Chipotle Bosses See Big Pay Cuts After Norovirus, E.coli Outbreaks


Chipotle is still deep in troubled waters. Although its E. coli outbreaks have been declared over by the Centers for Disease and Control Prevention (CDC) in February, four of its employees at a Massachusetts branch were reported to have tested positive for norovirus last week.

The strings of food-borne illness incidents have now prompted Chipotle to revise its incentive plan and cut off its executive officers' bonuses.

In 2014, company shareholders exercised the power to reject the pay packages of co-CEOs Monty Moran and Steve Ells. It was dubbed "say on corporate pay," and has been a seminal moment for investors.

Fast-forward to now, and the company has relied stronger on the "say-on-pay" vote as it weathers the biggest crisis it has faced ever. This time, it has cancelled 2015 executive bonuses.

The E. coli and norovirus outbreaks have negatively impacted the company's 2015 fourth quarter results. Chipotle earned $68 million at that time, a huge 44 percent drop from its 2014 earnings.

With its revised incentive plan, Chipotle's Compensation Committee and board of directors will only grant rewards if management is able to repair the food chain's value.

In a letter posted by Forbes, Chipotle lead director Neil Flanzraich and board members Pat Flynn and Darlene Friedman said that "programs should reward success when the management team's efforts build shareholder value, and limit compensation when shareholder value declines and/or goals are not achieved."

Still, even though Moran and Ells saw their pays decrease by about half of what they were paid in 2014, both executives still earned millions.

Ells received $13.8 million last year, including incentives. It was a 52 percent drop from the $28.9 million he earned in 2014.

Moran received a similar pay cut. He earned $13.6 million in 2015 after receiving $28.1 million the year before.

As part of the revised plan, the Moran and Ells did not receive stock options, but were given stock awards worth $12 million, the Wall Street Journal reported.

Likewise, other members of the C-suite received high earnings.

Chief Financial Officer (CFO) Jack Hartung received $6 million in total earnings, while Chief Creative Officer Mark Crumpacker received $4.3 million. Six of Chipotle's seven non-employee board of directors made more than $200,000 in total pay in 2015.

Meanwhile, Chipotle still has high hopes.

"We have the utmost confidence in the abilities of this team to rebuild the shareholder value that was lost in late 2015 and early 2016 and to continue to grow the value of Chipotle," the company wrote.

Photo : Mike Mozart | Flickr

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