Chipotle Investors Back Shareholders Right to Nominate Directors

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NYC Comptroller Scott Stringer -- big supporter of shareholders' rights

Chipotle investors have overwhelmingly supported a proposal to grant shareowners that have jointly held at least 3 percent of Chipotle’s common stock for at least 3 years the right to nominate directors using the corporate ballot, an initiative known as proxy access.

The resolution received 58 percent preliminary support, a significant increase from last year when 49.9 percent of investors supported the proposal, despite a competing proposal put forth by management that once again received significantly less support.

The proposal was sponsored by the New York City Pension Funds and co-sponsored by the UAW Retiree Medical Benefits Trust and the City of Philadelphia Public Employees Retirement System.  In addition, the California Public Employee Retirement System (CalPERS) and the New York City Pension Funds jointly conducted an exempt solicitation to encourage shareowners to support the proposal.

“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,” said Scott M. Stringer, the New York City Comptroller, investment advisor, trustee and custodian of the New York City Pension Funds.  “Chipotle has repeatedly ignored attempts by the lead proponents to engage on the proposal and understand our underlying concerns.  The onus is now on the board to move swiftly to engage investors on a meaningful proxy access bylaw and discuss next steps to ensure a strong and diverse board of directors.”

In the eighteen months since the New York City Comptroller and pension funds launched the Boardroom Accountability Project, more than 210 US companies have enacted meaningful proxy access bylaws.  Many of these companies have voluntarily enacted proxy access without the need for a vote, including more than 70 percent of the 72 companies that received proposals from the New York City Pension Funds for the 2016 proxy season.

"Shareowners have spoken - again - decisively. Companies benefit when boards are independent, competent and diverse. Proxy access is rapidly becoming the new market standard on board accountability. It sets the stage for ensuring companies are focused on long term sustainable value creation. Chipotle is sorely in need of that focus and proxy access brings the opportunity to find new direction," said Anne Simpson, Investment Director of Global Governance at CalPERS.

“Proxy access will provide shareholders with a needed voice in electing directors to Chipotle’s board. This comes at a critical time when food safety and executive compensation concerns raise questions about the ability of the current board to protect shareholders interests,” said Francis Bielli, Executive Director of the City of Philadelphia Public Employees Retirement System.

“Today shareholders signaled Chipotle’s board that a reasonable proxy access right – one allowing shareholders owning 3% of outstanding shares for at least three years – is the most appropriate way forward for Chipotle. It’s time to move forward, to engage with long term investors on issues of concern including board refreshment and composition. Proxy access is a fundamental shareholder right. We urge the board to adopt the 3 percent proxy access bylaw as supported today by investors,” said Meredith Miller, Chief Corporate Governance Officer, UAW Retiree Medical Benefits Trust.

Begun in fall 2014, the Boardroom Accountability Project is a nationwide campaign, supported by a coalition of investors with more than $1 trillion in assets under management, to give shareowners the right to nominate directors at U.S. companies using the corporate ballot. At the time, only six companies had bylaws that provided shareowners with meaningful proxy access. Today, more than 215 corporations have enacted meaningful proxy access bylaws.

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