Chipotle Mexican Grill (CMG) DEF 14ADefinitive proxy

Only shareholders of record at the close of business on March 21, 2022 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.

This proxy statement contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements contained in this proxy statement other than statements of historical fact, including statements relating to trends in or expected impacts of our initiatives, strategies, and plans, as well as trends in or expectations regarding our financial results and long-term growth model and drivers, and regarding our business strategy and plans and our objectives for future operations, are forward-looking statements. The words ‘”can,” “believe,” “may,” “should,” “will,” “continue,” “anticipate,” “intend,” “expect,” “seek,” and similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and trends. These forward-looking statements are based on currently available operating, financial and competitive information and are subject to various risks and uncertainties that could cause actual results to differ materially from expectations. These risks and uncertainties include, but are not limited to, the risks detailed in our filings with the Securities and Exchange Commission, including the “Risk Factors” section of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties, and assumptions, the future events and trends discussed in this proxy statement may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. The events and circumstances reflected in the forward-looking statements may not be achieved or occur. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results. We expressly disclaim any obligation to update or revise any forward-looking statements after the date of this proxy statement as a result of new information, future events or other developments, except as required by applicable laws and regulations.

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

To attend the virtual annual meeting, you must be a shareholder as of the close of business on the record date of March 21, 2022. Shareholders may attend the virtual annual meeting at www.virtualshareholdermeeting.com/CMG2022. The meeting will only be conducted via webcast; there will be no physical meeting location. 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 the proxy materials. If you would like to attend the virtual meeting and you have your control number, please go to www.virtualshareholdermeeting.com/CMG2022 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/CMG2022. After the formal business 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 as of the close of business on March 21, 2022, 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 21, 2022, there were 28,019,442 shares of common stock outstanding and entitled to vote.

A list of shareholders entitled to vote at the annual meeting will be available to shareholders 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.

The Board of Directors is not aware of any other matters to be presented for action at the meeting.

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 requested 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 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 vote 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 will be available at www.virtualshareholdermeeting.com/CMG2022.

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 “Information About How to Vote” above for more information.

Because the “say on pay” vote (proposal 2) and the shareholder proposals (proposals 6 & 7) 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 matters of the shareholder proposals. Ratification of our appointment of the independent registered public accounting firm 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.

Our bylaws require that any director who does not receive at least a majority of votes cast must submit an irrevocable resignation to the Nominating and Corporate Governance Committee of the Board, and the Committee must make a recommendation to the Board as to whether to accept or reject the resignation or whether other action should be taken. The Board must then act on the resignation, considering the Committee’s recommendation, and publicly disclose (by a press release and filing an appropriate disclosure with the Securities and Exchange Commission, or 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 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 21, 2022 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 corporate 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 $23,500 plus reimbursement of customary expenses.

The following table shows the beneficial ownership of shares of our common stock as of March 21, 2022 (unless otherwise noted) by:

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 28,019,442 outstanding shares of common stock as of March 21, 2022. 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 21, 2022 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. Two of our current directors – Neil Flanzraich and Ali Namvar – will not be standing for re-election at the annual meeting. Mr. Flanzraich has served on the Board since 2007 and, as former Lead Independent Director, has provided invaluable counsel and steady leadership through times of transition and growth for the company. Mr. Namvar has served on the Board since 2016 and has been a vital member of the Board, helping to guide us through a transformational time in Chipotle’s history. We extend our heartfelt appreciation to Messrs. Flanzraich and Namvar for the many contributions each has made to our success. The size of the Board will be reduced from eleven members to nine members immediately prior to the annual meeting. At the annual meeting, shareholders will vote on the nine nominees named below, each of whom is an incumbent member of the Board.

Each of the director nominees was elected at the 2021 annual meeting of shareholders and was nominated for re-election by the Board upon the recommendation of the Nominating and Corporate Governance Committee. Each director nominee has consented to serve if elected; however, if any nominee is unable to serve or will not serve for any reason, the directors may decide to reduce the size of the Board or the persons designated on the accompanying form of proxy will vote for other candidates in accordance with their judgment. We are not aware of any reason the nominees would not be able to serve if elected.

The Board of Directors held four meetings in 2021. Each director 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 2021. The Board requests that each of its members attend our annual shareholder meeting absent extenuating circumstances, and all directors serving on the Board following the date of the 2021 annual meeting attended the meeting.

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. If elected, the terms of all director nominees will 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, 2022, the date of the annual meeting.

The table below summarizes the key experience, qualifications, and attributes of each director nominee and highlights the balanced mix of experience, qualifications, and attributes of the board as a whole. We believe these skills, experiences and attributes are relevant and important to our company’s achievement of its strategic goals and enhancing our economic model to benefit our shareholders. Assuming all director nominees are elected at the annual meeting, the average age of our directors will be 57, and the average tenure will be five years. The summary below is not intended to be an exhaustive list of each director nominee’s skills or contributions to the board. No individual experience, qualification, or attribute is solely dispositive of becoming a member of our board.

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 five directors (including Messrs. Flanzraich and Namvar) have rotated off the Board. Of the directors standing for re-election, six have served on the Board for three years or less and three have served for four years or more. In 2021, the Board appointed a new Lead Independent Director and appointed a new Compensation Committee chair, with two of the three standing Committees of the Board now chaired by female directors. 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 with underrepresented backgrounds 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 diversity of the Board. Our commitment is aligned with the recently enacted California statute that requires us, by the end of 2022, to have at least three directors who are from underrepresented communities, which is defined as “an individual who self-identifies as Black, African American, Hispanic, Latino, Asian, Pacific Islander, Native American, Native Hawaiian, or Alaska Native, or who self-identifies as gay, lesbian, bisexual, or transgender.”

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 2022 the Board determined that none of our directors who served on the Board in 2021 has any relationships, transactions or arrangements that would compromise his or her independence, except Brian Niccol who serves as our CEO. 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 Person Transactions;” and (ii) our agreements with Pershing Square Capital Management, L.P., where Mr. Namvar was an employee until April 1, 2018 and currently serves on the advisory board. Accordingly, the Board concluded that each director who served on the Board during 2021, 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 Corporate Governance.

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 accounting firm 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 accounting firm, which reports directly to the Audit & Risk Committee. The Committee also reviews and approves our annual and quarterly reports filed with the SEC, our earnings press releases, and all transactions with related persons or situations that pose a potential conflict of interest that are required to be disclosed in the Company’s proxy statement or other SEC reports. The Committee regularly holds executive sessions with the audit partner for continued assessment of the performance, effectiveness and independence of the independent registered public accounting firm. The Audit & Risk Committee also retains, determines the compensation of, evaluates and, when appropriate, replaces our independent registered public accounting firm and pre-approves audit and permitted non-audit services provided by our independent registered public accounting firm. 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 accounting firm are

As required by law, the Audit & Risk Committee has established procedures to handle complaints received regarding our accounting, internal controls or auditing matters. It is also required to ensure the confidentiality of employees who have provided information or expressed concern regarding questionable accounting or auditing practices. The Audit & Risk Committee also fulfills the oversight function of the Board with respect to risk management, as described under “Corporate Governance – Role of the Board of Directors in Risk Oversight.” The Committee may retain independent advisors at our expense that it considers necessary for the performance of its duties. The Audit & Risk Committee held 10 meetings in 2021. The members of the Audit & Risk Committee are Messrs. Maw (Chairperson), and Carey and Ms. Winston. Our Board of Directors has determined that all of the Audit & Risk Committee members meet the enhanced independence standards required of audit committee members by regulations of the SEC and are financially literate as defined in the listing standards of the NYSE. The Board has further determined that each of Mr. Maw and Ms. Winston qualifies as an “Audit Committee Financial Expert” as defined in SEC regulations. In 2021 no member of the Audit & Risk Committee served on more than three audit or similar committees of publicly held companies, including Chipotle. A report of the Audit & Risk Committee is found under the heading “Audit & Risk Committee Report” on page 35.

