• Home
  • Latest
  • Fortune 500
  • Finance
  • Tech
  • Leadership
  • Lifestyle
  • Rankings
  • Multimedia

Trendingnow

1

MacKenzie Scott alone accounted for one-third of America's $19.2 billion in megagifts last year

2

Now worth $200 million, Sarah Jessica Parker credits being ‘one of eight kids that struggled financially’ for her hunger, ambition, and work ethic

3

Ray Dalio says the U.S. just had its 'Suez moment'—and history says what comes next could end an empire

1

MacKenzie Scott alone accounted for one-third of America's $19.2 billion in megagifts last year

2

Now worth $200 million, Sarah Jessica Parker credits being ‘one of eight kids that struggled financially’ for her hunger, ambition, and work ethic

3

Ray Dalio says the U.S. just had its 'Suez moment'—and history says what comes next could end an empire
RetailChipotle

Chipotle’s Board Feels the Heat from Agitating Shareholders

By
Beth Kowitt
Beth Kowitt
Down Arrow Button Icon
By
Beth Kowitt
Beth Kowitt
Down Arrow Button Icon
April 13, 2016, 5:35 PM ET
Chipotle
DENVER, CO - FEBRUARY 9: Steve Ells, 32, owner of the Chipotle Mexican Grill restaurant chain, in front of one of his stores at 32nd & Lowell Blvd. in Denver, Colorado on Monday, Feb. 9, 1998. (Photo by Hyoung Chang/The Denver Post via Getty Images)Photo by Hyoung Chang, Denver Post via Getty Images
Add Fortune on Google for similar content.

Chipotle (CMG) has a new problem—and this one has nothing to do with the company’s food.

CtW Investment Group, which works with union-backed pension funds that hold some 55,000 Chipotle shares, wants the fast-casual Mexican-food chain to shake up its board in the wake of the company’s food safety crisis. In a letter to shareholders, CtW called Chipotle’s group of directors “one of the least diverse, least independent boards among the S&P 500.”

CtW’s funds hold a relatively negligible stake, but CtW has a history of agitating for governance reforms. It was a vocal player in pushing for compensation reform at Chipotle in 2014 (more on that later).

Chipotle did not respond to requests for comment.

Here are a few of the key issues CtW called out in the letter to shareholders that it made public today:

  • “Excessively long director tenure.” The median tenure for a Chipotle director is 17 years, with six directors having served for more than a decade, the letter said. Four of the seven outside directors were appointed while the company was private, which CtW calls a “management-dominated process.” Two directors are former McDonald’s (MCD) executives and have been on the board since the fast food giant owned Chipotle. (Read this for more on McDonald’s governance issues.)
  • “A shocking dearth of racial and gender diversity.” The letter notes that 100% of the directors are white and only one is a woman.
  • Three of Chipotle’s seven outside directors have ties to Denver and Boulder, Colo., where the company is headquartered and the co-CEOs attended college.

To sum it up, the letter charges that Chipotle has outgrown its board. “They replicated the mom and pop recipe, and that’s probably what contributed a lot to their success,” says Jim Neale, a partner with law firm McGuireWoods, who specializes in food safety defense. “But there’s a level of sophistication that you need if you’re going to do things on a large scale so you can respond to large-scale problems.”

Larry Fauver of the University of Tennessee’s Corporate Governance Center said of the board, which has only one independent director who is currently a Fortune 500 executive: “You would expect a little more fire power.”

In addition to two directors who had stints at McDonald’s, another company popped up more than once: Syntex Corporation, which was acquired by Roche in the mid-1990s. Both Neil Flanzraich (a Chipotle director since 2007) and Darlene Friedman (a director since 1995) worked for the pharmaceutical company at one time. Founder and co-CEO Steve Ells’s father, Bob Ells, was once a senior executive at Syntex and was the first financial backer of Chipotle. A 2015 oral history of the company from Bloomberg noted that in the early days the board was made up of almost entirely of family friends.

Chipotle lists only two directors as not being independent—co-CEOs Ells and Monty Moran. But the Syntex connection is an example of what governance experts call “soft” ties. “When I think about independence, there are two flavors,” explains Hillary Sale, a professor of law and management at Washington University’s law school. “One is financial and one is state of mind. The state of mind standard is what we call a ‘beholdenness standard’—can they think independently? It’s much harder to measure and is not regulated by the federal government.”

Until September, Friedman and Patrick Flynn—a director since 1998 and one of the two former McDonald’s executive—had been the only two members of the compensation committee and also held the distinction of being among the longest-serving directors. CtW in its letter specifically called for shareholders to “withhold support” for the reelection of Friedman and Flynn.

“The longer you are on the board, the more comfortable you become with management and what management is doing,” says Charles Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware. “Where you see oversight failures, you will oftentimes see folks who have been there a long time and have soft or hard ties to management.” Elson says that Chipotle situation seems to be of that flavor.

Chipotle’s pay structure has been under scrutiny since CtW pushed for shareholders to vote against the company’s executive compensation in 2014. Equilar, in collaboration with The New York Times, rated Ells the No. 27 highest-paid CEO in 2014, with Moran coming in at No. 31. If you added their compensation together as co-CEOs, they would have ranked No. 10.

Ultimately, 77% of shareholders who voted opposed the compensation plan that year.

“That only happens in extreme cases,” says corporate governance expert Nell Minow. “It sends a serious message. It’s an indicator of a weak board.” Elson noted that it “symbolized a board that seems to be a little out of touch.”

In September 2015, a third director, Flanzraich, was added to the compensation committee and became its chair. The company also hired two compensation consulting firms and later announced big pay cuts for the co-CEOs in the wake of negative financial results caused by the food-borne illness issues.

Chipotle has made two additions to its board in recent years, adding Stephen Gillett, a senior executive at Google[x] and a former Starbucks CIO last year, and in 2013 entrepreneur Kimbal Musk (the brother of Tesla founder Elon Musk) joined the board. Musk does not sit on any committees.

The company disclosed in its proxy that Chipotle’s charitable foundation gave a non-profit organization founded by Musk a grant of $250,000. It also said that it had a “business relationship” with Google Inc., where Gillett works.

About the Author
By Beth Kowitt
LinkedIn iconTwitter icon
See full bioRight Arrow Button Icon
Add Fortune on Google for similar content.

Latest in Retail

Finance
Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam
By Fortune Editors
October 20, 2025
Finance
Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam
By Fortune Editors
October 20, 2025
Finance
Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam
By Fortune Editors
October 20, 2025
Finance
Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam
By Fortune Editors
October 20, 2025
Finance
Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam
By Fortune Editors
October 20, 2025
Finance
Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam
By Fortune Editors
October 20, 2025

Most Popular

Finance
Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam
By Fortune Editors
October 20, 2025
Finance
Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam
By Fortune Editors
October 20, 2025
Finance
Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam
By Fortune Editors
October 20, 2025
Finance
Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam
By Fortune Editors
October 20, 2025
Finance
Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam
By Fortune Editors
October 20, 2025
Finance
Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam
By Fortune Editors
October 20, 2025
Fortune Secondary Logo
Rankings
  • 100 Best Companies
  • Fortune 500
  • Global 500
  • Fortune 500 Europe
  • Most Powerful Women
  • World's Most Admired Companies
  • See All Rankings
  • Lists Calendar
Sections
  • Finance
  • Fortune Crypto
  • Features
  • Leadership
  • Health
  • Commentary
  • Success
  • Retail
  • Mpw
  • Tech
  • Lifestyle
  • CEO Initiative
  • Asia
  • Politics
  • Conferences
  • Europe
  • Newsletters
  • Personal Finance
  • Environment
  • Magazine
  • Education
Customer Support
  • Frequently Asked Questions
  • Customer Service Portal
  • Privacy Policy
  • Terms Of Use
  • Single Issues For Purchase
  • International Print
Commercial Services
  • Advertising
  • Fortune Brand Studio
  • Fortune Analytics
  • Fortune Conferences
  • Business Development
  • Group Subscriptions
About Us
  • About Us
  • Press Center
  • Work At Fortune
  • Terms And Conditions
  • Site Map
  • About Us
  • Press Center
  • Work At Fortune
  • Terms And Conditions
  • Site Map
  • Facebook icon
  • Twitter icon
  • LinkedIn icon
  • Instagram icon
  • Pinterest icon

