Just a brief post to thank shareowners at Chipotle Mexican Grill (CMG) for sending a strong message to the company’s board and management. 77% of shares were voted against the executive pay package and a majority supported our proposal to end supermajority voting requirements.
CalSTRS, Florida SBA, AFSCME, Calvert, Domini, Trillium, CBIS, CtW and many others joined to reject the non-binding say-on-pay measure and a proposed stock incentive plan. Both ISS and Glass Lewis recommended their clients vote against the package and the plan.
Chris Arnold, Chipotle communications director, reportedly said in an e-mail,
This year, shareholder support for our say-on-pay proposal was about 23% of the shares voted. We take this very seriously. It has always been, and continues to be, a top priority that our compensation programs are driving the creation of shareholder value. We thank our investors for the feedback we have received on this issue, and will continue to engage with our investors as we review our compensation programs that build value for all of our investors.
ISS, Glass Lewis and the same funds also supported my proposal to end supermajority voting. As readers may recall, Chipotle bypassed the SEC’s ‘no-action’ process and sued my wife, myself (James McRitchie) and John Chevedden unsuccessfully for filing the proposal. They sought to have us pay for their expensive legal services. Instead, the court awarded us our costs, which were minimal since we chose to represent ourselves rather than spending money to hire legal counsel.
In Chipotle, the court agreed with the defendants that the future potential injuries claimed by the plaintiff “fail to meet the ‘certainly impending’ standard necessary to establish standing.” According to the court, neither the prospect of the defendants breaking their “irrevocable promise” not to sue Chipotle, nor the possibility of a lawsuit by another shareholder or an SEC enforcement action is “certainly impending,” and thus, the “injury in fact” requirement was not met. The court added that even if Chipotle had established injury in fact, it could not show that a declaratory judgment “would redress its injury as against a third party over whom [the presiding court] has no jurisdiction.” (Three Courts Dismiss Lawsuits for Lack of Subject Matter Jurisdiction)
I also want to send out a special thanks to SRI Funds & Advisors Send Open Letters on Lawsuits Against Shareholders. I’m sure that action helped raise the visibility of proxy issues at CMG and the waste of resources in suing shareowners. Also a shoutout to John Chevedden and Phil Goldstein for help in keeping the supermajority proposal on the proxy.
It is satisfying to be vindicated not only in the courts but also at the ballot box.
Unfortunately, a shareholder proposal by CtW calling for sustainability disclosure was rejected.
See also Shareholders reject Chipotle exec compensation package, Denver Business Post.