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 avoid 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, oversees the succession planning process relating to executive officer positions; assist the Board with its responsibilities for our compensation and benefits programs generally; and perform 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, if approved at the annual meeting, the 2022 Stock Incentive Plan) and to make awards under the plan, including as described below under “Executive Officers and Compensation – Compensation Discussion and Analysis – 2021 Compensation Program – Fiscal 2021 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 2021 and for the equity compensation awards made to our executive officers in February 2021. All of the fees paid to FW Cook during 2021 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 six meetings in 2021. Additionally, members of the Committee held a number of discussions with shareholders regarding our 2021 executive compensation program 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 71.

The members of the Compensation Committee are Ms. Fili-Krushel (Chairperson) and Messrs. Engles, Flanzraich and Gutierrez. 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

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; recommending to the Board appropriate guidelines and criteria to determine the qualifications to serve and continue to serve as a director; overseeing our policies and programs relating to environmental, sustainability and social responsibility and the effectiveness of those policies and programs; and overseeing our Government Affairs initiatives and policies. 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 appointed 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 shareholder proposals, including director candidates nominated by our shareholders, if such proposals are within the time limits and meet other requirements established by our bylaws and makes recommendations to the Board regarding those proposals. The Committee oversees the annual evaluation of the performance of the Board and its committees, the effectiveness of our policies and programs relating to environmental, sustainability and social responsibility policies, goals and programs and our Government Affairs initiatives and policies.

The Nominating and Corporate Governance Committee held four meetings in 2021. The members of the Committee are Ms. Hickenlooper (Chairperson) and Messrs. Baldocchi 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. In May 2021, the Board approved the following changes to our non-employee director compensation program: (i) increased the annual cash retainer for each Committee Chair to better align with market practice, (ii) increased the annual cash retainer for Compensation Committee members to align the compensation of the Audit & Risk and Compensation Committees, (iii) provided an additional $2,000 retainer to each Committee member (including the Chair) of any Committee that held more than eight (8) formal meetings in the year, and (iv) changed the terms of the RSUs granted to the directors each year so that the RSUs vest 100% on the grant date. To be a “formal” meeting, the meeting must have been scheduled in advance, follow a defined agenda circulated in advance, be attended by a quorum of the Committee members and be documented with minutes. Directors who are employees of Chipotle do not receive compensation for their services as directors. Accordingly, Mr. Niccol did not receive additional compensation for service on the Board in 2021. We also reimburse directors for expenses incurred in connection with their service as directors, including travel expenses for meetings. The table below describes the compensation program for our non-employee directors, as amended in May 2021.

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 Corporate Governance.

If we make any substantive amendment to, or grant a waiver from, a provision of 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 Corporate Governance.

Our current Board leadership structure consists of a combined Chairman of the Board and Chief Executive Officer, a position held by Brian Niccol; 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 oversight 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 Mr. Niccol brings to the Board as Chairman and Chief Executive Officer, 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.

At this time in our company’s growth, we believe it is appropriate 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. 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) believe that a different leadership structure would be better based on the challenges and needs of the business, we would change the structure.

Scott Maw was appointed Lead Independent Director in May 2021. 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 and Committee performance self-evaluation process; and (8) with the Chair of the Compensation Committee, leading the annual performance evaluation of the Chief Executive Officer. See our Corporate Governance Guidelines, posted on the Investors page of our corporate website at ir.chipotle.com under Corporate Governance for the full description of the role of Lead Independent Director.

In consultation with the Lead Independent Director, the Chair 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, 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 2021. The Lead Independent Director chaired the non-employee executive sessions of the Board held during 2021. The Board expects to continue to conduct executive sessions of the independent directors at each regularly scheduled Board meeting during 2022, 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 nine nominees for election as a director at this year’s annual meeting are incumbent members of the Board. 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 Nominating and Corporate Governance 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. The Board believes that diverse membership is an important attribute of a well-functioning Board, as described under “Election of Directors – Board Refreshment and Diversity.”

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 “Shareholder Proposals and Nominations for 2023 Annual Meeting – Bylaw Requirements for Shareholder Submission of Nominations and Proposals” on page 83. 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 “Shareholder Proposals and Nominations for 2023 Annual Meeting – Inclusion of Director Nominations in Our Proxy Statement and Proxy Card under Our Proxy Access Bylaws” on page 82.

The Nominating and Corporate Governance Committee initially evaluates candidates in view of the qualifications and factors identified above under “– Candidate Qualifications and Considerations” and “Election of Directors – Board Refreshment and Diversity,” and 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 Committee self-evaluations and the current size and composition of the Board, including expected retirements and other 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).

We engage with our shareholders in a variety of ways throughout the year, with the participants and topics dependent on the stakeholders engaged. The table below generally summarizes our engagement process. Our Investor Relations team regularly meets, often with our Chairman and CEO or Chief Financial Officer, with investors, prospective investors, and investment analysts. Members of management and, upon request, members of our Board also regularly engage with our shareholders to provide updates and solicit their views and input on ESG, corporate governance and other topics of interest to them, such as our sustainability initiatives, human capital management and executive compensation program. We regularly share the feedback and input we receive from shareholders with our Board and the applicable Committees, which take them into account as we review and update our governance, compensation and ESG practices and policies.

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 and 2021 we reached out to shareholders holding a significant percentage of our outstanding common stock both before we filed our 2021 proxy statement, specifically to solicit input on COVID-19-related modifications our Compensation Committee was considering, and again after we filed our 2021 proxy statement, to discuss the disclosures in our proxy statement. In the fall of 2021, we contacted shareholders collectively holding almost 70% of our outstanding common stock as part of our regular proxy off-season engagement and to discuss the vote results from the 2021 annual meeting. Although many shareholders did not respond to our engagement request or declined to engage, we were able to engage with shareholders representing 49% of our outstanding common stock. See below under “2021 Advisory “Say on Pay” Vote on Executive Compensation and Shareholder Outreach” for a summary of those discussions.

We also reached out to all of the shareholders that submitted proposals for consideration at the 2022 annual meeting to discuss their proposals and our existing policies and practices. As a result of those discussions and the company’s response, a majority of the shareholder proponents withdrew their proposals.

Every year we provide our shareholders with the opportunity to cast an advisory vote to approve the compensation of our executive officers. At our 2021 annual meeting of shareholders, we received approximately 51.3% support for our “say on pay” advisory vote proposal, which was lower than our desired level of support. The Compensation Committee has taken the outcome of this vote seriously and we conducted broad shareholder outreach after the 2021 annual meeting to solicit and understand our shareholders’ feedback regarding Chipotle’s executive compensation program.

See “Executive Officers and Compensation – Compensation Discussion and Analysis – 2021 Advisory “Say on Pay” Vote on Executive Compensation and Shareholder Outreach” for more information on the feedback we received from our shareholders and the Board’s response.

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. At our 2021 annual meeting, a shareholder proposal was presented requesting that our Board of Directors permit shareholders to take action by written consent, including shareholder ability to initiate any appropriate topic for written consent. The proposal did not receive the affirmative vote of a majority of the voting power present at the annual meeting. After consideration of the proposal and the vote results at the 2021 annual meeting, the Board decided to not implement the proposal.

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 person has an interest during a year total less than $120,000. We refer to such transactions as “related person transactions.” Current related person transactions to which we are a party are described on page 81.

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 oversee the significant risks 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 directors receive 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. Our Board also receives detailed diversity data each quarter, which shows the status of our progress towards achieving our goals, and the Nominating and Corporate Governance

Committee biannually receives a report on the Company’s policies and programs relating to environmental, sustainability and social responsibility.

In addition, our Audit & Risk Committee receives quarterly reports on our information security and cyber fraud prevention programs from our Chief Information Security Officer and Chief Technology Officer. 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. Additionally, independent external audits are conducted, including penetration testing and overall review of program maturity based on the NIST Cybersecurity Framework.

Chipotle’s sustainability efforts are focused in three key areas: Food & Animals, People and the Environment. Goals are published in each of these three areas in our Sustainability Report on our website chipotle.com/about-us/sustainability. Chipotle introduced an Environmental, Social and Governance (“ESG”) metric in 2021 that tied a portion of the annual incentive plan bonus for executive officers to achieving predetermined ESG performance goals. The 2021 goals, categorized by the above three key areas, were achieved, and in February of 2022, we announced our targets for the new year to continue holding our executive leadership team responsible to make business decisions that Cultivate a Better World. The Nominating and Corporate Governance Committee is responsible for overseeing Chipotle’s policies and programs relating to environmental, sustainability and social responsibility and the effectiveness of those policies and programs. We report on our sustainability initiatives and progress toward achieving our sustainability goals at least twice a year to the Nominating and Corporate Governance Committee.

