(Adds investor comment, link to graphic of Chipotle board)
By Lisa Baertlein and Svea Herbst-Bayliss
Dec 16 Chipotle Mexican Grill Inc, under
pressure from activist investor Bill Ackman, named four new
board members on Friday, paving the way for a reunion of sorts
between its chief executive and a former top executive at
McDonald's, which once owned the burrito chain.
Matthew Paull, a former McDonald's Corp chief
financial officer, will join the Chipotle board. Media
executives Paul Cappuccio and Robin Hickenlooper, as well as Ali
Namvar, a partner at Ackman's hedge fund Pershing Square Capital
Management, round out the additions.
Ackman, Chipotle's largest single investor with a nearly
10-percent stake, sought to end the company's co-CEO arrangement
and replace some long-serving directors with fresh blood,
especially in marketing and food safety, according to people
familiar with his thinking.
Shares in Denver-based Chipotle jumped 2 percent to $390.25,
a boost for Ackman as he tries to pare losses in his investment
portfolio that has been battered for the second straight year by
its investment in troubled pharmaceuticals firm Valeant
Chipotle investors are agitating for a deep overhaul at the
company, which is struggling to get back on track after a string
of 2015 food safety stumbles that bruised sales and its
The company addressed some of those issues this week with
the announced departure of Chipotle co-CEO and director Monty
But the board "continues to lack the CEO's desired
additional expertise in marketing and branding," Barclays
analyst Jeffrey Bernstein wrote in a research note, calling the
additions an overall positive move.
None of the new directors has a food safety background.
Paull is an adviser to Ackman's $11.5 billion hedge fund and
is considered one of his go-to candidates for directorships. He
has taken board seats as Ackman's representative at Air Products
and Chemicals Inc and Canadian Pacific Railway Ltd
Namvar is one of Ackman's senior investment staffers but has
never served on a board.
Cappuccio is executive vice president at Time Warner Inc
and Hickenlooper is senior vice president of corporate
development at Liberty Global Plc. Hickenlooper, who
is married to the governor of Colorado, becomes the second woman
on Chipotle's 12-member board.
"We are pleased that Chipotle has taken the important step
of refreshing its board," Ackman said in a statement.
Paull was McDonald's CFO from 2001 to 2008 and is credited
with making major contributions to a company turnaround.
Paull and Steve Ells, who founded Chipotle and returned to
the role of sole CEO this week, worked together under the
McDonald's umbrella until 2006, when the burger giant spun off
the burrito seller.
CtW Investment Group, one of Chipotle's smallest but most
vocal investors, urged Ackman this week to use his muscle to
convince Ells to step down as board chairman and replace at
least two sitting directors with independent board members.
CtW and Amalgamated Bank in November filed a shareholder
resolution seeking to replace Ells with an independent chairman,
and Amalgamated CEO Keith Mestrich said he planned to discuss
the latest changes with the company "in the near future."
Chipotle's board has been criticized for being too
entrenched and too cozy with management. Five of the eight
existing directors have served more than 18 years.
CtW and Institutional Shareholder Services, an influential
proxy advisory group, this year urged shareholders to oppose the
reelection of directors Patrick Flynn, Darlene Friedman and
Albert Baldocchi at the company's annual meeting in May. The
trio survived those challenges.
(Reporting by Lisa Baertlein in Los Angeles and Svea
Herbst-Bayliss in Boston; Additional reporting by Sruthi
Ramakrishnan in Bengaluru; Editing by Saumyadeb Chakrabarty and