Chipotle Mexican Grill (CMG) DEF 14ADefinitive proxy

 

 

 

The 2024 annual meeting of shareholders of Chipotle Mexican Grill, Inc. will be a virtual meeting conducted exclusively via live webcast at www.virtualshareholdermeeting.com/CMG2024 on Thursday, June 6, 2024 at 8:00 a.m. (PDT).

Shareholders will consider and have an opportunity to vote on the following items:

Information about these matters is contained in the proxy statement that accompanies this notice.

Only shareholders of record at the close of business on April 9, 2024 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.

Your vote is important. Please note that if you hold your shares through a broker, your broker cannot vote your shares on the election of directors, on the say on pay vote, on one of the proposals to amend our Certificate of Incorporation, or on the shareholder proposals unless they have your specific instructions on how to vote. In order for your vote to be counted, please make sure that you submit your vote to your broker.

By order of the Board of Directors

 

Roger Theodoredis

PROXY STATEMENT SUMMARY

Matters to be Voted on at the Annual

Meeting and Board Recommendations

Highlights of Director Nominees

 

 

*Appendix A includes a reconciliation of restaurant level operating margin to the most directly comparable measure reported under U.S. generally accepted accounting principles.

Total Shareholder Return Since 2018

 

TABLE OF CONTENTS

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, trends in or expectations regarding our future financial performance, long-term growth, and our business strategy, plans and objectives for future operations such as growth in our average unit volumes, our goal for new restaurants and our sustainability goals, are forward-looking statements. The words “can,” “believe,” “may,” “should,” “will,” “continue,” “anticipate,” “intend,” “expect,” “seek,” “goal” and similar expressions are intended to identify forward-looking statements. These forward-looking statements are based on our current expectations and projections about future events and trends and 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 (“SEC”), including the “Risk Factors” section of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023. 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. 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.

ANNUAL MEETING INFORMATION

This proxy statement contains information related to the virtual annual meeting of shareholders of Chipotle Mexican Grill, Inc. to be held on Thursday, June 6, 2024, beginning at 8:00 a.m. (PDT) online at www.virtualshareholdermeeting.com/CMG2024. This proxy statement was prepared under the direction of Chipotle’s Board of Directors to solicit your proxy for use at the annual meeting. It was made available to shareholders on or about April 23, 2024.

To make the annual meeting accessible to more shareholders, the Board of Directors has determined 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 April 9, 2024. Shareholders may attend the virtual annual meeting at www.virtualshareholdermeeting.com/CMG2024. 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/CMG2024 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/CMG2024. After the formal business of the annual meeting, we will hold a question and answer session, during which we will 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 April 9, 2024, 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 April 9, 2024, there were 27,467,305 shares of common stock outstanding and entitled to vote.

Matters to be Voted on at the Annual Meeting and Board Recommendations

You will be asked to vote on nine proposals:

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.

You can change your vote or revoke your proxy at any time before it is voted at the annual meeting by:

Quorum requirement

Because the “say on pay” advisory vote (Proposal 2) and the vote on the shareholder proposals (Proposal 6 through 9) are advisory, the vote results 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 on 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 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 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 April 9, 2024 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. If you would like to request a copy of the materials for this and/or future shareholder meetings, you may (1) visit wwww.ProxyVote.com, (2) call 1-800-579-1639, or (3) send an email to sendmaterial@proxyvote.com. Requests by e-mail 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.

Proxy solicitation costs

We will pay 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 $27,000 plus reimbursement of customary expenses.

BENEFICIAL OWNERSHIP OF OUR COMMON STOCK

ELECTION OF DIRECTORS

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

Each of the director nominees was elected at the 2023 annual meeting of shareholders, except for Laura Fuentes, who was elected to the Board in September 2023. Ms. Fuentes initially was recommended to our Board by an executive recruiting firm retained by the Board to assist in identifying, evaluating and conducting due diligence on potential director candidates. Each director nominee was nominated for re-election to the Board upon the recommendation of the Nominating and Corporate Governance Committee and 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 2023. 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 2023. The Board requests that each director attend our annual shareholder meeting absent extenuating circumstances, and all directors who were serving on the date of the 2023 annual meeting attended the meeting.

There are no family relationships among our directors, or between our directors and executive officers.

The Board of Directors recommends a vote FOR the election of each of the director nominees.

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 June 6, 2024, the date of the annual meeting.

Board Skills, Experience and Attributes

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 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 58, and the average tenure will be seven 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.

2023 Director Compensation

The Compensation, People and Culture 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 2023, the Board approved an increase of $40,000 in the grant value of the annual equity grant to non-employee directors, bringing the total grant value to $215,000. 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 2023. 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 2023.

Under our stock ownership requirements for our directors, each non-employee director is required to own Chipotle common stock with a market value of five times the annual cash retainer within five years of the director’s election to the Board. All non-employee directors met this requirement as of December 31, 2023, except Laura Fuentes who was elected to the Board in September 2023.

The compensation we paid to each non-employee director who served on the Board in 2023 is set forth below.

CORPORATE GOVERNANCE

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; and the Chipotle Mexican Grill, Inc. Code of Ethics, which applies to all Chipotle directors, executive officers and employees. Our Corporate Governance Guidelines and our Code of Ethics 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 applies 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. Our Board regularly reviews (at least annually) the Board’s leadership structure and continues to believe that the combined Chairman and CEO role, together with a strong Lead Independent Director with clearly defined and robust responsibilities, and independent directors leading the Committees provides the best leadership structure for the company at this time. The Board believes that the current structure 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 Board also believes we can most effectively execute our business strategies and growth plans if our Chairman is a member of our management team, providing unified leadership and focus. The experience and operating expertise that Mr. Niccol brings to the Board as Chairman and Chief Executive Officer, combined with the strong independent leadership of our Lead Independent Director, allows 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.

If our Board (particularly the Lead Independent Director and the Chair of the Nominating and Corporate Governance Committee) believes that a different leadership structure would be more appropriate in light of challenges, opportunities and needs of our business and the growth state of our company in the future, the Board would reconsider the current leadership structure.

Scott Maw currently serves as our Lead Independent Director. The Board believes that maintaining a Lead Independent Director position helps ensure that our outside directors remain independent of management, provides objective oversight of our business and strategy, and supports the relationship between the Chairman and Chief Executive Officer and the independent directors. 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, People and Culture 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 a 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 our current self-evaluation process is designed to generate candid and real-time feedback on the efficacy of the Board and its

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 1100, 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. 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.

Executive sessions are scheduled at the end of each regular, quarterly meeting of each standing Committee of the Board, with only the Committee members or the Committee members and their advisors present, to discuss any topics the Committee members deem necessary or appropriate.