We currently follow the disclosure framework set by The Global Reporting Initiative (GRI), and we are evaluating aligning our disclosure to the Task Force on Climate-related Financial Disclosures (TCFD) framework in the future.

Food & Animals are at the core of our business and, therefore, are at the center of our sustainability efforts. We believe that how we grow our food is how we grow our future, and we focus significant efforts and progress around this important area. Below are a few examples of our 2021 initiatives.

A unique and impactful part of our sustainability strategy is to continue to source both organic and local ingredients. In 2021, Chipotle purchased 76.5 million pounds of local, organic and transitional ingredients, which is a 17.8% increase from the year prior. 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:

In an effort to drive positive change for underserved communities, we leveraged our Round Up for Real Change feature, which allows guests to round up their bill to the next highest dollar amount in the Chipotle app and on chipotle.com. In 2021, over $6.16 million was donated through this feature to organization like Kids in Need, Folds of Honor, The Trevor Project, Asian American & Pacific Islander Engagement Fund, American Red Cross and Project 10X: LISC’s Initiative for Racial Equity, among others.

In support of our ongoing commitment to diversity, equity and inclusion, we hosted ongoing activities to support our teams through our UNIFIED, PRIDE, Hustle, and Chipotle Serves employee resource groups as well as through our culture committee. We also implemented a program to accelerate the development of our diverse field organization and support center employees for promotion to above restaurant and next level roles. Chipotle also increased our average hourly wage to $15, introduced a new wellness platform called Strive that will cultivate a holistic, proactive, and inclusive approach to improving mental health among employees and diversified our debt-free degrees program to include additional majors including culinary, hospitality and agricultural degrees.

As a company with 3,000 restaurants and approximately 100,000 employees, we have a responsibility to drive meaningful change. Environmental sustainability is a key driving force in our mission to Cultivate a Better World and we acknowledge the need for all businesses, including our own, to take responsibility and action towards reducing their carbon impact. In November 2021, we announced that Chipotle set science-based targets with the Science Based Targets initiative (“SBTi”) to reduce absolute Scope 1, 2 and 3 greenhouse gas (GHG) emissions by 50% by 2030 from a 2019 base year. The approved targets were classified by SBTi as being in line with a long-term global temperature increasing trajectory of 1.5°C.

We plan to publish updates on our progress towards achieving these SBTi goals at least annually on our website chipotle.com/about-us/sustainability.

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.” We are proud of our culture, which champions diversity, ensures equity, and celebrates inclusion. As of December 31, 2021, more than 50% of our U.S.-based employee population is female and approximately 68% of our U.S based employee population is comprised of racial and ethnic minorities. In December 2021, Chipotle began pursuing Black Equity at Work Certification through Management Leadership for Tomorrow (MLT), a leading national nonprofit organization that, for the past twenty years, has developed and placed more than 10,000 primarily Black and Latino MBAs and college graduates in corporations and non-profits, provided best-in-class career advancement programs that have consistently enabled Black and Latino professionals to secure promotions, and advised more than one hundred companies on how to increase diversity, equity and inclusion. See “Proposal 6 – Proposal to Commission a Racial Equity Audit - Board of Directors’ Statement in Opposition” for more details on Chipotle’s participation with the Black Equity at Work Certification. Our most recent EEO-1 consolidated report is posted on the Investors page of our corporate website at ir.chipotle.com under Corporate Governance – Human Capital Information, and additional details about the demographics of our employee population is included in our biennial Sustainability Report and interim Update Report on our website chipotle.com/about-us/sustainability.

We believe people should be paid for what they do and how they do it, regardless of their gender, race, ethnicity or other personal characteristics. To fulfill that commitment, we benchmark pay using competitive market data, set pay ranges based on market data and consider factors such as an employee’s role and experience, the location of their job, and their performance. We regularly review our compensation practices, both in terms of our overall workforce and individual employees, to ensure our pay is fair and equitable.

In 2021, we retained an independent third-party consulting firm to conduct a pay equity analysis of our U.S. workforce, including factors of pay (e.g., grade level, tenure in role, most recent promotion) and external market conditions (e.g., geographic location) to ensure consistency and equitable treatment amongst our employees. Our review included 99% of our U.S. employee population, excluding only approximately 50 of our most senior management employees. The results of the 2021 analysis, summarized below, did not identify preferential treatment to any class of employee; however, we identified several isolated discrepancies between actual compensation and our policies and we quickly made pay adjustments to close all identified gaps.

We will continue to review compensation and engage in a range of initiatives aimed at increasing diversity and ensuring equal pay and opportunity for all employees.

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 Exchange Act, 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 54. See, in particular, the disclosures under “Executive Officers and Compensation – Compensation Discussion and Analysis – 2021 Advisory “Say on Pay” Vote on Executive Compensation and Shareholder Outreach” for a concise description of our shareholder outreach relating to the compensation of our executive officers, compensation decisions the Compensation Committee made for 2021, 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 emphasize performance-oriented components that encourage and reward strong operating and financial performance and stock price gains, and that align 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 Compensation Committee sought feedback from shareholders on the 2021 “say on pay” vote and made changes to our executive compensation program in response. See “Executive Officers and Compensation – Compensation Discussion and Analysis – 2021 Advisory “Say on Pay” Vote on Executive Compensation and Shareholder Outreach.”

The Audit & Risk Committee, which is responsible for the appointment, compensation and oversight of our independent registered public accounting firm, has engaged Ernst & Young LLP as our independent registered public accounting firm to audit our consolidated financial statements for the year ending December 31, 2022 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 our independent registered public accounting firm. 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 2022 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 our current independent registered public accounting firm 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, 2022, 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. Our current lead engagement partner plans to retire in 2022, and a new lead engagement partner will be appointed for the 2022 audit. As a result, the five-year rotation will occur after the 2026 audit.

The Audit & Risk Committee has adopted a policy which sets out procedures that the company must follow when retaining the independent registered public accounting firm 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 is 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, 2021 and 2020 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 accounting firm. Ernst & Young has served as our independent registered public accounting firm 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, 2021 and 2020 were:

With regard to the fiscal year ended December 31, 2021, the Audit & Risk Committee (i) reviewed and discussed with management our audited consolidated financial statements as of December 31, 2021 and for the year then ended; (ii) discussed with Ernst & Young LLP, the independent registered public accountants, 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, 2021 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.

On March 23, 2022, the Board approved the Chipotle Mexican Grill, Inc. 2022 Stock Incentive Plan (the “2022 Stock Incentive Plan”), subject to approval by our shareholders. The 2022 Stock Incentive Plan will replace our Amended and Restated 2011 Stock Incentive Plan (the “Prior Stock Plan”). If the 2022 Stock Incentive Plan is approved by our shareholders, no awards will be granted under the Prior Stock Plan after the 2022 Stock Incentive Plan becomes effective at the annual meeting (the “Effective Date”).

The Prior Stock Plan is our only plan for providing equity incentive compensation to our employees, other than our tax-qualified Employee Stock Purchase Plan that allows employees to purchase our stock at a discount. As of December 31, 2021, there were 2,141,419 shares of common stock that remained available for future issuances under the Prior Stock Plan, which will terminate and those shares will cease to be available for future grants if the 2022 Stock Incentive Plan is approved by our shareholders. If the 2022 Stock Incentive Plan is approved by shareholders, we will continue to be able to make awards of long-term equity incentives, which we believe are critical for attracting, motivating, rewarding and retaining a talented team who will contribute to our success. If the 2022 Stock Incentive Plan is not approved by our shareholders, we will continue to grant equity awards under the Prior Stock Plan until its termination in May 2023.

The following discussion and summary of the 2022 Stock Incentive Plan as proposed to be adopted is qualified in its entirety by reference to the actual text of the plan document. A copy of the 2022 Stock Incentive Plan is attached as Appendix A to this proxy statement.

