LOS ANGELES (Reuters) - Chipotle Mexican Grill Inc CMG.N, amid activist pressure to revamp its board and revive sales following last year’s string of food safety lapses, will “shortly” announce a new slate of directors, founder and co-chief executive Steve Ells said on Tuesday.
Billionaire investor William Ackman, who took a nearly 10 percent stake in the burrito chain three months ago, wants several board seats with the aim of beefing up food safety and marketing, three people familiar with the matter have told Reuters.
Shares in Chipotle tumbled 7.8 percent to $365.33 on Tuesday when Ells said he was nervous about meeting full-year targets. Executives blamed poor customer service and underperforming restaurants, particularly in the Northeastern United States, for a slower-than-expected sales recovery.
Shares in Chipotle have lost 40 percent of their value since Halloween weekend 2015, when the company’s food safety problems began grabbing national headlines.
Chipotle co-CEO and director Monty Moran did not join fellow executives at Tuesday’s Barclays investor conference in New York, fueling speculation by investors and analysts that he may be ousted in the shakeup. Moran has been co-CEO since January 2009 and rarely misses a presentation.
Moran oversees operations at Chipotle. The company’s operational challenges “make you wonder about his absence at an investor meeting,” Hedgeye Risk Management analyst Howard Penney said.
Chipotle spokesman Chris Arnold said company management has not changed.
Ells said Chipotle is taking a careful look at existing directors, with an eye toward what can be strengthened. In particular, he said the company is assessing long director tenures and considering new candidates with expertise in areas such as marketing, crisis management and corporate governance.
Reuters last month reported that Ackman and Chipotle had signed an agreement to engage in confidential discussions, a sign that the activist may force change at the burrito chain without a costly and drawn-out proxy contest.
“We don’t have any fundamental differences about the business,” Ells said of Ackman.
Chipotle’s board long has been under fire from pension funds and other shareholders for being insular, entrenched and overly generous with compensation.
Chipotle investors Amalgamated Bank and CtW in November urged shareholders to name an independent chairman to replace Ells as leader of the board.
Five of Chipotle’s nine directors have served for more than 18 years. Darlene Friedman, John Charlesworth and Ells are the longest serving with more than 20 years each.
(This story corrects stock symbol, paragraph 1)
Reporting by Lisa Baertlein in Los Angeles; editing by Bill Trott and Grant McCool