Our independent directors met in executive session without management present at the end of each regularly scheduled Board meeting during 2023 and the Lead Independent Director chaired these non-employee executive sessions. The Board expects to continue to conduct executive sessions of the independent directors at each regularly scheduled Board meeting during 2024, and independent directors may schedule additional sessions at their discretion.

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 10 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 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 a diversity of perspectives is an important attribute of a well-functioning Board, as described under “Election of Directors – Board Composition and Refreshment.”

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 nominate a candidate, a shareholder must comply with the provisions of our bylaws regarding shareholder nomination of directors, including the deadlines described under “Shareholder Proposals and Nominations for 2025 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 by complying with the proxy access provisions in our bylaws. These provisions are described under “Shareholder Proposals and Nominations for 2025 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 Composition and Refreshment,” 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, may be elected by the Board 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 shareholders engaged. The table below generally summarizes our engagement process. Our Investor Relations team, often with our Chairman and CEO or Chief Financial and Administrative Officer, regularly meets 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 our executive compensation program, sustainability initiatives, corporate governance matters, human capital management and other topics of interest to them. We report the shareholders’ feedback and input to our Board and the applicable Committees, which take them into account as we review and update our compensation, corporate governance and sustainability practices and policies.

We also reached out to all shareholders that submitted proposals for consideration at the 2024 annual meeting to discuss their proposals and our existing policies and practices.

Every year we provide our shareholders with the opportunity to cast an advisory vote to approve the compensation of our named executive officers. At our 2023 annual meeting of shareholders, we received over 96% support from votes cast for our “say on pay” advisory vote proposal, which we believe demonstrates that shareholders are supportive of Chipotle’s executive compensation program.

See “Compensation Discussion and Analysis – 2023 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 2023 annual meeting, shareholders voted on a proposal requesting that we adopt a noninterference policy with respect to our employees’ freedom of association and the right to pursue collective bargaining. Although the proposal was defeated by a wide margin, we implemented certain aspects of the proposal by amending our Code of Ethics to more expressly emphasize that we recognize the fundamental right of freedom of association, which is guided by the International Labour Organization’s Declaration on Fundamental Principles and Rights at Work, and expressly state that we respect our employees’ rights to choose whether to organize under the National Labor Relations Act. For the reasons described in Proposal 7, we do not believe additional actions are necessary.

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 82.

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 Chipotle 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:

In addition, our Audit & Risk Committee receives quarterly reports from our Chief Information Security Officer and Chief Customer and Technology Officer about the Company’s cybersecurity, privacy and data security programs, the status of projects to strengthen internal cybersecurity, results from third-party assessments, and any significant cybersecurity incidents, including recent incidents at other companies and the emerging threat landscape, and our Board of Directors receives an annual report and quarterly written updates regarding our cybersecurity program. 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.

Role of the Board of Directors in Succession Planning and Leadership Development

Our Board believes that leadership development and human capital management are critical to Chipotle’s continued growth and success. We believe in investing and supporting our people because they are our most important asset and give us a competitive advantage in our business.

One of the primary responsibilities of the Board is planning for the succession of the Chief Executive Officer and overseeing the planning for the succession of the other executive officers. The Board believes that succession planning should be an ongoing process, with the goal of providing sufficient lead time before an expected transition while also being prepared for and responsive to unexpected developments. The Board annually reviews our Chief Executive Officer succession plans and, together with the Compensation, People and Culture Committee and our Chief Human Resources Officer, periodically reviews the succession planning process for other executive officer positions. To facilitate the process, our Chief Executive Officer annually provides the Board with an assessment of our executive officers and other high-potential executives, their potential to succeed to the position of Chief Executive Officer and development areas and opportunities for each. In addition, the Board and Committees regularly receive presentations from high-potential executives and have opportunities to meet with these executives in small group settings.

BRAND GROWTH MATTERS

Chipotle’s sustainability efforts are focused in three key pillars: Food & Animals, People and the Environment. Goals are published in each of these three areas in our Sustainability Report on our website chipotle.com/sustainability. 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 towards achieving our sustainability goals at least twice a year to the Nominating and Corporate Governance Committee.

Since 2021, Chipotle has tied a portion of our cash annual incentive plan (“AIP”) for executive officers to achievement of certain predetermined Brand Purpose performance goals. The 2023 Brand Purpose modifier was aligned around the same three key pillars – Food & Animals, People and the Environment – and a 5% weight was assigned to each pillar. As described in “Compensation Discussion and Analysis,” the Brand Purpose modifier increased the 2023 AIP payout by +5% based on the level of achievement against these quantitative targets. The Compensation, People and Culture Committee approved a new set of goals for 2024 to continue holding our executive leadership team accountable to make business decisions that Cultivate a Better World.

Our 2022 Sustainability Report aligns with reporting frameworks set by The Global Reporting Initiative (GRI), Sustainability Accounting Standards Board (SASB), and Task Force on Climate-Related Financial Disclosures (TCFD). The 2023 Sustainability Report is an interim report with progress updates on our sustainability efforts.

Food & Animals are at the core of our business, and we believe that how we grow our food is how we grow our future. We focus significant efforts to advancing our Food with Integrity principles, which means sourcing real ingredients with respect for the people and communities that produce it, the animals that are raised for it, and the environment that nurtures it.

A unique and impactful part of our sustainability strategy is to source both organic and local ingredients. Organic farming practices protect water resources and promote healthy ecosystems, biodiversity, and healthy soils through the elimination of synthetic pesticides, herbicides, and fertilizers. In 2023, Chipotle purchased 40 million pounds of local ingredients, which is an increase of 3.6 million pounds over 2022. We have also continued to support the transition of 400 acres of conventional farmland to organic.

We are taking action to reinvigorate the fading farming industry for future generations and support food access. Some of these initiatives include:

We believe that our people and culture give us a competitive advantage in our business, and we strive to develop employees and provide continuing opportunities for them to grow in their leadership skills. In 2023, we had approximately 24,000 internal promotions. Additionally, 90% of all restaurant management roles were internal promotions, including 100% of U.S. Regional Vice President roles, 87% of Team Directors, and 87% of Field Leader positions. We provide our employees various learning opportunities to ensure that we maintain a diverse pipeline of talent available to regularly promote employees to leadership positions. In 2022, we successfully launched the inaugural Leadership Evolution and Development Program (“LEAD”) aimed at developing emerging leaders with the aspiration and motivation to thrive in higher roles at Chipotle. LEAD focuses on preparing a cross-functional cohort of mid-level managers for the future of work and leadership. During the nine-month program, participants learn the critical capabilities of leading oneself, leading others, and leading the business with topics designed to stretch capabilities and improve decision-making skills.

Beyond the leadership program, we support continuing education with our debt-free degrees. We now have nearly 100 degrees and 10 universities in which our employees can receive a degree completely tuition debt free.

