What’s Chipotle trying to pull here?

May 27, 2008

Normally, anything filed late on a Friday means that a company is trying to bury something pretty juicy. That’s doubly true when that late Friday filing happens before a holiday weekend when the markets are closed. So you can imagine my surprise to see this 8K filed by Chipotle (CMG) at 5:27 pm on Friday afternoon.

The filing has to do with various types of compensation — exactly the type of filing that’s ripe for late Friday hi-jinks. But that’s simply not the case here. Among the changes are a raise for Chipotle’s directors — from an $80K retainer to a $100K retainer. But the $20K raise is all in stock, which — how radical — aligns Chipotle’s directors with its shareholders. Given that Chipotle’s stock is down about 40% so far this year, that sends the right signal to investors.

Ditto for the other change in Friday’s filing which replaced the vesting of restricted shares based on merely having a particular job in favor of restricted stock based on performance plus service, which the company describes in the filing as being “performance contingent”. The difference here is that Chipotle’s top executives have to do more than just take up space at company headquarters in order to receive the shares. They also have to do a good job, which surprisingly enough is still pretty rare at many other companies. Under the plan, CEO Steve Ells received 55,000 of these shares, which the filing notes replaced an equal number of the unvested service-based shares. Other top executives also had their service-based restricted shares replaced.

For this, Chipotle gets a rare footnoted gold star. Even if filing late on a Friday before a holiday weekend totally screwed with my head!

UPDATE (6/3): I may have been a bit too quick to celebrate Chipotle here. David Milstead of the Rocky Mountain News, Chipotle’s home-town paper, has a different take on the disclosure, noting that the company has been less than forthcoming when it comes to disclosing the performance targets needed to get those options. Plus, the company gets a nice tax benefit to boot.

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