Chipotle's Outgoing CEO Will Need Shares to Soar to Get Payoff

(Bloomberg) -- Chipotle Mexican Grill Inc. founder Steve Ells, who announced plans this week to step down as chief executive officer, will be awarded stock options with an ambitious price target -- a sign the company has high hopes for its shares in the coming years.

Ells will get 175,000 options in January with an exercise price of $500 or the closing price on the date they're granted -- whichever is bigger. The stock has slid 18 percent this year to $307.59 on Friday, meaning the shares will have to gain than 60 percent for the executive to see a payoff.

Even as Ells vacates the CEO role, he plans to remain closely involved with Chipotle, staying on as executive chairman. The company embarked on a search for a new leader on Wednesday after struggling to pull out of a two-year slump. Foodborne-illness outbreaks and other woes -- including a data breach -- have dogged the burrito chain, hammering its share price and reputation.

He can exercise the options 18 months after they're granted, the Denver-based company said Friday in a regulatory filing. The securities will expire after five years, which is shorter than the usual seven- or 10-year life of options granted to public company executives.

Ells, who'll remain CEO until a successor is found, will also receive a $900,000 base salary in his new role, down from $1.54 million, and be eligible for a $900,000 target annual bonus.

During Chipotle's heyday -- prior to 2015 -- Ells drew criticism for overly generous compensation. CtW Investment Group had railed against the pay packages, saying Ells and former co-CEO Monty Moran were treated like “sun kings.”

To contact the reporter on this story: Anders Melin in New York at amelin3@bloomberg.net.

To contact the editors responsible for this story: Alicia Ritcey at aritcey@bloomberg.net, Lisa Wolfson, Nick Turner

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