from shareholders in 2020 regarding our executive compensation program generally was positive. Before we filed our proxy statement in early 2020, we reached out to shareholders holding over 51% of our outstanding common stock and shareholders holding over 20% of our common stock accepted our invitation to engage. After we filed our proxy statement, we again reached out and had conversations with shareholders holding almost 50% of our outstanding common stock. These discussions provided an important opportunity to develop relationships with our investors over the long-term and to engage in open dialogue on various topics including the shareholder proposals in our proxy statement, our executive compensation program and corporate governance and ESG matters. See “Corporate Governance – Shareholder Engagement” for more details about our outreach efforts.

In late 2020, it became clear that despite the successful acceleration of Chipotle’s digital transformation efforts and resulting shareholder value creation, COVID-related impacts would significantly reduce the funding of in-cycle incentives, where goals had been set well in advance of the pandemic and no related adjustments had been contemplated or written into the program terms. The Compensation Committee engaged with five of our top shareholders holding over 34.2% of our outstanding stock to understand their perspective on potential approaches to modifying certain impacted incentive awards. Input provided in these meetings influenced the Committee’s determination with regards to 2020 bonus plan funding and the methodology employed in modifying the 2018-20 PSUs. See “Earnout of Prior Years LTI Awards—2018-20 PSU Awards” for more details about the payout of the 2018-20 PSUs.

The Compensation Committee will continue to solicit shareholder feedback and consider input from our independent compensation consultant and the outcomes of future say on pay votes when assessing our executive compensation program and policies and making compensation decisions regarding our executive officers.

We strive to provide our executive officers with meaningful rewards while maintaining alignment with shareholder interests, corporate values, and important management initiatives. In setting and overseeing the compensation of our executive officers, the Compensation Committee believes our programs and policies should achieve the following specific objectives:

Consistent with our performance-driven compensation philosophy, the Committee allocates a significant portion of our executive officers’ total compensation to variable, at-risk pay elements (performance-based AIP and LTI awards), as illustrated below. As an employee’s responsibilities and ability to affect our financial results increases, base salary becomes a smaller component of his or her total compensation.

With respect to the CEO, at the beginning of each year the Committee reviews and approves the overall corporate objectives that apply to the AIP and LTI, and reviews and approves the CEO’s individual performance goals. After the end of the year, the Committee evaluates the CEO’s performance against those goals and makes determinations regarding the CEO’s compensation level based on its evaluation. The Committee also certifies the extent of the company’s achievement of the overall corporate objectives.

As part of its review of executive compensation, the CEO and Committee review historical pay for each executive officer (including the CEO), as well as their accumulated equity, which are used as a reference point to assist the Committee in understanding the overall compensation opportunity and realized pay provided to each executive officer.

The Compensation Committee believes the investment community generally assesses our performance by reference to a peer group composed primarily of other companies in the restaurant industry and other high-growth hospitality and digitally enabled, customer-oriented companies. The Committee and management recognize that the talent pool for executives is broader than the

Each year, the Committee’s independent compensation consultant provides the Committee with pay data for executive officer roles and the incentive plan structures of the companies in our peer group, which the Committee considers in setting pay levels for executive officers. This peer group data is only one factor considered by the Committee in setting executive compensation each year.

In setting 2020 pay levels, in addition to peer group data, the Committee also considered our progress of achieving our strategic objectives, current target compensation opportunities, internal equity, the value of outstanding equity awards and the overall design of our executive compensation program. We believe our executive compensation program has consistently demonstrated strong alignment with financial performance largely tied to shareholder value creation.

The peer group used for 2020 was generally comprised of publicly traded companies in the Restaurants industry with annual revenues and 12-month average market cap values greater than 0.25x Chipotle’s size and companies in the Hotel, Resorts & Cruise Line, Leisure Facilities (excluding gaming companies), Internet & Direct Marketing Retail, and Specialty Stores industries as defined by the Global Industry Classification Standard (GICS), with annual revenues and 12-month average market cap values between 0.30x and 3.33x Chipotle’s size and growth characteristics similar to us. For 2020, the Committee determined to remove five companies (Bloomin’ Brands, Inc., Brinker International, Inc., The Cheesecake Factory Incorporated, Hyatt Hotels Corporation and Marriott International, Inc.) due to lack of alignment on market-cap and revenue criteria, and replaced them with Dunkin’ Brands Group, Inc., Expedia Group, Inc., Norwegian Cruise Line Holdings Ltd., Royal Caribbean Group and Vail Resorts, Inc. The peer group includes our direct restaurant peers as well as non-restaurant companies that have some combination of high brand recognition, attractive growth opportunities, strong customer service and technology enabled operations, which align with Chipotle’s continued focus on customer service and operational excellence.