In determining the number of shares to authorize under the 2022 Stock Incentive Plan, the Board considered the historical share usage under the Prior Stock Plan, as well as the company’s three-year average burn rate for the preceding three years as follows:

“Burn Rate” measures how quickly we use shares and is calculated by dividing (i) the number of SOSARs and RSUs granted and the number of PSUs that vested during any particular period by (ii) the number of outstanding shares of common stock as of December 31^st of the applicable year. A higher burn rate indicates an increased number of equity awards being granted to employees and/or directors. The burn rate is usually compared to industry data.

The 2022 Stock Incentive Plan includes several provisions that we believe promote best practices by reinforcing alignment with shareholders’ interests. These provisions include, but are not limited to, the following:

Executive officers, officers, other employees, consultants and non-employee directors of Chipotle and our subsidiaries will be eligible to participate in the 2022 Stock Incentive Plan if selected by the Compensation Committee. As of March 1, 2022, this group includes ten non-employee directors and approximately 102,500 employees and consultants, including our eight executive officers.

The 2022 Stock Incentive Plan authorizes the Compensation Committee to grant non-qualified and incentive stock options, SARs and full value awards, including restricted stock, restricted stock units, performance shares, deferred share units, phantom stock or share-denominated performance units. Awards granted under the 2022 Stock Incentive Plan other than stock options and SARs are referred to as Full Value Awards.

Subject to the capitalization adjustment provisions described below and excluding substitute awards granted in connection with a corporate transaction, the number of shares authorized for issuance under the 2022 Stock Incentive Plan as of the Effective Date will not exceed 2,431,419 shares, less one share for every one share subject to a stock option or SAR granted under the Prior Stock Plan after December 31, 2021 and prior to the Effective Date, and less two shares for every one share subject to a Full Value Award granted under the Prior Stock Plan after December 31, 2021 and prior to the Effective Date. For example, if 100 shares are issued with respect to a restricted stock unit award granted under the 2022 Stock Incentive Plan, 200 shares will be counted against the share reserve. A share subject to a stock option or SAR issued under the 2022 Stock Incentive Plan only counts as one share against the share reserve.

The 2022 Stock Incentive Plan provides that the aggregate grant date fair value of all equity awards granted to any non-employee director during any single calendar year, plus the total cash and other compensation paid to such non-employee director for director services rendered for such calendar year (determined without regard to amounts paid to a non-employee director during any period in which such individual was an employee or consultant (other than grants of awards paid for service in their capacity as a non-employee director), and any severance and other payments paid to a non-employee director for such director’s prior or current service to Chipotle or any subsidiary other than serving as a director), may not exceed $750,000.

The maximum number that may be covered by “incentive stock options” within the meaning of Section 422 of the Internal Revenue Code may not exceed 2,000,000.

The exercise price of stock options granted under the 2022 Stock Incentive Plan may not be less than the fair market value of our common stock on the date of grant (other than in the case of substitute awards). The fair market value is generally the closing price of our common stock on a specified date, although the Compensation Committee is permitted to determine fair market value on the basis of the opening, closing, or average of the high and low sale prices of a share of our common stock on such date or the preceding trading day, the actual sale price of a share, any other reasonable basis using actual transactions involving shares of our common stock as reported on an established U.S. national or regional securities exchange, or on any other basis consistent with Section 409A of the Internal Revenue Code. The exercise price of incentive stock options granted to a ten percent shareholder may not be less than 110% of the fair market value on the grant date. The maximum exercise period may not be longer than ten years (five years, in the case of an incentive stock option granted to a ten percent shareholder). The Compensation Committee determines when each stock option becomes exercisable, including the establishment of performance vesting criteria, if any. The award agreement specifies the consequences under the stock option of a recipient’s termination of employment, service as a director or other relationship between us and the participant. Unless otherwise specified in an award agreement for a particular stock option, unvested stock options vest in full in the event of a non-employee director’s termination of service in connection with or as a result of a change in control or an employee participant’s termination without cause or, with

The 2022 Stock Incentive Plan provides that the Compensation Committee may not, without shareholder approval, (i) reduce the exercise price of any previously granted stock option or SAR; (ii) cancel any previously granted stock option or SAR and replace it with a new stock option or SAR with a lower exercise price; or (iii) take any other action with respect to a stock option or SAR that would be treated as a repricing under the rules and regulations of the New York Stock Exchange.

The Compensation Committee may make the grant, issuance, retention, or vesting of Full Value Awards contingent upon continued employment with Chipotle, the passage of time, or such performance criteria and the level of achievement against such criteria as it deems appropriate. A Full Value Award may, among other things, involve the transfer of actual shares of common stock, either at the time of grant or thereafter, or payment in cash or otherwise of amounts based on the value of shares of common stock and be subject to performance-based and/or service-based conditions. Unless otherwise specified in an award agreement for a particular award, unvested Full Value Awards vest in full in the event of a non-employee director’s termination of service in connection with or as a result of a change in control or an employee participant’s termination without cause or, with respect to executive officer participants, such participant’s resignation for good reason, in each case, within two years following a change in control, with the attainment level of any performance-based vesting conditions to be determined in accordance with the applicable award agreement.

The vesting of awards granted under the 2022 Stock Incentive Plan may be subject to the attainment of specified performance goals established by the Compensation Committee. These performance goals may be based on one or more of the following business criteria for Chipotle, on a consolidated basis, and/or for specified subsidiaries, divisions or operating units or groups or any combination of the foregoing (except with respect to the total shareholder return and earnings per share criteria) and may include any of the following as the Compensation Committee may determine: revenue growth; cash flow; cash flow from operations; net income; net income before equity compensation expense; earnings per share, diluted or basic; earnings per share from continuing operations, diluted or basic; earnings before interest and taxes; earnings before interest, taxes, depreciation, and amortization; earnings from continuing operations; net asset turnover; inventory turnover; capital expenditures; income from operations; income from operations excluding non-cash related entries; income from operations excluding non-cash adjustments; income from operations before equity compensation expenses; income from operations excluding equity compensation expense and lease expense; operating cash flow from operations; income before income taxes; gross or operating margin; restaurant-level operating margin; profit margin; assets; debt; working capital; return on equity; return on net assets; return on total assets; return on capital; return on investment; return on revenue; net or gross revenue; comparable restaurant sales; new restaurant openings; market share; economic value added; cost of capital; expense reduction levels; safety record; stock price; productivity; customer satisfaction; employee satisfaction; total shareholder return or any other criteria that the Compensation Committee determines in its sole discretion to be appropriate.

Any dividends or dividend equivalents related to an award under the 2022 Stock Incentive will be subject to the same restrictions, vesting, and risk of forfeiture as the shares subject to the underlying the award. Dividend equivalents will not be issued in tandem with stock options or SARs.

The Compensation Committee will administer the 2022 Stock Incentive Plan and will have broad authority to do all things necessary or desirable, in its sole discretion, in connection with plan administration. The Compensation Committee will select who will receive equity awards; determine the number of shares covered thereby; and, subject to the terms and limitations expressly set forth in the plan, establish the terms, conditions, and other provisions of the equity awards. The Compensation Committee will interpret the 2022 Stock Incentive Plan and may establish, amend, and rescind any rules related to the plan, and make remedial changes to the terms of an outstanding equity award to comply with applicable laws, regulations and listing requirements and to avoid unintended consequences resulting from unexpected events. The Compensation Committee has the discretion to permit the automatic exercise of vested in-the-money stock options and SARs and can delegate this authority to Chipotle’s management. The Compensation Committee has the authority to toll the exercise period for stock options and SARs if such awards held by a former employee cannot be exercised due to trading or other legal restrictions, but not beyond the maximum expiration date of the stock options or SARs.

Equity awards shall be subject to any right that Chipotle may have under any recoupment policy or other agreement with such participant, including any provisions that may be adopted regarding the recovery of “incentive-based compensation” under the Dodd-Frank Wall Street Reform and Consumer Protection Act.