We are also dedicated to supporting people in the communities we serve. Through our Round Up for Real Change program, restaurant guests are offered the opportunity to round up their bill to the next highest dollar amount in the Chipotle app and on chipotle.com. In 2023, approximately $3.3 million was donated through this feature to organizations such as the National Young Farmers Coalition, Folds of Honor, The Trevor Project, American Red Cross, Kids in Need Foundation, National Urban League Project and the Farmlink Project among others.

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 actions to address climate change. As a result, Chipotle has committed to reducing our absolute Scope 1 and Scope 2 greenhouse gas emissions 50% by 2030 from a 2019 base year. We also have committed to reducing our absolute Scope 3 greenhouse gas emissions 50% within the same timeframe. Our goal was approved by Science Based Targets initiative (‘SBTi”) and is in alignment with scientific recommendations of emission reductions required to keep global warming from exceeding 1.5°C.

Our strategy starts with seeking out energy efficiency opportunities to reduce our overall demand on energy resources, utilization and development of alternative low carbon resources, and use of renewable energy. We continue to identify design strategies to reduce our reliance on fossil fuels (e.g. natural gas) in our restaurants to support greater use of renewable resources. In 2023, we opened 21 all-electric restaurants removing the use of fossil fuels at these restaurants. We also matched over 51% of our electricity use with renewable energy (including on-site solar generation and a mix of renewable energy certificates). In 2023 we reduced our Scope 1 and Scope 2 emissions by 13% compared to 2019. To address Scope 3 emissions requires dedicated engagement with our supply chain partners to influence process changes and innovation to achieve our climate goals. We are committed to identifying strategies for greenhouse gas emission reductions in our value chain.

Fresh water is vital to our operations, from cooking and cleaning, to growing and processing the ingredients in the meals we serve our guests. We have optimized water use in our restaurants through recovery, reuse, recycling and proper wastewater disposal. We also prioritized supporting conservation and restoration efforts in high-risk watersheds to build resiliency and support watershed health. We believe collaboration is essential to drive change in a multi-stakeholder area like watershed conservation and management. We intend to engage in public-private partnerships, collaboration with NGOs and direct engagement with suppliers to support restoration and conservation efforts.

We are proud of our achievements in 2023 but recognize there is more work to do. We look forward to sharing our strategies and progress annually on our website at chipotle.com/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, 2023, more than 50% of our U.S.-based employee population was female and approximately 68% of our U.S based employee population was comprised of racial and ethnic minorities. In December 2021, Chipotle began pursuing Black Equity at Work Certification through Management Leadership for Tomorrow, a leading national nonprofit organization that, for the past 20 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 100 companies on how to increase diversity, equity and inclusion. In addition to pursuing a Black Equity at Work Certification, in early 2023 we engaged an independent third-party consultant to conduct a Talent Management Equity Audit to identify places in our talent management cycle where we may need to eliminate bias and/or create more equitable policies, practices, and procedures; identify potential blockers and new opportunities to create and sustain equity in talent management; and identify key strengths and pockets of risk. We plan to disclose key results and action plans from both the Talent Management Equity Audit and the Black Equity at Work Certification Program in our Sustainability Report or elsewhere on our website. 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/sustainability.

Gender and Racial Pay Equity

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 2023, we again retained an independent third-party consulting firm to conduct a pay equity analysis of our U.S. and Canadian 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. and Canadian employee population, excluding only approximately 50 of our most senior management employees. Since there are not many common roles among our 50 most senior executives, we consider both internal equity by level as well as individualized market data to help ensure we maintain pay equity among this group. The 2023 analysis, summarized below, identified small, isolated pay gaps for certain segments of the population, and we subsequently made pay adjustments to close those 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.

APPROVAL, ON AN ADVISORY BASIS, OF THE COMPENSATION OF OUR named EXECUTIVE OFFICERS AS DISCLOSED IN THIS PROXY STATEMENT

As required by Section 14A of the Exchange Act, we are asking shareholders to cast an advisory vote to approve the compensation of our named 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 compensation programs and policies applicable to, and the compensation paid to, our named executive officers. In accordance with the results of the last advisory vote to approve the frequency of the “say on pay” vote, which occurred at our 2023 annual meeting, we will hold “say on pay” votes at each year’s annual meeting.

Detailed discussion and analysis of our executive compensation programs begins on page 54. See, in particular, the disclosures under “Compensation Discussion and Analysis – 2023 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 named executive officers, compensation decisions the Compensation, People and Culture Committee made for 2023, and measures we’ve taken to align our named executive officer compensation with company performance and the creation of shareholder value.

The Compensation, People and Culture Committee believes that our executive compensation programs, including the programs applicable to our named executive officers, 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 our shareholders. Accordingly, our Board asks that you vote in favor of the following shareholder resolution:

“RESOLVED, that the compensation of the named executive officers of Chipotle Mexican Grill, Inc. as disclosed pursuant to the Securities and Exchange Commission’s compensation disclosure rules, including the Compensation Discussion and Analysis section, compensation tables and related material in the company’s proxy statement, are hereby approved.”

The “say on pay” vote is advisory and therefore will not be binding on the Compensation, People and Culture Committee, the Board of Directors, or Chipotle. However, the Compensation, People and Culture Committee and Board will review the voting results and take them into consideration when making future decisions regarding executive compensation for our named executive officers. The Compensation, People and Culture Committee sought feedback from shareholders on the 2023 “say on pay” vote and considered changes to our executive compensation program in response. See “Compensation Discussion and Analysis – 2023 Advisory “Say on Pay” Vote on Executive Compensation and Shareholder Outreach.”

The Board of Directors recommends a vote FOR the say on pay proposal.

RATIFICATION OF APPOINTMENT OF ERNST & YOUNG LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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, 2024 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 2024 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, 2024, 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 end of each five-year mandatory rotation period. Our current lead engagement partner was appointed beginning with the 2022 audit. In selecting the lead engagement partner, Ernst & Young identified candidates for consideration and the candidates were interviewed by members of our management. After considering the candidates recommended by Ernst & Young, management made a recommendation to the Committee regarding the lead engagement partner. The Committee discussed the qualifications of the proposed lead engagement partner with the current lead engagement partner and then, individually and as a group, interviewed the leading candidate and approved the appointment of the lead engagement partner as a Committee.

The Audit & Risk Committee has adopted a policy that 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, 2023 and 2022 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. Prior to the 2018 audit, Ernst & Young’s Denver, Colorado office managed the audit; however, after Chipotle relocated its headquarters to the current location in 2018, Ernst & Young’s Southern California office has managed the audit. 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.

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM’S FEES

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, 2023 for filing with the SEC.