Chipotle’s revenues rank at the 72^nd percentile of this peer group, and our market capitalization ranks at the 79^th percentile of this peer group (as of December 31, 2020), which confirmed for the Committee that this peer group is appropriate in generally reflecting comparable organizational size and related complexity.

We pay a base salary to our executive officers to compensate them for services rendered during the year and to provide them with a fixed level of income. The Committee reviews the executive officers’ base salaries at least annually and makes adjustments as it deems appropriate.

Our CEO makes recommendations to the Committee for base salaries of our executive officers (other than for himself). The Committee reviews and approves the CEO’s base salary and any changes each year. Adjustments to base salaries, if any, typically occur during the first quarter of each year. For 2020, after an extensive review of market data, the following salary increases were made to better align with competitive market levels and our desired compensation philosophy:

The AIP is our annual cash incentive program for certain bonus eligible employees, including our executive officers, which is based on the achievement of a company performance factor (“CPF”) and individual performance factor (“IPF”). For 2020, the Committee refined the AIP by rebalancing performance objectives such that 75% of the target value is based on CPF achievement and 25% is based on IPF achievement. The total bonus is then subject to a food safety modifier that can reduce the bonus as much as -20%. Chipotle is committed to food safety and strong food safety performance is an expectation. Therefore, our executive officers cannot earn a higher bonus for strong food safety performance.

The graphic below illustrates the AIP calculation, including the weighting of the Company Performance Factor (“CPF”) and Individual Performance Factor (“IPF”) and potential food safety negative modification:

Each executive officer’s target opportunity under the AIP is expressed as a percentage of base salary. For 2020, the Compensation Committee approved an increase in the target opportunity for each NEO to better align with competitive market levels and our desired compensation philosophy:

For 2020, the Committee decided to utilize the same CPF metrics and weightings as in 2019, which consist of the following three key financial and operational objectives: 40% comparable restaurant sales (“CRS”), which is the change in sales year-over-year for restaurants open for at least 13 full calendar months at the end of 2020; 40% restaurant cash flow (“RCF”) margin, which is cash flow generated at the restaurant level resulting from restaurant sales minus all costs incurred to run the restaurant; and 20% site assessment requests (“SARs”), which is a measure of our inventory for new restaurants over the next 12 – 18 months. The Compensation Committee continued to utilize these metrics because it believes that achievement of our CRS, RCF and SARs goals contribute to strong shareholder value creation.

Target goals for the three financial objectives that comprise the CPF were approved by the Compensation Committee at the beginning of 2020, before the unprecedented COVID-19 pandemic altered our operations and the overall business environment. Achievement at the target level of each performance metric would yield a CPF of 100%, equating to a payout at the target level. For achievement of the CPF above or below the target level, the payout is adjusted up to a maximum of 275% or down to 0% based on actual performance. Any payout above 200% of the target level will be paid in the form of RSUs that vest in two equal installments on the 2nd and 3rd anniversaries of the grant date. For 2020, the CRS, RCF, and SARs targets all represent increases to 2019 target levels of achievement and were considered appropriately rigorous at the time the goals were set.

In response to the unexpected and unprecedented challenges presented by COVID-19 and the fact that such an extraordinary event was not contemplated when the performance goals were set, the Compensation Committee decided that, in determining performance results for the year, it would be appropriate to exclude (i) from the CRS growth and RCF margin calculations the three months in 2020 most impacted by the pandemic (i.e., March, April and May 2020) when CRS based on food and beverage revenue was below -7.5%, and (ii) certain COVID-related expenses in the calculation of RCF margin (i.e., the net increase in delivery costs) from the remaining months of 2020. This determination was made after seeking input from key shareholders on how to equitably address the impact of the pandemic and was consistently applied to the roughly 970 Chipotle employees participating in the plan. See “COVID-19 Related Modifications to Incentive Compensation” for more details regarding these modifications.

As shown in the chart below, in 2020 Chipotle’s adjusted performance was above target on CRS and SARs, but below target on RCF, resulting in a CPF of 120%. The Compensation Committee believes that the COVID-19 related modifications were appropriate in light of the leadership team’s successful navigation of the pandemic, highlighted by the acceleration of its digital strategy that enabled its continued profitable growth, restoration of confidence in the company’s food safety and quality, strengthening of the Chipotle brand and significant value delivery to shareholders despite unprecedented COVID-related restrictions on restaurants. This strong performance benefited employees throughout the company, as the modifications to the 2020 AIP applied to all participants in the plan, and we paid nearly $40.0 million in discretionary bonuses and assistance pay to our restaurant employees in other bonus plans following a similar methodology. See “Environmental, Social and Governance Matters—Chipotle’s Response to COVID-19.”