Chipotle shareholders vote for more power to pick board

Wed May 11, 2016 6:22pm EDT
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By Lisa Baertlein

LOS ANGELES (Reuters) - Chipotle Mexican Grill Inc's (CMG.N: Quote) shareholders approved a proposal on Wednesday to give investors more power to shake up the burrito chain's board after a string of food safety-related outbreaks undermined confidence in its directors.

Over the board's objection, investors at Chipotle's annual meeting passed a non-binding proposal that would allow an investor or group of investors owning three percent or more of the company's outstanding shares continuously for at least three years to nominate directors to the board.

Investors also heeded the call of an activist shareholder and a proxy adviser to withhold support for some directors in protest of lax oversight. While the entire board was reelected, three members received unusually low numbers of votes.

The New York City Pension Funds, which sponsored the successful proxy access proposal, had predicted that the vote would be a referendum on Chipotle's board.

"Today's vote serves as a wake-up call for a board that urgently needs to restore investor confidence in the wake of costly risk oversight failures," Scott Stringer, investment adviser at the proposal's sponsor, the New York City Pension Funds, said in a statement.

Those failures include a lack of response to early red flags on food safety, his office said. The proposal received 57 percent of votes cast, according to Reuters' calculations from results in a Chipotle regulatory filing. A counterproposal by Chipotle that would have required a 5-percent ownership threshold failed with about 24 percent of votes in support.

Company spokesman Chris Arnold said, "We have a history of taking action in response to the outcome of shareholder votes, and I don't expect this will be any different." He did not immediately clarify what action the company might now take.

Several major pension funds supported the measure this year, including the California Public Employee Retirement System, which helped Stringer drum up investor support.   Continued...

A Chipotle Mexican Grill is seen in Los Angeles, California, United States, April 25, 2016. REUTERS/Lucy Nicholson