The 2022 Stock Incentive Plan will continue until terminated by Board or all available shares are issued under the plan. The Board may terminate, amend, or suspend the 2022 Stock Incentive Plan, provided that no action may be taken by the Board (except those described in “Adjustments” below) without shareholder approval to:

In the event of a stock dividend, recapitalization, stock split, combination of shares, extraordinary dividend of cash or assets, reorganization, or exchange of our common stock, or any similar equity restructuring transaction (as that term is used in Financial Accounting Standards Board Accounting Standards Codification Topic 718) affecting our common stock, the Compensation Committee will equitably adjust the number and kind of shares available for grant under the 2022 Stock Incentive Plan, the number and kind of shares subject to the award limitations set forth in the plan, the number and kind of shares subject to outstanding awards under the plan, and the exercise price of outstanding stock options and of other awards.

The impact of a merger or other reorganization of Chipotle on outstanding stock options, SARs and Full Value Awards granted under the 2022 Stock Incentive Plan will be determined in the Compensation Committee’s sole discretion. Permitted adjustments include assumption of outstanding equity awards, accelerated vesting, or accelerated expiration of outstanding equity awards, or settlement of outstanding awards in cash.

The Compensation Committee also has the discretion to modify or waive the performance goals of an outstanding performance-based award in the event that an unanticipated change in circumstances renders them unsuitable.

In the event of a change in control, the Compensation Committee, in its sole discretion, may (i) provide that (A) some or all outstanding options and SARs will become exercisable in full or in part, either immediately or upon a subsequent termination of employment, (B) the vesting period applicable to some or all outstanding awards will lapse in full or in part, either immediately or upon a subsequent termination of employment, (C) the performance period applicable to some or all outstanding awards will lapse in full or in part, and (D) the performance goals applicable to some or all outstanding awards will be deemed satisfied at the target or any other level; (ii) require that the shares of stock of the corporation resulting from such change in control, or a parent corporation of such corporation, or other property be substituted for some or all of the shares of our common stock subject to outstanding awards under the 2022 Stock Incentive Plan; (iii) require outstanding awards, in whole or in part, to be surrendered to Chipotle in exchange for (X) a cash payment or other property, (Y) shares of capital stock of the corporation resulting from or succeeding to the business of Chipotle pursuant to such change in control, or a parent corporation of such corporation, or (Z) a combination thereof; and/or (iv) any combination of (i), (ii) and (iii).

The following is a brief summary of some of the federal income tax consequences of certain transactions under the 2022 Stock Incentive Plan based on federal income tax laws in effect as of the date of this proxy statement. This summary is not intended to be complete and does not describe federal taxes other than income taxes, or any state, local or foreign tax consequences. It is not intended as tax guidance to participants in the 2022 Stock Incentive Plan. The tax consequences of awards may vary depending upon the particular circumstances, and it should be noted that income tax laws and regulations and interpretations thereof change frequently. Participants should rely upon their own tax advisors for advice concerning the specific tax consequences applicable to them, including the applicability and effect of state, local, and foreign tax laws.

Chipotle generally will be entitled, subject to the application of Section 162(m) of the Internal Revenue Code, to a deduction in connection with a participant’s exercise of a non-qualified stock option in an amount equal to the income recognized.

If the participant disposes of the shares before the later of such dates or was not employed by Chipotle or one of its subsidiaries during the entire applicable period, the participant will have ordinary income equal to the lesser of (i) the difference between the exercise price of the shares and the fair market value of the shares on the date of exercise and (ii) the difference between the exercise price of the shares and the amount realized on the disposition. Any gain realized in excess of the amount of ordinary income recognized will be treated as a capital gain. Chipotle generally will be entitled to a corresponding tax deduction, subject to the application of Section 162(m) of the Internal Revenue Code.

If a Section 83(b) election is made, any dividends received on shares that are subject to Restrictions will be treated as dividend income. If no election is made under Section 83(b) of the Internal Revenue Code, dividends received on the common stock for the period prior to the time the Restrictions on such shares lapse will be treated as additional compensation, and not dividend income, for federal income tax purposes, and will be subject to wage withholding and employment taxes with respect to employees.

In general, a deduction will be allowed to Chipotle for federal income tax purposes (subject to the application of Section 162(m) of the Internal Revenue Code) in an amount equal to the ordinary income recognized by the participant with respect to restricted stock awarded pursuant to the 2022 Stock Incentive Plan.

If a Section 83(b) election is made and, before the Restrictions on the shares lapse, the shares which are subject to such election are in effect forfeited: (i) the participant will not be allowed a deduction for the amount included in the participant’s income by reason of a Section 83(b) election; and (ii) the participant may recognize a loss in an amount equal to the excess, if any, of the amount paid for the shares over the amount received upon such forfeiture (which loss will ordinarily be a capital loss).

If a participant receives restricted stock units or another stock-based award, the participant will generally recognize ordinary income at the time that the award is settled in an amount equal to the cash and/or fair market value of the shares received at settlement. In general, a deduction will be allowed to Chipotle for federal income tax purposes (subject to the application of Section 162(m) of the Internal Revenue Code) in an amount equal to the ordinary income recognized by the participant with respect to such restricted stock units or other stock-based award awarded pursuant to the 2022 Stock Incentive Plan. The ordinary income recognized with respect to such restricted stock units or other stock-based award granted to employees will be subject to both wage withholding and employment taxes.

The Compensation Committee has the discretion to grant awards under the 2022 Stock Incentive Plan and, therefore, it is not possible as of the date of this proxy statement to determine future awards that will be received by participants under the 2022 Stock Incentive Plan.

The following table presents information regarding options and rights outstanding under our equity compensation plans as of December 31, 2021. All options/SOSARs reflected are options to purchase common stock.

On March 23, 2022, the Board approved the Chipotle Mexican Grill, Inc. Employee Stock Purchase Plan (the “ESPP”), subject to approval by our shareholders. The ESPP will replace our existing employee stock purchase plan (the “Prior ESPP”), which expired in January 2022. The ESPP provides our eligible employees, as well as those of our participating subsidiaries, with an opportunity to purchase shares of our common stock at a discount based on their accumulated payroll deductions for the relevant purchase period.

The following discussion and summary of the ESPP as proposed to be adopted is qualified in its entirety by reference to the actual text of the plan document. A copy of the ESPP is attached as Appendix B to this proxy statement.

The purpose of the ESPP is to provide eligible employees of Chipotle and participating subsidiaries with a convenient means of acquiring an equity interest in Chipotle through payroll deductions or other contributions in order to enhance such employees’ sense of participation in the affairs of Chipotle. The ESPP includes two components: (i) a component intended to qualify as an “employee stock purchase plan” under Section 423 of the Internal Revenue Code (the “423 Component”), the provisions of which will be construed so as to extend and limit participation in a uniform and nondiscriminatory manner consistent with the requirements of Section 423 of the Internal Revenue Code; and (ii) a component that does not qualify as an “employee stock purchase plan” under Section 423 of the Internal Revenue (the “Non-423 Component”), under which options will be granted pursuant to rules, procedures or sub-plans adopted by the Compensation Committee designed to achieve tax, securities laws or other objectives for eligible employees, Chipotle and its participating subsidiaries. Except as otherwise provided in the ESPP, the Non-423 Component will operate and be administered in the same manner as the 423 Component.

The ESPP will be administered by the Compensation Committee. The Compensation Committee has the discretionary authority to do everything necessary and appropriate to administer the ESPP, including, without limitation, interpreting the provisions of the ESPP. All actions, decisions and determinations of, and interpretations by the Compensation Committee with respect to the ESPP will be final and binding upon all participants.

If the ESPP is approved by shareholders, the number of shares reserved for issuance under the ESPP will be equal to 250,000 shares, subject to the adjustment provisions included in the ESPP for stock splits, stock dividends and other changes in Chipotle’s capital stock.

In the event of a proposed sale of all or substantially all of the assets of Chipotle, or the merger of Chipotle with or into another corporation in which Chipotle is not the surviving entity, each outstanding option under the ESPP will be assumed or an equivalent option substituted by the successor corporation or a parent or subsidiary of the successor corporation, unless the Board determines, in the exercise of its sole discretion, that in lieu of such assumption or substitution to either terminate all outstanding options and return to each participant the payroll deductions and other contributions credited to such participant’s purchase account or to provide for the offering period in progress to end on a date prior to the consummation of such sale or merger. In the event of the proposed dissolution or liquidation of Chipotle, any offering period then in progress would terminate immediately prior to the consummation of such proposed action, unless otherwise provided by the Board, and the Board may either provide for the purchase of shares as of the date on which such offering period terminates or return to each participant the payroll deductions credited to such participant’s purchase account.