The Audit & Risk Committee:

Scott Maw, Chairperson

Matt Carey

Mary Winston

POLICY FOR PRE-APPROVAL OF AUDIT AND PERMITTED NON-AUDIT SERVICES

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 accounting firm by type of covered service being performed or expected to be provided. Our Chief Financial and Administrative 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.

APPROVAL of Amendments to the Certificate of Incorporation to Increase the Number of Authorized shares of Common Stock

We are asking shareholders to approve amendments to our Amended and Restated Certificate of Incorporation (the “Charter”) to increase the number of authorized shares of common stock, par value $0.01 per share, from 230 million to 11.5 billion (the “Share Increase Proposal”) to implement a stock split of our common stock in the form of a stock dividend. The Board has determined that the Charter amendment is advisable and in the best interests of Chipotle and its shareholders and has approved the Share Increase Proposal, subject to shareholder approval.

The Share Increase Proposal would amend Article IV of the Charter as follows (additions are shown as double underlined and deletions are shown as struck through):

The above summary is qualified in its entirety by reference to the full text of the amended Charter, attached to this proxy statement as Appendix B.

The primary purpose of increasing the number of authorized shares of our common stock is to facilitate a fifty-for-one stock split (the “Stock Split”) in the form of a one-time special stock dividend. On March 19, 2024, our Board approved the Stock Split, subject to and contingent upon shareholder approval and the effectiveness of the Certificate of Amendment to our Charter. As of April 9, 2024, there were 27,467,305 shares of common stock issued and outstanding and approximately 2.28 million shares reserved for issuance under Chipotle’s equity compensation plans. This leaves approximately 200.3 million shares of common stock remaining available for issuance, which number is not sufficient to effectuate the Stock Split.

The Share Increase Proposal would increase the number of authorized shares of common stock from 230 million to 11.5 billion. The additional 11.27 billion shares would be a part of the existing class of common stock and, if and when issued, would have rights identical to currently outstanding shares of common stock of the Company. The preferred stock, of which none are outstanding, would not be affected.

The Board believes the Stock Split is in the best interests of Chipotle. The trading price of our common stock has risen significantly over the past couple of years and our common stock currently trades higher than most other S&P 500 companies. We believe the Stock Split would help reset the market price of the common stock, which would give employees more flexibility in managing their Chipotle shares and make our common stock more accessible to a broader range of potential investors.

If the Share Increase Proposal is approved, each shareholder of record at the close of business on June 18, 2024 (the “Record Date”) will receive, on the June 25, 2024 distribution date, 49 additional shares of common stock for each share of common stock held by such shareholder as of the Record Date. All shares issued in connection with the Stock Split will be issued in book-entry form, either through the Direct Registration System (“DRS”) or as a credit to an existing account of a shareholder of record. If you hold certificates representing shares of common stock, keep the certificate and do not return it to the Company or to its transfer agent, as it will not be necessary to submit outstanding certificates for exchange.

In connection with the Stock Split, and pursuant to the anti-dilution adjustment provisions in Chipotle’s equity compensation plans, including the 2022 Stock Incentive Plan and any other equity incentive plan or arrangement maintained by Chipotle, proportionate adjustments will be made to the number of shares of common stock that remain available for issuance pursuant to such plans, as well as to the outstanding awards under such plans. Specifically, the number of shares that remain available for issuance pursuant to such plans as well as the per-person annual award limits set forth in such plans will increase by a multiple of 50, the number of shares subject to outstanding awards under such plans will increase by a multiple of 50, and the exercise price per share of stock options granted under such plans will be divided by 50.

If shareholders approve the Share Increase Proposal at the annual meeting, we intend to file a corresponding Certificate of Amendment to our Charter reflecting the approved amendment and, if approved, the Charter Amendment Proposal covered by Proposal 5, with the Delaware Secretary of State as soon as practicable following the annual meeting, at which time the increase in the number of authorized shares of common stock would become effective.

If the Board proceeds with the Stock Split, shareholders of record as of the Record Date will receive 49 additional shares for each share held, which will be distributed after market close on June 25, 2024. Chipotle’s shares are expected to begin trading on a post-split basis at the market open on Wednesday, June 26, 2024.

The Board reserves the right, notwithstanding shareholder approval of the Share Increase Proposal and without further action by the shareholders, to elect not to proceed with the Share Increase Proposal if, at any time prior to filing the Certificate of Amendment to our Charter, the Board determines that it is no longer in the best interests of Chipotle and its shareholders to proceed with the Stock Split.

For the foregoing reasons, our Board believes that approving the Share Increase Proposal would be in the best interests of Chipotle and its shareholders.

Our Board of Directors recommends a vote FOR Proposal 4.

APPROVAL OF AMENDMENTS TO THE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION TO CLARIFY THE BOARD’S AUTHORITY TO MAKE FUTURE AMENDMENTS

The SOC Investment Group has advised us that they intend to submit the following proposal for consideration at the annual meeting. 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.

Resolved: Shareholders request the Board of Directors of Chipotle Mexican Grill, Inc. (“the Company”) commission an independent third-party audit on the impact of the Company’s policies and practices on the safety and well-being of workers. A report on the audit, prepared at reasonable cost and omitting proprietary information, should be made available on the Company’s website.

Workplace violence is recognized as a national cause for concern. The U.S. Occupational Safety and Health Administration (OSHA) states that acts of violence and other injuries are the third leading cause of fatal occupational injury in the U.S.¹ OSHA states, “However it manifests itself, workplace violence is a major concern for employers and employees nationwide.”²

Chipotle has been the subject of media reports over the past year showing staff exposure to customer violence. We believe these reports represent a growing reputational risk to Chipotle and shareholders.

In 2023, there were terrifying reports of workers being robbed at gunpoint in Pittsburgh, Pennsylvania; Rochester, Minnesota; and Columbus, Ohio as well as Chipotle workers being assaulted by customers in Parma, Ohio.

Chipotle workers have been exposed to unsanitary conditions. A Chipotle restaurant in South Florida was the subject of an investigative TV news report on health risks from unclean conditions. The report revealed overflowing sewage from the restrooms into the dining and food service areas and observed workers standing in the sewage during cleanup efforts.

The Company has come under fire for failure to protect employees’ mental, emotional, and physical well-being. The United States Equal Employment Opportunities Commission (EEOC) filed a suit against the company alleging management harassment of a female Muslim Chipotle worker in Lenexa, Kansas.

The EEOC claims a manager repeatedly requested the worker to remove her hijab and eventually forcibly took the hijab off her head. Her complaints to management went unheeded and she resigned. The Company eventually offered her a position at another location and fired the manager for an unrelated issue.

Chipotle’s Code of Ethics states the Company protects the health and safety of its employees. We believe that however well-intentioned the policy, this commitment is not being met. We urge shareholders to vote FOR this proposal.

