Chipotle Mexican Grill Inc said on Thursday it would strengthen its lead director position in an agreement with a group of shareholders who are withdrawing their proposal to split the chief executive and chairman roles.
Union-affiliated investors Amalgamated Bank and CtW Investment Group filed a proposal in November to strip the chairman's role from Steve Ells, who is also Chipotle's founder and chief executive officer, by instituting an independent chair.
Chipotle said in a filing that it was not only "appropriate but also important" for Ells to serve as both chairman and CEO. (http://bit.ly/2oe9hZn)
Under the agreement, Chipotle agreed to strengthen the lead director position held by Neil Flanzraich, who has been an independent director since September 2014. Among other things, Flanzraich will write an annual letter to shareholders beginning in 2018.
"The lead director essentially serves as an independent chief for the board and provides an alternative to splitting the chairman and CEO roles," Chipotle spokesman Chris Arnold said in an email. He added that the letter from the lead director will be in addition to the chairman's annual letter.
Keith Mestrich, president and CEO of Amalgamated, called the move "a step in the right direction to bring transparency and trust back to the company."
Dieter Waizenegger, executive director of CtW, added: "We will continue to monitor Chipotle's progress, but are encouraged by these steps."
Management at the formerly high-flying burrito chain has been under a microscope since late 2015 when it was hit by a string of sales-battering food safety lapses, and investor pressure has led to a number of changes.
Bill Ackman's New York-based hedge fund, Pershing Square Capital Management LP, which is Chipotle's largest shareholder, has been agitating separately for change at the board level.
On Dec. 16, Chipotle added new four directors to its board: Matthew Paull, a former McDonald's Corp chief financial officer; media executives Paul Cappuccio and Robin Hickenlooper; and Ali Namvar, a partner at Pershing Square Capital Management.
Just days before, the company announced that Ells would resume the role of sole chief executive due to the departure of co-CEO Monty Moran.
Earlier this month Chipotle said four of its 12 directors would not stand for re-election at its upcoming board meeting.
The company said John Charlesworth, Patrick Flynn, Darlene Friedman and Stephen Gillett opted not to be on the ballot for the May 25 election.
(Reporting by Lisa Baertlein in Los Angeles and Aishwarya Venugopal in Bengaluru; Editing by Leslie Adler and Matthew Lewis)