Photographer: David Paul Morris/Bloomberg

Chipotle Adds Four Board Members in Ackman-Endorsed Shake-Up

Updated on
  • New directors include former finance chief of McDonald’s
  • Burrito chain’s board has drawn criticism for being insular

Chipotle Mexican Grill Inc., facing criticism that it was slow to respond to an E. coli outbreak last year, named four new directors to its board in a long-anticipated shake-up supported by activist investor Bill Ackman.

The new members -- Paul Cappuccio, Robin Hickenlooper, Ali Namvar and Matthew Paull -- joined the board on Wednesday. The move brings the current number of directors to 12, the burrito chain said in a statement on Friday.

The overhaul addresses concerns that Chipotle’s board was too insular and lacked diversity. The changes also add restaurant-industry experience in the form of Paull, previously chief financial officer of McDonald’s Corp. Following a series of foodborne-illness outbreaks last year, Chipotle drew flak for lacking the operational expertise of larger fast-food chains.

The revamped board “gives us the oversight, accountability and leadership we need,” Chief Executive Officer Steve Ells said in the statement.

The stock gained 3.1 percent to $394.05 as of 10:12 a.m. in New York following the news. It had been down 20 percent this year through Thursday’s close, hurt by Chipotle’s food-safety crisis. The chain suffered a series of foodborne-illness outbreaks in 2015 and then struggled to repair its image, bringing massive sales declines.

Pershing Square

Namvar is an executive at Ackman’s firm, Pershing Square Capital Management, Chipotle’s largest investor. He joined Pershing Square in 2006 and helped oversee its investments in McDonald’s, Wendy’s International and other food companies. Paull, who previously served on Chipotle’s board when the company was owned by McDonald’s, is also on the advisory board at Pershing Square. 

“Chipotle has taken the important step of refreshing its board, which will position the company for continued growth and long-term success,” Ackman said in the statement.

Pershing Square disclosed a stake of almost 10 percent in Chipotle in September. If the holding in Chipotle falls below 5 percent, Namvar will resign from the restaurant chain’s board, Pershing Square said in a separate filing Friday.

Hickenlooper, meanwhile, is a former investment banker at Thomas Weisel Partners who serves in senior executive roles at both Liberty Global and Liberty Media -- two pieces of billionaire John Malone’s cable and media empire. She married the governor of Colorado, John Hickenlooper, earlier this year.

Time Warner Lawyer

Cappuccio, a former U.S. Supreme Court clerk and associate deputy attorney general at the Department of Justice, rounds out the new additions. He has been general counsel at Time Warner Inc. since 2001.

The reshuffle follows a CEO change on Monday, when Ells retook the role on a solo basis. He had served as co-leader with Monty Moran, but the board felt the arrangement made the chain harder to operate. Ells started the Denver-based company more than 23 years ago and ran it until 2009, when he assumed the shared role with Moran.

Paull’s involvement extends a complicated relationship with McDonald’s. Chipotle was a subsidiary of the burger giant before holding an initial public offering in 2006. Since then, Chipotle’s executives have railed against traditional fast food and the burrito company has taken pains to distance itself from its former owner. Now, as Chipotle struggles with restaurant operations and new food-safety protocols, it’s seeking advice from a veteran of the world’s largest fast-food chain.

The question is how much difference the board changes will make, said Michael Halen, an analyst at Bloomberg Intelligence. It’s a positive sign that Pershing and Chipotle are working together constructively, but the new board members alone aren’t enough to jump-start the troubled chain’s recovery, he said.

“It’s really about people trusting the brand again, and ultimately that’s going to take time,” he said.

— With assistance by Gerry Smith

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