The Board recommends a vote against this shareholder proposal because Chipotle already has an effective safety and security program and is committed to the safety and security of our employees. We do not believe an independent third-party audit is necessary or will meaningfully improve the safety of Chipotle employees for the following reasons:

The mission of the GS&R team is to support the personal safety of employees and guests, secure Chipotle’s property, and investigate incidents of theft, fraud, or other dishonesty. The team conducts periodic audits of our restaurants and offices to evaluate and identify any vulnerabilities to workplace violence or life safety hazards, and they take prompt corrective action to reduce any risks identified. GS&R’s 24/7 Global Security Operations Center (GSOC) constantly monitors for severe weather, public protests, civil unrest, geopolitical disruptions, and other external threats that could impact a Chipotle facility or employee and proactively implements safety precautions, which may include onsite security personnel, closure of a facility, and implementation of a customized Employee Protection Plan.

We also monitor any known harassment, violence, or threats from any person toward any of our employees and proactively implement safety precautions. We investigate and report to the police any threat that is direct or specific, and we assign an onsite security guard until the threat is assessed and resolved. All Chipotle restaurants are equipped with a duress button that will trigger a silent alarm to the GSOC and our third-party alarm monitoring partners in the event of an emergency in the restaurant. Our restaurants are open to the public and we are subject to state and local laws and regulations that may restrict some safety measures otherwise available to us, but our commitment is unwavering: we abhor any violence or threats of violence against our employees or guests and we are committed, to the extent it is within our reasonable control, to protect the safety and security of all people who enter our premises.

We believe our strong safety and staffing policies and procedures evidence our commitment to providing a safe workplace for our employees. We have numerous policies to ensure the safety of all people who enter our facilities, including our Workplace Violence Policy; Theft and Criminal Conduct Policy; Restaurant Security Policy; Heat Illness Prevention Plan; Environment, Health and Safety Program Manual; Injury, Illness Prevention Program; and Restaurant Emergency Procedures that cover natural disaster, active aggressor, bomb threat, fire and similar occurrences. We regularly monitor circumstances and implement best practices to create a safe workplace environment.

We also maintain policies on the staffing of our restaurants to ensure we always have sufficient employees to safely operate the restaurant and will close restaurants or limit services offered in the event we fall short of our staffing model. The shareholder proponent cites our former restaurant in Augusta, Maine and alleges that Chipotle workers raised safety concerns due to understaffing. What the proponent does not state is that Chipotle engaged in a prolonged, aggressive recruiting effort to hire additional employees at that restaurant to meet the requirements of our staffing policies. When we were unable to hire sufficient employees for that location, we acted in the best interest of our employees’ safety and permanently closed the Augusta, Maine restaurant (at significant cost to Chipotle) and offered all employees of that restaurant positions at other Chipotle restaurants.

We regularly review our safety and security policies and procedures to ensure they are effective and address top risks.

It is Chipotle’s policy that all policies should be reviewed at least annually to ensure they remain relevant and to update them for changes in processes and regulations and for experiences and learnings acquired since the last update. Our GS&R team also conducts periodic audits of our restaurants and offices to evaluate and identify any vulnerabilities to workplace violence or life safety hazards, and promptly take necessary corrective action to reduce any risks identified and update our programs and practices to reflect changes.

For all of the foregoing reasons, our Board believes that Chipotle already has sufficient policies and procedures to protect the safety and security of all people who enter our premises, to the extent it is within our reasonable control, and that the proposed audit is neither necessary nor will meaningfully improve the safety of Chipotle employees.

Our Board of Directors recommends a vote AGAINST Proposal 6.

Proposal 7 – Proposal requesting adoption of a Non-Interference Policy

The Comptroller of the City of New York has advised us that they intend to submit the following proposal for consideration at the annual meeting. 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.

RESOLVED: the Board of Directors of Chipotle Mexican Grill, Inc. (“Chipotle”) shall adopt and disclose a Noninterference Policy (the “Policy”) upholding the rights to freedom of association and collective bargaining in its operations as reflected in the International Labour Organization’s Declaration on Fundamental Principles and Rights at Work (“Fundamental Principles”) and the United Nations Guiding Principles on Business and Human Rights (“UNGP”). The Policy should contain commitments to the following:

Freedom of association and collective bargaining are fundamental human rights under internationally recognized human rights frameworks, including the Fundamental Principles, UNGP, and United Nations Universal Declaration of Human Rights (“Declaration”).

According to the International Labour Organization, “Freedom of association refers to the right of workers …to create and join organizations of their choice freely and without fear of reprisal or interference.”⁴

As stated in the UNGP guide, “…where national laws and regulations offer a level of human rights protection that falls short of internationally recognized human rights standards, enterprises should operate to the higher standard.”⁵

Chipotle’s Code of Ethics is indeterminant as to which standards prevail if applicable laws offer human rights protections that fall short of international human rights standards: “[w]e conduct our business in a way that respects fundamental human rights…and we support and align around the standards set out in [Declaration] and other applicable federal, state, provincial and local laws.”⁶ Chipotle should adopt a Policy upholding workers’ exercise of their fundamental rights under international standards and U.S. law.

Since May 2022, Chipotle has settled 11 unfair labor practice charges brought before the National Labor Relations Board (“Board”) involving workers’ right to organize.⁷ Alleged tactics include retaliatory firings, restaurant closure, anti-union consultants, and captive audience meetings.⁸ In November 2023, Chipotle reportedly faced five open unfair labor practice charges at the Board.⁹ In 2023, Chipotle agreed to pay 24 employees $240,000 after closing a Maine store where workers tried to unionize.¹⁰

Microsoft has adopted company-wide noninterference Principles¹¹ and announced a “labor neutrality agreement” at Activision Blizzard, which “reflects a fundamental belief ... that enabling workers to freely and fairly make a choice about union representation will benefit Microsoft and its employees...”¹²

Chipotle’s failure to similarly respect workers’ rights presents reputational, legal, and operational risks that may negatively impact long-term shareholder value.

Board of Directors’ Statement in Opposition

Chipotle’s vision is to cultivate an environment where our employees can thrive, pursue their passion and become lifelong leaders. We are committed to investing and supporting our employees because our people are our most important asset and give us a competitive advantage in our business – without an engaged and committed workforce, we will not be able to meet our strategic and growth goals. Our Board recommends a vote AGAINST this proposal for the following reasons:

We respect our employees’ right to form and to join – and to not join, if that is their preference – collective bargaining associations. In 2023, we discussed a virtually similar proposal with the shareholder proponent and, in response to that discussion, we expanded the language in our Code of Ethics to more clearly express our support for employees’ rights to organize – expressly referencing the ILO Declaration on Fundamental Principles and Rights at Work and the National Labor Relations Act – and emphasize our intolerance of retaliation. Our Code of Ethics now states that:

We demonstrated our commitment to timely bargain in good faith when employees voted to form a union at our Lansing, Michigan restaurant. In August 2022, employees at that restaurant voted to form a union and throughout the entire campaign process no charges were filed claiming that Chipotle engaged in any misconduct. Since that election, Chipotle has engaged in good faith bargaining with the Lansing, Michigan employees’ group, meeting regularly with them to work towards a collective bargaining agreement.