Latest in Retail

The ‘FIFA 15’ is American culinary diplomacy in action
North AmericaFood and drink
The ‘FIFA 15’ is American culinary diplomacy in action
By Catherina GioinoJune 26, 2026
2 hours ago
Fortune 500 Power Moves: Which executives gained and lost power this week
C-SuiteFortune 500 Power Moves
Fortune 500 Power Moves: Which executives gained and lost power this week
By Fortune EditorsJune 26, 2026
5 hours ago
Marketing leaders speak at Fortune's Fuel Up event in Cannes. (L-R) Natalia Ball, Mars Pet Nutrition; Zena Arnold, Sephora; Tati Lindenberg, Unilever; Laura Jones, Instacart; Ruth Umoh, Fortune
RetailCMO
The new CMO playbook: how marketers are balancing broader remits and tighter budgets
By Sam BirchallJune 26, 2026
7 hours ago
AI is overwhelming our senses—Edward Enninful has an answer for that 
EuropeLetter from London
AI is overwhelming our senses—Edward Enninful has an answer for that 
By Kamal AhmedJune 26, 2026
10 hours ago
kid
SuccessSocial Media
Kids want to be influencers when they grow up, because they ‘gets lots of money’ and ‘they want to be famous’
By Matthew Simoneau and The ConversationJune 26, 2026
11 hours ago
g
AIunemployment
One of the Democratic Party’s brightest stars is co-founding a group to help with the coming AI jobs earthquake
By Josh Boak and The Associated PressJune 25, 2026
21 hours ago

Most Popular

MacKenzie Scott alone accounted for one-third of America's $19.2 billion in megagifts last year
Success
MacKenzie Scott alone accounted for one-third of America's $19.2 billion in megagifts last year
By Sydney LakeJune 25, 2026
1 day ago
Now worth $200 million, Sarah Jessica Parker credits being ‘one of eight kids that struggled financially’ for her hunger, ambition, and work ethic
Success
Now worth $200 million, Sarah Jessica Parker credits being ‘one of eight kids that struggled financially’ for her hunger, ambition, and work ethic
By Orianna Rosa RoyleJune 24, 2026
2 days ago
Ray Dalio says the U.S. just had its 'Suez moment'—and history says what comes next could end an empire
Economy
Ray Dalio says the U.S. just had its 'Suez moment'—and history says what comes next could end an empire
By Nick LichtenbergJune 26, 2026
12 hours ago
Trump turns on Big Oil donors who spent nearly $100 million to get him elected—now he wants the DOJ to investigate them for price gouging
Economy
Trump turns on Big Oil donors who spent nearly $100 million to get him elected—now he wants the DOJ to investigate them for price gouging
By Tristan BoveJune 25, 2026
22 hours ago
The bond market knows something about the $39 trillion national debt that Washington doesn’t
Economy
The bond market knows something about the $39 trillion national debt that Washington doesn’t
By Eva RoytburgJune 25, 2026
21 hours ago
Current price of oil as of June 25, 2026
Personal Finance
Current price of oil as of June 25, 2026
By Joseph HostetlerJune 25, 2026
1 day ago

© 2026 Fortune Media IP Limited. All Rights Reserved. Use of this site constitutes acceptance of our Terms of Use and Privacy Policy | CA Notice at Collection and Privacy Notice | Do Not Sell/Share My Personal Information
FORTUNE is a trademark of Fortune Media IP Limited, registered in the U.S. and other countries. FORTUNE may receive compensation for some links to products and services on this website. Offers may be subject to change without notice.