Executive compensation challenges: the Chipotle case

| Apr 30, 2014 | Business Litigation

In terms of legal compliance, corporate governance has become a more challenging endeavor in recent years.

After all, within a decade, Congress passed two major laws that affect such governance. One was the Sarbanes-Oxley Act in 2002. This was followed, in 2010, by the corporate regulatory law that is commonly called Dodd-Frank.

These laws address a host of corporate governance issues, from accounting standards to required disclosures about executive compensation.

In this post, we will take note of a breaking news story that raises the issue of executive compensation.

The story concerns a national restaurant chain called Chipotle Mexican Grill. The company is facing sharp criticism from shareholders who contend that executive compensation there is excessive.

Critics point out that a handful of executives – five people – received a total of more than $67 million in compensation last year. This level of compensation appears to be out of line with some other well known companies, such as Coca-Cola and General Electric.

A shareholders’ group at Chipotle is planning to challenge the compensation in a shareholders’ vote later this year. The group sent a letter to the U.S. Securities and Exchange Commission this week, documenting its concerns about excessive compensation.

Not surprisingly, Chipotle’s board defended the company’s executive compensation structure. But clearly the company is under increasing scrutiny for its compensation practices.

It isn’t only that the overall compensation level for top executives is so high. It is also the fact that the company continues to use numerous perks like commuting allowances and housing expenses for its executives that are out of line with many other companies.

Source: The Denver Post, “Shareholder group takes aim at Chipotle executive pay,” Aldo Svaldi, April 25, 2014