Only employees of Chipotle or a participating subsidiary are eligible to be granted options under the ESPP and, in no event may a participant be granted an option under the ESPP following his or her termination date. In addition, no employee may participate in an offering period if the employee owns 5% or more of the total combined voting power or value of our stock or the stock of any of our subsidiaries. An employee will be eligible to participate on the first enrollment date that occurs at 12 months (or such other time determined by the Compensation Committee) after such employee’s first date of employment with Chipotle or a participating subsidiary; provided, that such employee properly completes and submits an election form by the deadline prescribed by Chipotle. As of March 1, 2022, approximately 32,700 employees of Chipotle and its participating subsidiaries were eligible to participate in the ESPP.

A participant may elect to have payroll deductions made during a purchase period equal to no less than 1% of the participant’s eligible compensation up to a maximum of 15% (or such greater amount as the Compensation Committee establishes from time to time). All payroll deductions made by a participant will be credited to his or her purchase account.

The Compensation Committee may allow participants to make other contributions under the ESPP via cash, check, or other means instead of payroll deductions if payroll deductions are not permitted under applicable local law and, for any offering period under the 423 Component, the Compensation Committee determines that such other contributions are permissible under Section 423 of the Internal Revenue Code. Unless otherwise determined by the Compensation Committee prior to the beginning of an offering period, no participant may purchase more than 5,000 shares of common stock during any offering period.

The purchase price per share is equal to the lesser of (i) 92.5% of the fair market value of a share on the grant date and (ii) 92.5% of the fair market value of a share on the exercise date for such offering period; provided, however, that the Compensation Committee may determine a different per share purchase price provided that such per share purchase price is communicated to participants prior to the beginning of the offering period and provided that in no event will such per share purchase price be less than the lesser of (i) 85% of the fair market value of a share on the grant date and (ii) 85% of the fair market value of a share on the exercise date. If the fair market value of a share of common stock on the first day of the current offering period in which a participant is enrolled is higher than the fair market value of a share of common stock on the first day of any subsequent offering period, Chipotle may establish procedures to automatically enroll such participant in the subsequent offering period and any funds accumulated in a participant’s account prior to the first day of such subsequent offering period will be applied to the purchase of shares on the exercise date immediately prior to the first day of such subsequent offering period.

Offering periods are three-month periods beginning each March 1^st, June 1^st, September 1^st and December 1^st or such other period designated by the Compensation Committee; provided that in no event will an offering period exceed twenty-seven (27) months. The first offering period under the ESPP will commence on June 1, 2022 and end on August 31, 2022, subject to shareholder approval of the ESPP at the annual meeting.

Purchase periods are periods designated by the Compensation Committee during which payroll deductions or other contributions of the participants are accumulated under the ESPP. A purchase period may coincide with an entire offering period or there may be multiple purchase periods within an offering period, as determined by the Compensation Committee prior to the commencement of the applicable offering period.

Neither payroll deductions credited to a participant’s purchase account nor any rights with regard to the exercise of an option or to receive shares under the ESPP may be assigned, transferred, pledged or otherwise disposed of in any way (other than by will, the laws of descent and distribution) by the participant.

On the termination date of a participant for any reason prior to the applicable exercise date, whether voluntary or involuntary, and including termination of employment due to retirement, death or as a result of liquidation, dissolution, sale, merger or a similar event affecting Chipotle or a participating subsidiary, the corresponding payroll deductions and other accumulated contributions credited to his or her purchase account will be returned to him or her or, in the case of the participant’s death, to the participant’s designated beneficiaries or estate, and his or her option will be automatically terminated.

Subject to any requirement for shareholder approval under applicable law, the Board or the Compensation Committee may at any time and for any reason amend, modify, suspend, discontinue or terminate the ESPP without notice; provided that no participant’s existing rights in respect of existing options are adversely affected thereby. Without shareholder consent and without regard to whether any participant rights may be considered to have been “adversely affected,” the Board or the Compensation Committee will be entitled to change the purchase price, offering periods, limit or increase the frequency and/or number of changes in the amount withheld during an offering period, establish the exchange ratio applicable to amounts withheld in a currency other than U.S. dollars, permit payroll withholding in an amount less than or greater than the amount designated by a participant in order to adjust for delays or mistakes in Chipotle’s processing of properly completed withholding elections, establish reasonable waiting and adjustment periods and/or accounting and crediting procedures to ensure that amounts applied toward the purchase of shares for each participant properly correspond with amounts withheld from the participant’s compensation, and establish such other limitations or procedures as the Board or the Compensation Committee determines in its sole discretion advisable which are consistent with the ESPP.

The following is a brief summary of some of the federal income tax consequences of certain transactions under the ESPP based on federal income tax laws in effect as of the date of this proxy statement. This summary is not intended to be complete and does not describe federal taxes other than income taxes, or any state, local or foreign tax consequences. It is not intended as tax guidance to participants in the ESPP. The tax consequences of awards may vary depending upon the particular circumstances, and it should be noted that income tax laws and regulations and interpretations thereof change frequently. Participants should rely upon their own tax advisors for advice concerning the specific tax consequences applicable to them, including the applicability and effect of state, local, and foreign tax laws.

The benefits that might be received by participating employees under the ESPP cannot be determined because the benefits depend upon the degree of participation by employees and the trading price of Chipotle’s common stock in future offering periods.

The Comptroller of the State of New York has notified us that it beneficially owns 32,174 shares of our common stock and that it intends to submit the following proposal at the annual meeting. We will provide its 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 recommends that you vote “AGAINST” this shareholder proposal.

Shareholders of Chipotle Mexican Grill, Inc. (“Chipotle”) request that the Board of Directors commission a racial equity audit analyzing Chipotle’s impacts on civil rights, equity, diversity and inclusion, and the impacts of those issues on Chipotle’s business. The audit may, in the board’s discretion, be conducted by an independent third party with input from civil rights organizations, employees, communities in which Chipotle operates and other stakeholders. A report on the audit, prepared at reasonable cost and omitting confidential or proprietary information, should be publicly disclosed on Chipotle’s website.

The murder of George Floyd, and the public outcry over the killings of other Black men and women, have galvanized the movement for racial justice and equity. This movement has focused the attention of media and policymakers on systemic racism, racial violence, and inequities throughout society. Companies whose operations heavily rely on their employees’ and customers’ trust and loyalty would benefit from assessing the risks of products, services and overall corporate practices that are or are perceived to be discriminatory, racist, or increasing inequalities. Companies that fail to assess these risks could face controversies that result in customer and employee attrition, negative press, significant fines or regulatory inquiries.

In June 2020, Chipotle expressed public support for racial equality while committing to do its “part to create an equal society.” Chipotle has also taken measures to address racial equity, including committing financial resources to support organizations advocating against systemic racism and publishing data on diversity, equity and inclusion. However, Chipotle faces numerous controversies, some significant, that pose various risks and raise questions related to the company’s overall strategy and the company’s alignment with its public statements.

According to Chipotle, 19 percent of its hourly crew and managers are “Black or African American” and over 60 percent are workers of color. These employees have been disproportionally impacted by various workforce controversies over recent years. This includes investigations into Chipotle’s scheduling, wage and hour, child labor, paid sick leave and COVID-19 practices. For example, Chipotle has been accused of failing to comply with a New York City law, alleging nearly 600,000 incidences of violation of the Fair Workweek Law, affecting approximately 6,500 employees.

There is no evidence that Chipotle is assessing the potential or actual negative impacts of its policies, practices, products, and services from a racial equity lens.

Companies like Starbucks, Facebook and Airbnb have conducted civil rights and equity audits that assisted each company to identify, prioritize, and implement improvements. These efforts provide an emerging model for such audits, typically conducted by a third party, in collaboration with experts in civil rights, and input from an array of stakeholders.

We urge Chipotle to commission a racial equity audit of its policies, practices, products, and services to analyze the way Chipotle impacts civil rights, equity, diversity and inclusion and the impacts of those issues on Chipotle’s business.

