Chipotle 2021 Proxy Vote Recommendations

Chipotle 2021 Proxy Vote Recommendations

Chipotle 2021 annual meeting is May 18, 8AM Pacific Time. To attend, vote, and submit questions during the Annual Meeting visit here. From there you will need the control number you got from ProxyVote or elsewhere. Of course, I recommend voting in advance. To enhance long-term value. Vote AGAINST Engles, Fili-Krushel, Flanzraich, Gutierrez, Namvar, Niccol, Pay, and  Auditor. Vote FOR Written Consent. 

Chipotle Mexican Grill, Inc., owns and operates 2,724 Chipotle restaurants in the United States, 40 international, and 4 non-Chipotle restaurants. The company was founded in 1993 and is headquartered in Newport Beach, California. Most shareholders do not vote.  Reading through 90 pages of the proxy takes time but your vote could be crucial. Below, how I voted and why.

If you have read these posts related to my portfolio and proxy proposals for the last 25 years and trust my judgment, skip 7 minutes of reading. See how I voted my ballot. Voting will take you only a minute or two. Every vote counts.

I voted with the Board’s recommendations 50% of the time. View Proxy Statement via SEC’s EDGAR system (look for DEF 14A).

Read Warnings below. What follows are my recommendations on how to vote the proxy in order to enhance corporate governance and long-term value.

Chiptole 2021: ISS & Sustainalytics Ratings

From the Yahoo Finance profile page:  Chipotle Mexican Grill, Inc.’s ISS Governance QualityScore as of April 30, 2021, is 2. The pillar scores are Audit: 2; Board: 2; Shareholder Rights: 4; Compensation: 5.

Corporate governance scores courtesy of Institutional Shareholder Services (ISS). Scores indicate decile rank relative to index or region. A decile score of 1 indicates lower governance risk, while a 10 indicates higher governance risk. We need to pay close attention to Shareholder Rights and Compensation.
Sustainalytics’ rates ESG score riskier than its peers.

Chiptole 2021: Board Proposals

1. Directors

Egan-Jones Proxy Services recommends against Albert S. Baldocchi, Gregg L. Engles, Patricia Fili-Krushel, Neil W. Flanzraich, Mauricio Gutierrez, Ali Namvar, and Brian Niccol.  These directors either serve on the compensation committee (and Egan-Jones recommends against Pay) or have served for longer than 10 years (so are no longer considered independent). E-J recommends against Brian Niccol, CEO/Chair, since they assign cyber risk needing attention to him. I am not ready to go there on the cyber risk responsibility yet.

Vote: AGAINST Engles, Fili-Krushel, Flanzraich, Gutierrez, Namvar, and Niccol.

2. Executive Compensation

Chipotle’s Summary Compensation Table shows the highest paid named executive officer (NEO) was CEO Brian Niccol at $14.8M. I’m using Yahoo! Finance to determine market cap ($40B) and I define large-cap as $10B, mid-cap as $2-10B, and small-cap as less than $2B. Chipotle is certainly a large-cap company.mylogiq_logo

According to MyLogIQ, the median CEO compensation at large-cap corporations was $13M in 2020. CEO Brian Niccol is at $14.8M is above that amount.  Chipotle shares have outperformed large-caps over the most recent one-, two-, and five-year time periods. The ratio of the annual total compensation of the CEO to the median of the annual total compensation of all employees was 1,129 to 1. That is outrageous, especially given front-line Covid risk in 2020. See also A squandered chance to reform executive pay.

Egan-Jones Ratings

Egan-Jones Proxy Services found the Company’s compensation policies and procedures are not effective or aligned with the long-term interest of its shareholders. They recommend voting Against. Given my concern for the growing wealth disparity, I agreed.


3. Ratification of Independent Auditor

I have no reason to believe the auditor engaged in poor accounting practices or has a conflict of interest. Egan-Jones recommends voting against the auditor if they served for seven years. Independence becomes compromised by that time. Ernst & Young has been the auditor for more than seven years, in fact, 24 years. No other issues appear significant.


Chipotle 2021: Shareholder Proposals

4. Shareholder Right to Act by Written Consent

This good corporate governance proposal comes from me, James McRitchie, so of course I voted FOR. Egan-Jones also recommends For.

Many boards and investors assume a false equivalency between rights of written consent and special meetings. However, any shareholder, regardless of how many (or few) shares she owns, can seek to solicit written consents on a proposal.

By contrast, calling a special meeting may require a two-step process. A shareholder who does not own the minimum shares required must first obtain the support of other shareholders. Once that meeting is called, the shareholder must distribute proxies asking shareholders to vote on the proposal to be presented at the special meeting. This two-step process can take more time and expense than the one-step process of soliciting written consents. A similar proposal won 41.5% of the vote at Chipotle last year.

Vote: FOR

Chipotle CorpGov RecommendationsProxy Insight

Proxy Insight reported the votes of Trillium when I last checked. They voted For Carey, Engles, Gutierrez, and Written Consent; Against all other items.

In looking up a few funds in our Shareowner Action Handbook, I see Calvert voted For all items except Pay and the Auditor. CBIS voted the same. NYC Pensions voted Against Fili-Krushel, Flanzraich, Namvar, and Pay; For all other items. Norges voted against Niccol and Pay; For all other items. It is nice to have the support of all pre-disclosing funds for my proposal, #4 Shareholder Right to Act by Written Consent.

CorpGov Votes:

  1. Directors: AGAINST Engles, Fili-Krushel, Flanzraich, Gutierrez, Namvar, and Niccol.
  2. Executive Pay: AGAINST
  3. Auditor: AGAINST
  4. Shareholder Right to Act by Written Consent: FOR

Chipotle 2021: Issues for Future Proposalsinsightia

Looking at insightia for anti-shareholder provisions:

  • No requirement to separate the CEO and Chair.
  • Shareholders have no right to act by written consent.

Chipotle 2022: Mark Your Calendar

Shareholder proposals to be included in our 2022 proxy must be received by no later than December 6, 2021, unless the date of our 2022 annual meeting is more than 30 days before or after May 18, 2022. All proposals must be addressed to Chipotle Mexican Grill, Inc., 610 Newport Center Dr., Suite 1400, Newport Beach, CA 92660, Attn: Corporate Secretary.

Related Posts

Chipotle 2020: Shareholder & Worker Rights


Be sure to vote for each item on the proxy. Any items left blank get voted in favor of management’s recommendations. (See Broken Windows & Proxy Vote Rigging – Both Invite More Serious Crime). I generally vote against pay packages where NEOs were paid above median in the previous year but make exceptions if warranted. According to Bebchuk, Lucian A. and Grinstein, Yaniv (The Growth of Executive Pay), aggregate compensation by public companies to NEOs increased from 5 percent of earnings in 1993-1995 to about 10 percent in 2001-2003.

Few firms admit to having average executives. They generally set compensation at above average for their “peer group.” Peer groups are often chosen by aspiration. The “Lake Woebegone effect” may be nice in fictional towns, “where all the children are above average.” However, corporations live in the real world. All CEOs are above average. Ignoring that fact partly explains why their collective pay spiraling out of control. We need to slow the pace of money going to the 1% or our economy will fail to serve the majority. The rationale for peer group benchmarking is a mythological market for CEOs. For more on the subject, see CEO Pay Machine Destroying America.


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