April 13, 2016 / 3:00 PM / 3 years ago

Chipotle investor seeks board shakeup for more diversity

(Reuters) - Chipotle Mexican Grill Inc (CMG.N) shareholder CtW Investment Group on Wednesday urged investors not to re-elect two long-time board members, saying the chain’s recent food safety crisis shows the company needs a board that is more independent and also more diverse in race and gender.

The logo of Chipotle Mexican Grill is seen at a restaurant in Paris, March 7, 2016. REUTERS/Charles Platiau

The move comes as the formerly fast-growing burrito chain works to win back consumers and mollify shareholders after a string of food-borne illness outbreaks last year hammered sales and erased roughly $6 billion in market value. The problem surfaced in late October.

Chipotle shares were down 1 percent at $440.51 on Wednesday afternoon after CtW Executive Director Dieter Waizenegger encouraged investors in a letter to withhold votes for directors Patrick Flynn and Darlene Friedman at Chipotle’s annual shareholder meeting on May 11.

“The last three quarters were a crucial time for Chipotle to demonstrate competent leadership in crisis. In contrast, the response has been publicly labeled as a mere PR blitz - one that was slow, superficial and unconvincing,” Waizenegger wrote.

Chipotle did not immediately respond to requests for comment.

The median tenure for members of Chipotle’s all-white board is 17 years, the union pension fund adviser said. Flynn has been on the company’s board for 18 years and Friedman for 21 years.

The nine-member board has seven independent directors and Friedman is the only female member, according to Thomson Reuters data.

"With the company facing slowing momentum and potential growth challenges going forward, Chipotle is in need of genuinely independent oversight now more than ever," Cwt's Waizenegger wrote. (bit.ly/1S6LLC9)

This is not the first time shareholders have pressed Chipotle to diversify its board. Last year, under pressure from activist investor Trillium Asset Management, Chipotle agreed to amend its governance guidelines to ensure the presence of women in its pool of board nominees. (bit.ly/1S6Hxdu)

CtW also criticized Chipotle on Wednesday for its reluctance to lower its threshold for shareholder ownership to nominate candidates to the board to 3 percent from 5 percent.

CtW has previously tangled with Chipotle. The pension fund adviser in 2014 successfully urged shareholders to vote against the company’s executive pay proposal.

CtW has also agitated for board changes at companies including Chipotle’s former parent, McDonald’s Corp (MCD.N), and retailer Wal-Mart Stores Inc (WMT.N).

Reporting by Yashaswini Swamynathan in Bengaluru and Lisa Baertlein in Los Angeles; Editing by Kirti Pandey and Matthew Lewis

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