The Board of Directors recommends a vote AGAINST this proposal because we are already focusing intensively and rigorously on increasing racial equity via a comprehensive, systematic racial equity program.

Since December 2021, Chipotle has been participating in Management Leadership for Tomorrow’s Black Equity at Work Certification Program. Management Leadership for Tomorrow (MLT) is a leading national nonprofit organization that, for the past twenty years, has developed and placed more than 10,000 primarily Black and Latino MBAs and college graduates in corporations and non-profits, provided best-in-class career advancement programs that have consistently enabled Black and Latino professionals to secure promotions, and advised more than one hundred companies on how to increase diversity, equity and inclusion.

In October 2020, following the murder of George Floyd, MLT developed a Black Equity at Work Certification program that requires and supports employers to apply comprehensive, sustained rigor to meaningfully increase Black equity. Participating employers start with an audit of their current performance across eighteen Black equity indicators that span five pillars: Representation, Compensation, Inclusive and Anti-Racist Work Environment, Racially Just Business Practices, and Racial Justice Investments and Contributions. They then utilize a meticulously developed scoring framework to calculate a baseline assessment, which we have done, and then, focusing on areas where there are equity gaps, develop a three-year Black Equity at Work Certification plan, which we are in the process of doing. Plans are assessed and approved by independent MLT reviewers (separate from the staff person assigned to guide each employer) based on rigor and achievability. Approved plans must have strong root cause analyses for each area where there are equity gaps, activities that will address the root causes, targets, KPIs, frequent progress monitoring, and the right owner to ensure progress.

Following the first milestone of Plan Approval, which we anticipate achieving in 2022, and as we execute our Plan to progress on the journey to Black equity, MLT will hold regular check-ins to assess progress and also share best practices across all five Black Equity pillars. At the end of the first year, and then every year following, we will submit detailed information as part of a progress assessment. We will also update our three-year Plan to reflect lessons learned and those updates will again be assessed by independent MLT reviewers based on rigor and achievability.

As should be clear from the description above, the Black Equity at Work Certification Program establishes a clear and comprehensive standard and aggregate measurement system and provides a rigorous, results-oriented approach that assures and accelerates progress toward Black equity internally, amongst our employees, and externally by supporting Black equity within our business partners and in the communities where Chipotle operates.

Chipotle’s participation in the Certification Program reflects our commitment to sustained, comprehensive rigor, and Chipotle currently intends to achieve Certification for the first time based on overall progress in the first half of 2023 and publish details about our results in mid-2023 in Chipotle’s 2022 Sustainability Report. Finally, while our initial focus is on Black equity given the stark and persistent disparities between white and Black Americans, we are deeply committed to Hispanic equity and have signed up to become a launch employer in the MLT Hispanic Equity at Work Certification Program, which will start in mid-2022.

The shareholder proposal requests that Chipotle “commission a racial equity audit analyzing its impacts on civil rights, equity, diversity and inclusion, and the impacts of those issues on Chipotle’s business and to publish a report of the findings on our website.” Although we are not opposed to conducting a racial equity audit in the future, undertaking the type of racial equity audit specifically requested by the proposal at the same time as we continue our intensive work to achieve Black Equity at Work Certification would divert key resources from our human capital and DE&I initiatives, and possibly even impede our ability to complete either project successfully.

Chipotle is committed to fostering a culture that champions diversity, ensures equity and celebrates inclusion, and our achievements have been recognized by Forbes naming Chipotle one of America’s Best Employers for Diversity 2021; the inclusion of Brian Niccol, our Chairman and CEO, on Comparably’s list of “Best CEOs For Diversity in Large Companies;” and Comparably recognizing Chipotle as a “Best Place to Work for Women.” We are intentional about building a diverse and inclusive workforce, and as of December 31, 2021, more than 50% of Chipotle’s U.S.-based employee population is female and approximately 68% of our U.S.-based employee population is comprised of racial and ethnic minorities. In 2021, we retained an independent third-party consulting firm to conduct a pay equity analysis of our U.S. workforce, including factors of pay (e.g., grade level, tenure in role, most recent promotion) and external market conditions, such as geographic location, to ensure consistency and equitable treatment amongst our employees. The analysis did not identify preferential treatment to any class of employee, and we quickly adjusted several isolated discrepancies between actual compensation and our policies. See “Gender and Racial Pay Equity” for a quantitative summary of the results of the analysis.

We applaud and support the Comptroller of the State of New York’s efforts to promote racial equity in the workplace and in the broader society and would respectfully request the Comptroller learn more about the Black Equity at Work Certification Program and forthcoming Hispanic Equity at Work Certification Program. We believe the Comptroller will welcome the programs’ rigor, intentionality, and comprehensiveness, and recognize them as pathbreaking mechanisms to increase racial equity in the workplace and in society.

The Nathan Cummings Foundation has notified us that it beneficially owns shares of our common stock worth at least $25,000 and that it intends to submit the following proposal at the annual meeting. We will provide its 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 recommends that you vote “AGAINST” this shareholder proposal.

Promotion and retention rates of diverse employees are essential data sets for investors looking to assess the effectiveness of companies’ diversity, equity, and inclusion programs.

Promotion rates show how well diverse talent is nurtured at a company. Unfortunately, research from McKinsey found that women and people of color experience “a broken rung” in their careers. For every 100 men promoted, only 86 women are. Women of color are particularly impacted, comprising 17 percent of the entry-level workforce and only 4 percent of executives.¹

Morgan Stanley suggests that “Employee retention that is above industry peer averages can indicate the presence of competitive advantage. This advantage may lead to higher levels of future profitability than past financial performance would indicate.”² High levels of employee satisfaction have also been linked to annual excess returns of more than two percent.³

Unlike other companies, such as McDonald’s, Chipotle has not yet committed to release standardized workforce composition data through its consolidated EEO-1 form, which is best practice in diversity data reporting. Further, Chipotle has not shared sufficient retention and promotion data to allow investors to determine the effectiveness of its human capital management programs.

Eighty-one percent of the S&P 100 have released, or have committed to release, their EEO-1 forms. In fact, corporate disclosure of this data set increased by 239 percent between September 2020 and September 2021. The number of S&P 100 companies disclosing, or committing to disclose, gender retention data increased by more than 90% over the same period. Disclosure of gender, race, and ethnicity promotion rate data also increased significantly. Chipotle is fast becoming an outlier in its failure to publicly disclose these data sets.

Chipotle needs to provide clear, quantitative data on workforce composition, promotion, and retention rates so that investors can compare the effectiveness of Chipotle's diversity programs to those of its peers. Investors have reasons to be particularly concerned about the effectiveness of Chipotle's diversity, equity, and inclusion programs; the Company has faced a number of claims related to race, religion, pregnancy, and gender discrimination.

The Board of Directors recommends a vote AGAINST this proposal because we believe we not only substantially comply with this proposal but also provide even more information than is requested about our diversity and equity initiatives and workforce composition.

The proposal requests that Chipotle publish “quantitative data on workforce composition, retention, and promotion rates of employees by gender, race, and ethnicity.” We have already implemented the core of this proposal by disclosing detailed quantitative data about the composition of our workforce, broken out by gender and ethnicity. This information is contained in our EEO-1 consolidated report and a report entitled “Diversity Statistics 2019-2021,” which summaries the three-year trend in our workforce composition not only by gender, race and ethnicity but also by four work classifications (restaurant hourly, restaurant salaried, above restaurant leadership and corporate/restaurant support). Our EEO-1 and the Diversity Statistics 2019-2021 report are posted on our website at ir.chipotle.com/corporate-governance under Corporate Governance – Human Capital Information.

Chipotle is committed to fostering a culture that champions diversity, ensures equity and celebrates inclusion, and our commitment is demonstrated by the following:

Our diversity, equity and inclusion initiatives have been recognized outside our industry. Forbes named Chipotle one of America’s Best Employers for Diversity 2021, and Brian Niccol, our Chairman and CEO, was included on Comparably’s list of “Best CEOs For Diversity in Large Companies.” Comparably also recognized Chipotle as a “Best Place to Work for Women” and a “Top Company for Happiest Employees.”

