Chipotle 2013 Annual Report Download - page 111

Returning to the core topic of this proposal from the context of our clearly improvable corporate climate,
please vote to protect shareholder value:
Simple Majority Vote—Proposal F
Statement in Opposition by our Board of Directors
Chipotle’s supermajority voting provisions apply to limited fundamental changes. Under our Amended and
Restated Bylaws, approval of most matters submitted to a vote of our shareholders requires the vote of a majority
of the shares present at a meeting and entitled to vote. As permitted by Delaware law, however, our Amended
and Restated Certificate of Incorporation, as approved by shareholder votes in 2009 (with over 80% approval)
and again in 2013 (with over 98% approval), contain a limited number of supermajority voting requirements
relating to a few fundamental elements of our corporate governance. The affirmative vote of two-thirds of the
outstanding shares of our common stock is required for shareholders to remove directors from our Board, or to
adopt, amend or repeal a shareholder-proposed or adopted bylaw.
The Board strongly believes that these limited supermajority voting provisions are reasonable, appropriate,
and in the best interests of shareholders as a whole. When shareholders seek to take the extraordinary step of
removing a director, or seek to amend our bylaws, which could have a long-lasting effect on Chipotle and our
corporate governance, we believe it is reasonable and appropriate to ensure that a broad consensus of
shareholders agree that the change is prudent. Our supermajority voting provisions do not apply to a vast
majority of the matters on which our shareholders may vote, and do not pose an obstacle to changes that are
broadly supported by shareholders.
Many companies continue to employ supermajority voting requirements, often requiring more than a two-
thirds majority requirement; frequently 75% or even 80% votes are required. And companies often require
supermajority votes for a wider array of matters than we do. Our Board has considered these factors in
determining that our supermajority voting requirements are reasonably designed to protect the interests of all
shareholders.
The proponents misunderstand the purpose of supermajority provisions. The proponents describe
supermajority voting provisions as an “entrenching mechanism,” without further explanation or analysis. They
also argue that supermajority voting provisions are “most often used to block initiatives supported by most
shareowners but opposed by a status quo management,” without offering a single example of when this has
actually occurred, either at Chipotle or any other company. These statements demonstrate the proponents’
misunderstanding of the purpose of supermajority voting provisions.
The proposal must be evaluated in light of our unique business and the concentration of ownership of our
common stock. The proponents’ supporting statement implies that the approval of similar proposals at other
companies suggests that it should also be approved by Chipotle shareholders. We disagree, and believe that
shareholders should evaluate the proposal in light of the particular circumstances unique to Chipotle. From our
vision to change the way the world thinks about and eats fast food, to our focus on top-performing employees
who are promoted from within our company preparing and serving high quality ingredients in a distinctive
environment, we believe we’re different than just about anyone else in our industry. Our growth strategy—to
grow organically by opening exclusively company-owned restaurants rather than franchising—is also unique in
the restaurant world. These factors, while differentiating Chipotle from most of our peers, could be questioned by
those who believe in a more “traditional” way of running and growing a restaurant company. It is certainly
foreseeable that one or more investors may believe that growing faster through franchising, or that decreasing
food costs by serving lower quality ingredients, would improve our business over the short term. Such investors
might be emboldened to try to force these kinds of strategies on us, including by forcing changes to our Board.
Our Board believes that, while in some circumstances there might be potential short-term gains to be made by
pursuing these or other changes to our unique strategy, such changes would be detrimental to our company and
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Proxy Statement