The shareholder proponent seems to imply that we closed our Augusta, Maine restaurant due to employees’ efforts to unionize. That is not true. The truth is that we closed the Augusta, Maine restaurant due to our inability to properly staff the restaurant, despite our sustained recruiting efforts. We ensure we always have at least the minimum number of employees needed to safely operate our restaurants and we will close restaurants or limit services if we have too few employees. Chipotle engaged in a prolonged, aggressive recruiting effort to hire additional employees for the Augusta, Maine restaurant to try to meet our staffing policies. When we were not able to hire sufficient employees for that location, we acted in the best interest of our employees and permanently closed the restaurant and offered all employees of that restaurant positions at other Chipotle restaurants. Contrary to the proponent’s suggestions, we reviewed this situation as we would any other restaurant with unique staffing challenges and made the decision unrelated to any organizing activities occurring in the restaurant.

Chipotle respects the right of employees to organize under the National Labor Relations Act. While unfair labor practices charges have been filed against Chipotle, charges are not lawsuits. They can be filed by anyone for any reason and the NLRB will investigate them even if they have no merit. In none of the unfair labor practice charges filed against Chipotle has there been any legal decision concluding that Chipotle has violated the law. Nonetheless, in some of those cases, Chipotle decided that entering into a settlement was in the best interest of Chipotle and our crew and avoided expending resources on litigation.

We are committed to complying with applicable law in every jurisdiction in which we operate, and we believe those laws provide strong protection for our employees. As of December 31, 2023, we employed over 116,000 people and over 98% of our employees work in the United States. We believe that federal, state and local laws in the United States regarding employment, employees’ rights and human rights are among the strongest and most comprehensive in the world, in addition to being applicable to almost all of our restaurants. We have employees working in 48 states and the District of Columbia, and the proponent’s request that “where national or local law is silent or differs from international human rights standards, Chipotle will follow the higher standards” is not only unworkable but also would create confusion among our employees regarding what rights they have and how to enforce them. In the United States, we comply with the federal National Labor Relations Act (in addition to other applicable laws), which provides a clear, consistent standard governing the vast majority of our restaurants.

We have created a culture of open communication, which places no restrictions on our employees’ ability to freely discuss their wages and conditions of employment, and we maintain multiple avenues for employees to report concerns.

To ensure compliance with our employment policies, we provide multiple avenues for employees to raise concerns, including our Respectful Workplace Hotline, where employees can report complaints (anonymously if they wish) about inappropriate workplace behavior, including complaints of any restrictions on freedom of association and retaliation. We take every Hotline complaint seriously and regularly report to the Audit & Risk Committee of our Board of Directors about Hotline complaints and how they are resolved. In addition, we train or retrain employee populations as appropriate based on Hotline complaints and monitor changes in complaints in response to those initiatives. We also encourage our employees to bring their concerns to any trusted manager, a member of the human resources team, or a member of our Ethics & Compliance team. We strongly believe that fostering open dialogue between our employees and their managers and support teams provides employees with the most direct and efficient means of resolving any concerns they may have.

We value our employees and we take steps to ensure that we maintain high employee satisfaction. In 2023, we received external recognition for creating cultural equity for employees from the American Opportunity Index, Bloomberg (Gender Equality Index), Forbes (Best Brands for Social Impact), Fortune (500, America’s Most Innovative Companies, and World’s Most Admired Companies), Human Rights Campaign (Corporate Equality Index), Investor’s Business Daily (100 Best ESG Companies), JUST Capital (America’s Most Just Companies), Latino Leaders (Best Places to Work for Latinos), Newsweek (Excellence 1000 Index) and TIME (100 Most Influential Companies).We offer career advancement opportunities, competitive wages and industry-leading benefits, such as crew bonuses, free meals, educational assistance and debt free degrees, and formally engage with our employee base on a regular basis. In 2023, we promoted over 24,000 employees, and 90% of all restaurant management roles were internal promotions, including 87% of Field Leader positions.

We are proud of our employees and the culture we have created together – by providing equity and inclusivity, development opportunities, strong support and monetary rewards, we believe we have created an environment where people can thrive and pursue their passion. The Board of Directors recommends a vote “AGAINST” this proposal because we do not believe it would enhance our existing employee engagement or commitment to protecting employee rights, and it would not create additional benefits to our employees or value for our shareholders.

Our Board of Directors recommends a vote AGAINST Proposal 7.

Proposal 8 – Proposal requesting a Report on adoption of automation

The International Brotherhood of Teamsters General Fund has advised us that they intend to submit the following proposal for consideration at the annual meeting. 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 request the Chipotle Mexican Grill, Inc.’s (“Chipotle” or the “Company”) Board of Directors prepare a report on the principles by which the company seeks to address and measure the social implications on its workforce of the growing adoption of advanced technologies, including artificial intelligence and automation. The report should be prepared at reasonable cost, omit proprietary information, and be available to investors.

We live in a time of major change. The climate crisis has prompted significant changes in many aspects of human behavior, along with a recognition corporations should consider the social costs of this change. For example, the International Labor Organization (ILO) emphasizes the need to commit to “decent work” as society addresses the climate challenge. The four pillars are “social dialogue, social protection, rights at work and employment.” (https://www.ilo.org/wcmsp5/ groups/public/@ed_emp/@emp_ent/documents/publication/wcms_432859.pdf)

The looming changes from artificial intelligence and automation – which risk significant changes in the economy and everyday life – present similar concerns about how to protect decent work, especially if the social costs of these changes are ignored.

A recent report by the McKinsey Global Institute finds “Generative AI is both accelerating automation and extending it to an entirely new set of occupations,” warning that “almost 12 million occupational changes will need to take place …[before] 2030. Over 80% of those jobs fall into four occupations, including food service. McKinsey notes “[m]ost of these workers are lower paid, and disproportionately composed of less educated workers, women, and Black and Latino Americans.” (https://www.mckinsey.com/mgi/our-research/generative-ai-and-the-future-of-work-in-america) Goldman Sachs estimated roughly two-thirds of current jobs in the US and Europe are exposed to “some degree of AI automation.” (https://www.gspublishing.com/content/research/en/reports/2023/03/27/d64e052b-0f6e-45d7-967b-d7be35fabd16.html)

The ILO warns “those who lose their jobs … may be the least equipped to seize the new job opportunities,” and calls for “harnessing and managing technology for decent work.” (https://www.studocu.com/row/document/arab-academy-for-science-technology-maritime- transport/human-resource-management/ilo-2019-international-labor-organization-with-highlighted-important-topics/47547465) McKinsey emphasizes advances in technology must be “well managed,” by employers and policy makers, with “clear guidelines and guardrails” so workers “see these tools not as job destroyers but as work enhancers.”