We believe that modifying our human capital disclosures to accommodate the specific request of the shareholder proponent would not add meaningful information for our employees or shareholders and would divert resources currently allocated to furthering our diversity, equity and inclusion goals.

In addition to Brian Niccol, our Chairman and 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 1, 2022, are as follows:

Despite a second year of COVID-19 related challenges, Chipotle posted another year of strong performance, which we believe highlights our organizational strength and the resiliency of the Chipotle brand. We believe actions taken by the company before and at the start of the pandemic positioned it well to not just survive but to thrive during the prolonged pandemic. Performance highlights from 2021 include:

All of these results were achieved while the company continued to invest in its employees and the environment and to use our success as an opportunity to further Cultivate a Better World.

We are proud of our financial performance and progress in advancing social initiatives in 2021, and the payouts under Chipotle’s 2021 annual incentive plan (AIP) and 2019 performance share unit (PSU) awards reflect the Company’s strong performance. Chipotle is a performance driven company, and we believe there is a strong connection between our impressive financial results and shareholder return and the corresponding robust goals that we set under our incentive plans.

We also want to assure you that the Compensation Committee is receptive and responsive to feedback from our shareholders. We were disappointed with only 51.3% support for our “say on pay” advisory vote proposal at the 2021 annual meeting and, as outlined below under the heading “2021 Advisory “Say on Pay” Vote on Executive Compensation and Shareholder Outreach,” we engaged with shareholders owning almost half of Chipotle’s outstanding common stock to discuss their vote and hear from them on other concerns and topics. From our shareholder engagement, we learned that the primary reason for the low vote in 2021 was our decision to modify the 2018 PSU award and 2020 AIP to reflect the unplanned impact of the COVID-19 pandemic and to reward our leadership team’s extraordinary success in developing and executing the turnaround strategy that we believe has benefited employees and greatly increased shareholder value. We also received feedback from some shareholders on our incentive plan design and perquisites. We heard you, and we made changes in response. Despite the continuing impact of the pandemic, we did not make any modifications to in-flight incentive awards. We also eliminated several perquisites for our executive officers and made some refinements to our 2022 incentive plan design. We hope you will agree that the Company’s executive compensation program for 2022 reflects your feedback. Our primary compensation goal has been and remains rewarding performance and incentivizing shareholder value creation.

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 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 Chairman and Chief Executive Officer (CEO), Chief Financial Officer (CFO) and three other most highly compensated executive officers for the year ended December 31, 2021 (the “named executive officers” or “NEOs”), and explains the Compensation Committee’s determinations as to the compensation of our NEOs for 2021. 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 CD&A.

2021 was an outstanding year for Chipotle, as we achieved total revenue of $7.5 billion, an increase of 26.1% compared to 2020, which was driven by new restaurant openings and a 19.3% increase in comparable restaurant sales. We opened 215 new restaurants during the year, of which 174 (or 81%) included a Chipotlane, bringing the total restaurant count at year end to 2,966, of which 355 included a Chipotlane. We also generated total shareholder return (TSR) of 26.1% during fiscal 2021, annualized three-year TSR of 35.9%, and annualized five-year TSR of 28.9%. By comparison, the S&P 500 index had annualized returns of 16.1% over the three-year period and 13.1% over the five-year period.

We delivered these outstanding results despite the continuing challenges created by the COVID-19 pandemic that began in early 2020. Throughout 2021, our employees managed diverse and constantly changing mandates on COVID-19 protective measures, such as requiring employees and guests to be vaccinated and/or wear face coverings, supply chain disruptions and temporary ingredient shortages, staffing challenges and a highly competitive recruiting market. The investments we have made over the past three years to expand our digital ecosystem, strengthen our food safety program, attract and develop world class talent, build an inclusive culture and implement strong business fundamentals laid the foundation for our strong performance during the pandemic.

Every year we invite our shareholders to cast an advisory vote to approve the compensation of our NEOs. At our 2021 annual meeting, we received approximately 51.3% support for our “say on pay” advisory vote proposal, which was lower than our desired level of support and the 95.32% support we received at the 2020 annual meeting. The Compensation Committee has taken the outcome of this vote seriously and we conducted broad shareholder outreach after the 2021 annual meeting to solicit and understand our shareholders’ feedback regarding Chipotle’s executive compensation program. In the fall of 2021, we contacted shareholders that collectively held 70% of our outstanding common stock. Executive officers and other senior members of our People Experience, Legal/Corporate Secretary, Sustainability and Investor Relations teams participated in these meetings, with members of the Compensation Committee available upon request. During the shareholder calls, we discussed the rationale for modifying the 2018 performance share unit (PSU) awards and 2020 AIP to reflect the unplanned impact of the COVID-19 pandemic and to reward our leadership team’s extraordinary success in developing and executing a strategic turnaround of our business, which we believe generated tremendous shareholder value. We also discussed Chipotle’s (i) diversity, equity and inclusion metrics and initiatives and workforce management issues, (ii) executive compensation programs and 2021 refinements, (iii) corporate sustainability achievements and initiatives, and our recently announced initial science-based targets, and (iv) Board composition and leadership and our corporate governance practices.

During our discussions, we heard that the low 2021 vote primarily was due to shareholder concern about the Committee’s modification of our 2018 PSU awards and 2020 AIP to reflect the unplanned impact of the COVID-19 pandemic. Excluding this one-time modification, shareholders expressed support for our executive compensation philosophy and performance-driven pay practices.

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. In 2021, variable, at-risk pay comprised 93% of our CEO’s compensation and 87% of our other NEO’s 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 company’s achievement against the overall corporate objectives established for the year.

For other executive officers, the CEO makes recommendations to the Committee about their compensation after reviewing Chipotle’s overall performance, achievement by each executive officer of his or her individual performance goals and his or her personal contributions to the company’s success. The Committee is responsible for reviewing the CEO’s recommendations and setting and approving executive officer compensation.

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 reference points to assist the Committee in understanding the overall compensation opportunity and realized pay provided to each executive officer.

At the same time that the Committee is considering executive officer compensation, it also reviews and approves key elements of the compensation plan for non-executive officers, including (i) the plan design for the AIP for all eligible employees, (ii) the LTI grant guidelines by employee level, which contains details on grant ranges, LTI vehicle mix and employee participation rates, and (iii) the total value of the share pools for the annual LTI grants to non-executive officer employees. The Committee also reviews, but does not approve, a summary of pay grades, salary ranges and target annual and equity incentive values for all non-executive officer employees.

The typical process is for the Committee to be presented with and to review the above information during one Committee meeting, and then formally approve compensation actions at the subsequent Committee meeting, which gives the Committee the opportunity to consider the totality of the Company’s compensation practices, request any additional information or seek clarifications, and discuss the proposed compensation plan before final approval.

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 restaurant industry and, for that reason, chose to include other non-restaurant consumer focused companies in our compensation peer group, although the majority of our compensation peers are in the restaurant and hospitality industries.

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 and determining pay design for executive officers. This peer group data is only one factor considered by the Committee in setting executive compensation each year.

The peer group used for 2021 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 2021, the Committee determined to remove two companies (Dunkin' Brands Group, Inc. and Norwegian Cruise Line Holdings Ltd.) due to lack of alignment on the market-cap criteria, and replaced them with eBay Inc. and Wayfair Inc. (however Wayfair’s two co-founders, including its CEO, are not used in Chipotle’s benchmarking of market pay levels). 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 50^th percentile of this peer group, and our market capitalization ranks at the 83^rd percentile of this peer group (as of December 31, 2021), which confirmed for the Committee that this peer group is appropriate in generally reflecting comparable organizational size and related complexity.

The Committee reviews the composition of the peer group periodically and adjusts the composition in response to changes in size, business operations and/or strategic focus, mergers and acquisitions, and companies becoming public. In September 2021, the Committee decided for purposes of 2022 compensation to remove Royal Caribbean Group and Vail Resorts, Inc. due to lack of alignment on the market-cap criteria and to replace them with DoorDash, Inc. and Uber Technologies, Inc.

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 2021, after an extensive review of market data, the Committee approved salary increases for the NEOs, other than our CEO, to better align with competitive market levels and our desired compensation philosophy: