Chipotle Mexican Grill’s
top bosses have extra reason to make sure the burrito chain recovers from its year of food safety mishaps: their compensation.
Last year, the fast-service restaurant chain was rocked by an E.Coli outbreak that closed dozens of restaurants and made headlines for months, decimating its sales results and keeping diners away for months: last quarter, same-restaurants sales (which exclude the impact of newly opened or closed outlets) fell 15%. It was also hurt by norovirus outbreaks at two Boston-area restaurants, the most recent case occurring last week.
Those incidents, as well as a federal probe into its food safety practices, have weighed on Chipotle’s shares, which remain about 33% below pre-crisis peaks, a tough reversal of fortune for the one-time Wall Street darling. (They are now trading in the low $500-range, up from around $400 at the trough in December as the crisis seems to be ebbing, last week’s norovirus case notwithstanding.)
So now, Chipotle’s brass will future compensation tied directly to the company’s share price performance, according to a filing with the U.S. Securities and Exchange Commission.
In the filing, Chipotle’s board said that share prices would have to return to above $700 for 30 straight days to trigger the new stock awards, meaning shares have to rise 40% or so for those incentives to kick in.
“We had concerns that using 2015 year-end financials or stock price at the beginning of 2016 as the basis for relative performance evaluation for a 2016 performance share program could create a misalignment of shareholder returns and executive officer compensation,” lead director and compensation committee chair Neil Flanzraich said in a letter to shareholders included in securities filing.
Chipotle’s co-CEO’s, Monty Moran and Steve Ells, have already been dinged by the food safety crisis: neither received bonuses for 2015, so their total compensation fell by about half each.