The risk is particularly great in the restaurant sector. The investment bank TD Cowen says automation and AI are “nearing a tipping point” in the industry with “increased momentum” catalyzed by a “tight labor market…emerging risks from unionization,” and the “longer-term potential to reduce labor costs.” (https://www.cowen.com/insights/revolution-in-restaurant-automation/) One consulting firm estimates “[u]p to 82% of restaurant positions could, to some extent, be replaced with robots.” (https://aaronallen.com/blog/restaurant-robotics) The Washington Post notes, “th[is] shift comes as concern is rising over the effect of automation on job security, and as fast-food workers nationally demand higher wages and better working conditions.” (https://www.washingtonpost.com/business/2023/10/03/chipotle-robots-bowls-salads/)

Chipotle touts new technologies as central to its future, but apart from generalities – such as claiming new technologies will “unlock the human potential” of employees – Chipotle fails to disclose the principles that will guide Chipotle’s efforts to ensure these transformations to the workplace are just and equitable.

Our Board recommends a vote AGAINST this proposal for the following reasons:

Chipotle has been working with several product development companies, but we have not yet implemented any advanced technologies in our restaurants.

In 2022, Chipotle launched Cultivate Next, a venture fund formed to make early-stage investments into strategically aligned companies that further the Company’s mission to Cultivate a Better World and help accelerate our aggressive growth plans. To date, Chipotle has invested in a wide range of companies innovating in areas such as farming, supply chain, advanced robotics, and plant-based foods, and only two of our investments have applications that are relevant to this proposal.

One relevant investment is in Hyphen, which is developing a foodservice platform that can be developed into an automated digital makeline that builds bowls and salads underneath, while Chipotle employees use the top makeline to craft burritos, tacos, and quesadillas. The other is our investment in Vebu, which is developing “Autocado,” a robot that can cut, core, and peel avocados. Both Hyphen and Autocado are progressing through Chipotle’s stage-gate process and will undergo an operational test in one restaurant in spring 2024. No decisions have been made on whether to scale either of these platforms or how and when they would potentially be rolled out, so our Board believes that this proposal is premature.

The innovations Chipotle is exploring, such as Hyphen and Autocado, are intended to remove less favorable tasks for restaurant crew members so they can focus on our guests, as well as support order accuracy and improved throughput. Hyphen is a ‘cobot’ (a collaborative robot) that is designed to work in tandem with Chipotle crew members and is expected to augment labor, not replace it, while Autocado is being developed to reduce one of our more tedious food preparation tasks – cutting and coring avocados to make our hand mashed guacamole. Although in some industry sectors advanced technologies, including artificial intelligence and automation, are being developed specifically to reduce headcount, the technology we are developing is intended to improve operations rather than facilitate staffing reductions. One hallmark of our “guest obsessed” culture is to free up our restaurant crew to enable them to focus on connecting with and serving our guests. Our makeline format provides opportunities for crew members to engage with guests throughout the order process, and we believe using automation to eliminate some of our kitchen tasks will enhance that engagement.

Our business requires a significant number of restaurant employees and our recruiting team is constantly working to fill new and open positions. In January 2024, we announced that we are looking to hire 19,000 additional employees for our busiest time of year running from March to May, and we introduced new benefits to our already best-in-class employee benefits to attract new employees. Although well intentioned, this proposal is not needed to preserve jobs at Chipotle. For these reasons, the Board of Directors recommends a vote “AGAINST” this proposal.

Our Board of Directors recommends a vote AGAINST Proposal 8.

Proposal 9 – REQUESTING A Report on harassment and discrimination statistics

The New York State Common Retirement Fund has advised us that they intend to submit the following proposal for consideration at the annual meeting. 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.

Resolved: Shareholders request the Board of Directors oversee the preparation of an annual public report describing and quantifying the effectiveness and outcomes of efforts by Chipotle Mexican Grill, Inc., (Chipotle) to prevent harassment and discrimination against its protected classes of employees. In its discretion, the Board may wish to consider including disclosures such as:

This report should not include the names of accusers or details of their settlements without their consent and should be prepared at a reasonable cost and omit any information that is proprietary, privileged, or violative of contractual obligations.

Chipotle states in its Code of Ethics, “We will not tolerate any form of harassment. Harassment includes but is not limited to any unwanted conduct based on a person’s protected characteristics that creates an intimidating, degrading, offensive or hostile work environment that interferes with an employee’s ability to do their work or adversely affects their employment opportunities.”

There have been several high-profile derivative suits settled including at Twentieth Century Fox, Wynn Resorts, and Alphabet, alleging boards breached their duties by failing to protect employees from discrimination and harassment, injuring the companies and their shareholders.

Civil rights violations within the workplace can result in substantial costs to companies, including fines and penalties, legal costs, costs related to absenteeism, reduced productivity, challenges recruiting, and distraction of leadership. A company’s failure to properly manage its workforce can have significant ramifications, jeopardizing relationships with customers and other partners.

A public report such as the one requested would assist shareholders in assessing whether the Company is improving its workforce management.

Board of Directors’ Statement in Opposition

At Chipotle, our vision is to cultivate an environment where our employees can thrive, pursue their passion and become lifelong leaders. We are committed to investing and supporting our employees because they are our most important asset and give us a competitive advantage in our business – without an engaged and committed workforce, we will not be able to meet our strategic and growth goals. Although we appreciate the spirit in which this proposal was submitted, after careful consideration our Board recommends a vote AGAINST this proposal for the following reasons:

In our employee handbooks, Code of Ethics and communications with our employees, we are very clear that we will not tolerate any form of harassment, including any unwanted conduct based on a person’s protected characteristics that creates an intimidating, degrading, offensive or hostile work environment that interferes with an employee’s ability to do their work or adversely affects their employment opportunities. We define “protected characteristics” broadly to include race (including traits historically associated with race, such as hair texture and hairstyles protected by applicable law, including braids, locks, and twists), ethnicity, religion, religious creed (including religious dress and grooming practices), color, caste, sex (including childbirth, breast feeding, sex-based stereotypes, and related medical conditions), gender, gender identity or expression, sexual orientation, national origin, ancestry, citizenship status, uniform service member and veteran status, marital status, pregnancy, age (40 and over), protected medical condition and other protected classes. We do not tolerate retaliation of any kind against any employee who, in good faith, reports suspected inappropriate behavior or unethical conduct. We are also proactive in training on these policies and we retain an independent third-party consulting firm to conduct an annual gender and racial pay equity analysis of our U.S. and Canadian workforce, the results of which are reported on page 0 of this proxy statement.

