Pushed by investor Ackman, Chipotle adds four new directors to board

By By Lisa Baertlein and Svea Herbst-BaylissMarketsReuters

Chipotle Mexican Grill Inc , under pressure from activist investor William Ackman, named four new board members on Friday, paving the way for a reunion of sorts between its chief executive officer and a former top executive at McDonald's, which once owned the burrito chain.

Matthew Paull, a former McDonald's Corp chief financial officer, will join the Chipotle board along with media executives Paul Cappuccio and Robin Hickenlooper, and Ali Namvar, a partner at Ackman's hedge fund Pershing Square Capital Management. Ackman is Chipotle's largest single investor with a nearly 10 percent stake.

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Shares in Denver-based Chipotle jumped 2.2 percent to $390.66, a boost for Ackman as he tries to pare losses in his investment portfolio which has been battered for the second straight year by its investment in Valeant .

Ackman sought to end the company's co-CEO management and replace some long-serving directors with fresh blood, according to people familiar with his thinking.

The company addressed some of those issues this week when it announced the departure of Chipotle co-CEO and director Monty Moran.

Paull is an adviser to Ackman's $11.5 billion hedge fund and is considered one of his go-to candidate for board seats. He has taken board spots as Ackman's representative at Air Products and Chemicals Inc and Canadian Pacific Railway Ltd . Both of the investments have performed well for Pershing Square.

Namvar is one of Ackman's senior investment staff and has been instrumental in other consumer goods investments but has never served on a board.

Cappuccio is executive vice president at Time Warner Inc and Hickenlooper is senior vice president of corporate development at media company Liberty Global Plc . Hickenlooper, who is married to the governor of Colorado, will become the second woman on Chipotle's 12-member board.

"We are pleased that Chipotle has taken the important step of refreshing its board," Ackman said in a statement.

Paull was McDonald's CFO 2001 to 2008 and is credited with making a major contribution during a four-year turnaround.

Paull and Steve Ells, who founded Chipotle and was named sole CEO this week, worked together under the McDonald's umbrella until 2006, when the burger giant spun off the burrito chain.

Other Chipotle investors are agitating for a deep overhaul to get the company���s business back on track after a string of food safety stumbles that bruised sales and its reputation.

CtW Investment Group, one of Chipotle's smallest but most vocal investors, urged Ackman this week to use his muscle to convince Ells to step down as board chairman and replace at least two sitting directors with independent board members.

Chipotle's board has been criticized for being too entrenched and loyal to management. Five of the eight existing directors have served more than 18 years.

CtW and Institutional Shareholder Services, an influential proxy advisory group, got together earlier this year to call for the replacement of Patrick Flynn, chairman of the nominating and governance committee and a former executive at McDonald's. They have blamed Flynn for failing to freshen the board's skill set to keep pace with the company's size and complexity.

CtW also targeted the removal of director Darlene Friedman, who has been on the board for more than two decades, while ISS recommended moving off Albert Baldocchi.

Flynn, Friedman and Baldocchi were all re-elected last May.

(Reporting by Lisa Baertlein in Los Angeles and Svea Herbst-Bayliss in Boston; Additional reporting by Sruthi Ramakrishnan in Bengaluru; Editing by Saumyadeb Chakrabarty and Jeffrey Benkoe)