Chipotle 2013 Annual Report Download - page 110

PROPOSAL F
AN ADVISORY VOTE ON A SHAREHOLDER PROPOSAL REQUESTING
CHIPOTLE TO ADOPT SIMPLE MAJORITY VOTING
Proposal F is a shareholder proposal. If the shareholder proponent, or representative who is qualified under
state law, is present at the annual meeting and submits the proposal for a vote, the proposal will be voted upon.
The shareholder proposal and related supporting statement are included in this proxy statement as submitted by
the proponent and we accept no responsibility for their contents. The Board’s statement in opposition to the
proposal is presented immediately following the proposal and supporting statement. The name and address of the
proponent and the amount of stock owned by the proponent will be promptly provided to any shareholder making
an oral or written request for such information to our corporate Secretary at our headquarters.
Simple Majority Vote
RESOLVED, Shareholders request that our board take the steps necessary so that each voting requirement
in our charter and bylaws that calls for a greater than simple majority vote be eliminated, and replaced by a
requirement for a majority of the votes cast for and against applicable proposals, or a simple majority in
compliance with applicable laws. If necessary this means the closest standard to a majority of the votes cast for
and against such proposals consistent with applicable laws.
Shareowners are willing to pay a premium for shares of corporations that have excellent corporate
governance. Supermajority voting requirements have been found to be one of six entrenching mechanisms that
are negatively related to company performance according to “What Matters in Corporate Governance” by Lucien
Bebchuk, Alma Cohen and Allen Ferrell of the Harvard Law School. Supermajority requirements are arguably
most often used to block initiatives supported by most shareowners but opposed by a status quo management.
This proposal topic won 74% to 88% support at Weyerhaeuser, Alcoa, Waste Management, Goldman Sachs,
FirstEngergy, McGraw-Hill and Macy’s. The proponents of these proposals included Ray T. Chevedden and
William Steiner. Currently a 1%-minority can frustrate the will of our 66%-shareholder majority. As a sign of
shareholder interest in reform, Chipotle shareholders gave 98% support to the 2013 management proposal to
elect each director annually.
This proposal should also be more favorably evaluated due to our Company’s clearly improvable
environmental, social and corporate governance performance as reported in 2013:
GMI Ratings, an independent investment research firm, rated our board D. Lead Director Albert Baldocchi
had 16-years long-tenure which detracts from director independence. John Charlesworth and Albert Baldocchi,
who compromised 67% of our audit committee, each had more than 14-years long-tenure. Patrick Flynn and
Darlene Friedman each had more than 15-years long-tenure and comprised 67% of our executive pay and
nomination committees.
In regard to executive pay there was $50 million for Steve Ells and shareholders had a potential 14% stock
dilution. Shareholders responded at our 2013 annual meeting and voted 27% against executive pay. Unvested
equity pay would not lapse upon CEO termination. Chipotle had not incorporated links to environmental or social
performance in its current incentive pay policies.
Chipotle had constituency provisions that can be invoked to deter tender offers regarded as hostile by
management and lacked fair price provisions to help insure that all shareholders are treated fairly. Chipotle was
rated as having Very Aggressive Accounting & Governance Risk—indicating higher accounting and governance
risk than 93% of companies. GMI said Chipotle environmental impact disclosure practices were significantly
worse than its sector peers.
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Proxy Statement