To ensure compliance with our policies, we provide multiple avenues for employees to raise concerns, including our Respectful Workplace Hotline, where employees can report complaints (anonymously if they wish) about inappropriate workplace behavior, including alleged harassment and discrimination. We investigate every Hotline complaint involving harassment or discrimination, and regularly report to the Audit & Risk Committee of our Board of Directors about Hotline complaints and resolutions of those complaints. In addition, we train or retrain employee populations as appropriate based on Hotline complaints and monitor changes in complaints in response to those initiatives.

We believe our existing procedures are effective in both preventing and in promptly remediating incidents of discrimination and harassment in our workforce.

The proponent references two incidents in which Chipotle employees made allegations of sexual harassment and religious discrimination. We believe even one allegation is too many; however, we also recognize that with over 237,000 employees working for us for some period during the year (including turnover), no policies or programs will prevent all incidents of inappropriate behavior. We believe our proactive initiatives and our swift response to complaints evidence our commitment to providing a safe workplace where all employees can thrive and pursue their passions.

Similar to many other large employers, we previously required all new hires to sign an arbitration agreement covering the resolution of all employment-related disputes. Starting in September 2020, we incorporated an opt out provision into our arbitration agreements, allowing all new employees to opt out of the arbitration agreement. Although we still believe that both employees and the Company benefit from arbitrating employment-related complaints, we give employees the choice.

We do not believe that the proposed report would provide shareholders with meaningful information, and the report would require disclosures that are not customary among our restaurant peers, which could cause us competitive harm, and would divert resources better used in training and investigating.

The proposed report would require us to disclose a wide range of detailed statistics that would require significant resources to systematically track and that we do not believe would provide meaningful information to enable our shareholders to assess the effectiveness of our practices. The turnover rate for retail and restaurant employees is over 100% industry-wide, and it would be difficult to accurately determine the specific turnover rate for employees who raise harassment or discrimination concerns, relative to total turnover, because over 40% of Hotline complaints are reported anonymously. We investigate all complaints of discrimination or harassment, and in 2023 the vast majority of complaints were determined to be unsubstantiated. Therefore reporting the number of complaints without more details could be misleading. In addition, the report would require Chipotle to provide detailed disclosures that are not customary among our restaurant industry peers and therefore would be viewed without the appropriate context or basis for comparison. Without such comparable metrics from our peers, the Company could be subject to increased litigation and reputational risk and could be put at a competitive disadvantage in recruiting and retaining qualified employees. Also, the resources required to compile the requested report would divert management attention and resources away from investing in initiatives, such as training and investigating complaints, that would further prevent inappropriate behavior. For these reasons, we do not believe that producing the proposed report would be a good use of Company resources or in the best interest of our shareholders.

Our Board of Directors recommends a vote AGAINST Proposal 9.

EXECUTIVE OFFICERS

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, 2024, are as follows:

LETTER FROM THE COMPENSATION, PEOPLE AND CULTURE COMMITTEE OF OUR BOARD OF DIRECTORS

We had an exceptionally strong year in 2023, driven by our focus on exceptional people, exceptional food and exceptional throughput. We believe our focus on recruiting and retaining great employees, consistently serving delicious, fresh food, and setting high operational standards positioned Chipotle for success last year and into the future. Our team posted outstanding results in 2023:

We remain focused on cultivating an environment where our employees can thrive and deliver great culinary and strong in-restaurant execution. We also made strategic investments in our long-term future by forming our first international partnership, leveraging and amplifying our use of technology, and investing in companies that are innovating and disrupting the agriculture and restaurant markets.

We are proud of our financial performance in 2023 and the momentum we are building for our future strategic growth, while at the same time maintaining cultural relevance among our employees and guests. We are a performance-driven company, and our 2023 financial results drove the payouts under Chipotle’s 2023 annual incentive plan (“AIP”) and 2021 performance share unit (“PSU”) awards described on the following pages. We believe there is a strong connection between our financial results and shareholder returns. The corresponding robust goals that we set under our incentive plans help to ensure high performance for one drives high performance for all.

In the Compensation Discussion and Analysis section that follows, we provide further details about Chipotle’s compensation philosophy and decisions that this Committee believes clearly link executive pay delivery to company and individual performance, support continued growth and align the interests of our leaders with our employees, guests and shareholders.

Compensation, People and Culture Committee:

Patricia Fili-Krushel, Chair

Gregg Engles

Laura Fuentes

COMPENSATION DISCUSSION AND ANALYSIS

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 and Administrative Officer (“CFAO”), and our three next most highly compensated executive officers for the year ended December 31, 2023 (collectively, “NEOs”), and explains the Compensation, People and Culture Committee’s decisions regarding the 2023 compensation of our NEOs. 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.

We delivered outstanding performance in 2023 as we surpassed $3 million in average unit volumes (AUVs) driven by strong transaction growth fueled by our focus on throughput and successful menu innovation. We also opened a record number of new restaurants, including our 800th Chipotlane, and formed our first international partnership. Looking forward, we believe we are well positioned to pursue our long-term growth opportunities. As a performance-driven company, our outstanding 2023 financial results resulted in over 200% payouts under Chipotle’s 2023 annual incentive plan (“AIP”) and a 278% payout under the 2021 performance share unit (“PSU”) awards, which are described in this section.

 

2023 Advisory “Say on Pay” Vote on Executive Compensation and Shareholder Outreach

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, People and Culture 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 2023, our target variable, at-risk pay comprised 93% of our CEO’s compensation and 88% of our other NEO’s compensation.

 

The Compensation, People and Culture Committee sets compensation for the executive officers annually after considering the following factors:

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 determines the CEO’s compensation 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 personal contributions to the company’s success. The Committee is responsible for reviewing the CEO’s recommendations and setting and approving compensation for all executive officers.

As part of its review of executive compensation, the CEO and the Compensation, People and Culture 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 additional information or seek clarifications, and discuss the proposed compensation plan before final approval.

The Compensation, People and Culture 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 most 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.

In setting 2023 pay levels, in addition to peer group data, the Committee also considered our progress on achieving our strategic objectives, current target compensation opportunities, internal equity, the value of outstanding equity awards and the overall design of our executive compensation program. We believe our executive compensation program has consistently demonstrated strong alignment with financial performance and shareholder value creation.

In identifying companies for potential inclusion in the peer group, the Compensation, People and Culture Committee used the following criteria:

Chipotle’s revenues rank at the 35th percentile of this peer group, and our market capitalization ranks at the 64^th percentile of this peer group (as of December 31, 2023), which confirmed for the Committee that this peer group is appropriate in generally reflecting comparable organizational size and related complexity.