Outcome: Successfully withdrawn after the company agreed to amend its Corporate Governance Guidelines and Nominating & Corporate Governance Charter to ensure that women are in the pool from which Board nominees are chosen.
WHEREAS: Chipotle Mexican Grill has one woman on its Board of Directors.
We believe that diversity, inclusive of gender and race, is a critical attribute of a well-functioning board and a measure of sound corporate governance.
Research confirms a strong business case for diversity on corporate boards. For example, several studies suggest a critical mass of at least three women directors strengthens corporate governance (research from Schwartz-Ziv, Miriam, Does the Gender of Directors Matter? (December 2, 2013); Kramer,V.W., Konrad A.M. & Erkut,S.(2006) Critical mass on corporate boards: Why three or more women enhance governance.)
An August 2012 Credit-Suisse Research Report Gender Diversity and Corporate Performance links board diversity to better stock market and financial performance (higher return on equity, lower leverage, and higher price/book ratios.) The report suggests several explanations for this better performance including, among other factors, a stronger mix of leadership skills, improved understanding of consumer preferences (women control more than two-thirds of consumer spending in the U.S.), and more attention to risk. An update to this report published by Credit-Suisse Research in September, 2014 confirmed similar results.
Recognizing the benefits of diversity in corporate leadership and interest from institutional investors, investment firms are responding with new products and services. In 2014, U.K.-based Barclays launched an exchange-traded note based on an index of companies with female CEOs or directors (the latter with a threshold of 25 percent.) In the U.S., Bank of America, Morgan Stanley, and Pax World Investments have similarly expanded their product offerings.
Chipotle lags its peers on board diversity. Dunkin Brands, Yum Brands and McDonalds each have at least two women on their boards. Ninety-two percent of S&P 500 boards include at least one woman; the average is two women directors (2014 ISS Board Practices Study).
Resolved: Shareholders request that the Board of Directors report to shareholders by September 2015, at reasonable expense and omitting proprietary information, on plans to increase diverse representation, inclusive of gender and race, on the Board as well as an assessment of the effectiveness of these efforts. The report should include a description of how the Nominating and Corporate Governance Committee, consistent with its fiduciary duties, takes every reasonable step to:
1. include women and minority candidates in the pool from which Board nominees are chosen; and
2. expand director searches to include nominees from non-executive corporate positions and non-traditional environments including academia and non-profit organizations.
Companies combining competitive financial performance with high standards of corporate governance including board diversity are better positioned to generate long-term shareholder value. We suggest that the requested report also address the following:
• Changes to the Nominating and Governance Committee Charter to embed a commitment to diversity inclusive of gender, race and ethnicity in Board searches.
• The number of women and minorities in the candidate pool in the most recent three year period.
• A summary of any challenges and plans to address them.