A shareholder group pushing for board changes at Chipotle Mexican Grill Inc. is seeking allegiance from activist investor William Ackman, according to a letter made public Tuesday.
The union-affiliated CtW Investment Group for months has been urging Chipotle to diversify the makeup of its board as the Denver-based chain struggles to recover from a foodborne illness crisis last year. Most recently, CtW and Amalgamated Bank filed nonbinding shareholder resolutions to remove Chipotle founder and CEO Steve Ells as chairman of the board.
Ells’ co-CEO Monty Moran stepped down on Monday and gave up a board seat. Chipotle officials have promised board changes are coming, and Ells vowed to correct the chain’s ongoing guest experience troubles.
In an open letter Tuesday, however, CtW sought to move the process along by joining forces with Ackman of Pershing Square Capital Management, which holds a nearly 10-percent stake in Chipotle.
Despite Moran’s departure, CtW executive director Dieter Waizenegger said the group remains troubled by Chipotle’s trajectory and argued that eliminating the co-CEO structure is not a suitable stopping point.
“Chipotle is in critical need of several new independent directors who will bring new points of view and objective expertise to the company’s enterprise risk management, supply chain, and human capital challenges, while also reflecting the company’s professed commitment to improve racial and gender diversity,” the letter said.
The group called to quickly replace two or more directors in light of the chain’s slow recovery.
Waizeneggar wrote that keeping Ells as both CEO and chair weakens the company’s governance and can harm shareholder value, and “Chipotle has yet to debut a convincing, comprehensive approach to repairing the brand.”
A representative for Pershing Square said Ackman and the company had no comment.
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