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Chipotle’s Shareholders Slam Executive Pay at Annual Meeting

Steve Ells
Steve Ells, who serves as Chipotle’s chairman in addition to co-CEO, made $25.1 million last year, including $12.3 million in stock options. Photographer: Gabriel Olsen/Getty Images

May 15 (Bloomberg) -- Chipotle Mexican Grill Inc. investors aren’t happy with how much the restaurant chain pays its top executives.

In a say-on-pay referendum at the company’s annual meeting, about 77 percent of votes opposed the current compensation terms, according to spokesman Chris Arnold. The vote is advisory and the board and compensation committee aren’t bound by it. Still, Chipotle uses the results to make future decisions on executive pay.

Chipotle has drawn criticism for paying its co-chief executive officers a combined $49.5 million last year. CtW Investment Group, a union-backed pension-fund firm, encouraged shareholders to revolt against the pay packages, saying the executives were being treated like “Sun Kings.” The proxy advisers Institutional Shareholder Services and Glass Lewis joined CtW in opposing the compensation.

Chipotle, based in Denver, said today that it takes the results of the vote “very seriously.”

“It has always been, and continues to be, a top priority that our compensation programs are driving the creation of shareholder value,” Arnold said in an e-mail. “We thank our investors for the feedback we have received on this issue, and will continue to engage with our investors as we review our compensation programs.”

Shares of the Mexican food chain fell 1.7 percent to $495.92 at the close in New York. The stock has declined 6.9 percent this year.

Stock Options

Steve Ells, who serves as Chipotle’s chairman in addition to co-CEO, made $25.1 million last year, including $12.3 million in stock options. The compensation package for co-leader Monty Moran was $24.4 million, with $12.3 million coming in options.

The broader industry has seen CEO compensation climb quickly since 2008, even as hourly wages for workers remained static, according to data compiled by Bloomberg Industries. Fast-food companies had a CEO-to-worker compensation ratio of 1,203 in 2012. That figure was just 211 in 2000.

Chipotle’s board didn’t heed investor sentiment after say-on-pay opposition rose from 21 percent in 2012 to 27 percent in 2013, CtW said in a statement today. With the latest 77 percent margin, that should change, the group said.

Pension Funds

The California State Teachers Retirement System, CalPERS, the New York City Pension Funds and the Florida State Board of Administration joined CtW in voting against the plan, according to the statement.

“We expect our board to get to work reining in runaway executive pay at Chipotle,” said Dieter Waizenegger, CtW’s director. “Chipotle’s unbalanced approach to human capital management poses unacceptable risks to shareholders.”

New York City Comptroller Scott Stringer also voiced support for shareholders’ decision.

“Shareowners overwhelmingly said today they are fed up with excessive executive pay at Chipotle,” he said in a statement. “The onus is now on the board to rein in the company’s egregious pay practices.”

To contact the reporter on this story: Nick Turner in New York at nturner7@bloomberg.net

To contact the editors responsible for this story: Nick Turner at nturner7@bloomberg.net

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