Chipotle Investors Want Diversity, Calls For Board Shakeup


It looks like Chipotle's woes aren't over. Still struggling to shake off a string of food safety scares, the popular Mexican grill is facing a contentious board shakeup.

CtW Investment Group urged investors of Chipotle Mexican Grill Inc. to stop the re-election of two long-serving board members, saying that the Chipotle board is "too white, too male and too entrenched".

In a letter to the board on April 13, Dieter Waizenegger, executive director of CtW Investment Group, called for shareholders to withhold support for Patrick Flynn and Darlene Friedman during the upcoming May 11 annual meeting.

Flynn has been on the Chipotle board for 18 years and Friedman for 21 years while the average tenure for board members is 17 years. Friedman is the sole female member in a nine-member board with seven independent members.

CtW, which holds a relatively minor stake of 55,000 Chipotle shares, claims that Chipotle's board is "one of the least diverse, least independent boards among the S&P 500." Highlights of the issues that it made public are:

    • "Excessively long director tenure"
    • "A shocking dearth of racial and gender inequality"
    • That Chipotle has outgrown its board

CtW Investment Group works with pension funds sponsored by a federation of unions representing an estimated 5.5 million members. It has a history of inciting for governance reforms, having been a dominant player in fighting for executive compensation adjustments at Chipotle in 2014, saying the executives should not be treated as "Sun Kings." CtW also called for a no-vote on Chipotle Co-CEO's annual compensation in the same year.

CtW likewise helped push for changes at other companies like Bank of America (BofA), Oracle Group and Arcos Dorados Holdings.

CtW last year agitated shareholders at BofA to force CEO Brian Moynihan to resign from his chairmanship, a post he hasn't given up so far.

At CtW prodding, Oracle changed its executive compensation package.

CtW also dipped its fingers into Arcos Dorados Holdings, McDonald's largest franchisee. The union-backed group called for SEC investigation into the franchisee's alleged secretive transactions, urged Arcos Dorados shareholders to withhold votes for CEO Woods Staton, and filed a complaint to NYSE questioning the eligibility of Arcos Dorados' listing.

McDonald's, Walmart, Wendy's Company, Domino's Pizza, Universal Health Services, Caterpillar Inc., and Massey were all targeted by CtW for institutional reforms.

Chipotle shares shed off 1.3 percent with a value of $438.95 in afternoon trading on April 13 while the stock is down 35 percent over the past year.

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