Chipotle Asked to Link Sustainability to CEO Pay

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By Andrea Vittorio

March 16 — Chipotle Mexican Grill Inc. has said yes to tying its executives’ pay to stock performance but no to a shareholder request to do the same for sustainability performance.

The co-chief executive officers’ future compensation will now depend in part on whether Chipotle’s stock price can return to levels not seen since before a food safety crisis that made the stock lose about 25 percent in the past 12 months, according to a securities filing last week.

Even with this change, the CEOs’ “excessively large pay packages”—which despite being cut in half still totaled more than $13 million each last year—“dangerously elide accountability for sustainability-related risks,” Clean Yield Asset Management wrote in a draft memo appealing to fellow shareholders.

The Vermont-based asset management firm is trying to draw up support for a shareholder resolution asking Chipotle to consider adding sustainability metrics, including food and worker safety incidents, to its compensation incentive plans.

Board Opposes Idea

“While no one can know for certain whether a more rigorous management approach to food safety might have averted the current crisis, moving forward, shareholders can insist upon a proactive approach to the management of sustainability issues by altering top executives’ compensation packages to incentivize it,” Clean Yield’s memo, set to be published on the Securities and Exchange Commission’s website this week, says.

Chipotle’s board advised shareholders to vote against the idea at the company's annual meeting in May, saying it has “carefully crafted” a compensation plan structured around performance measures that it believes are “most important in driving the responsible, long-term growth of our business.”

“That is not to say that our Board does not believe sustainability is important,” the company’s proxy statement said. “On the contrary, our entire Food With Integrity mission is closely aligned with the advancement of numerous sustainability-related concerns.”

‘Food With Integrity.’

Food With Integrity—the buy-local burrito chain’s commitment to fresh produce and “responsibly raised” meats—has been called into question in the wake of multiple food-borne illness outbreaks .

Co-CEO Steve Ells said in an investor presentation in New York on March 16 that the company remains “fully committed” to the program, citing a recently announced $10-million fund to help local suppliers cover the costs of new food safety standards.

“They think that their Food With Integrity program is enough,” Shelley Alpern, director of social research and advocacy at Clean Yield, said in an interview. “What we’re saying is: it’s been rolled out with a kind of…‘trust us to implement this without any transparency’ attitude. That’s just not cutting it.”

Planning for Sustainability

Chipotle seems to lack a clear plan to live up to its sustainability commitments because it does not publish a sustainability report, does not set public sustainability goals and it has not explicitly charged its board with overseeing sustainability matters, Clean Yield wrote in its memo.

The memo calls executive compensation another “lost opportunity” for ensuring stronger accountability over sustainability efforts.

Only one company in the U.S. restaurant and bar sector currently discloses a connection between pay and environmental, social and governance issues, and it is a Texas-based steakhouse chain, according to data on the Bloomberg terminal.

“Sustainability fits very squarely into their [Chipotle's] philosophy,” said Jennifer Bartashus, a Bloomberg Intelligence analyst focusing on restaurants and consumer staples. “If any company were to incorporate it, I believe Chipotle would be among the most open to it,” as long as sustainability ambitions don’t detract from stock price recovery, she said in an interview.

To contact the reporter on this story: Andrea Vittorio in Washington at

To contact the editor responsible for this story: Larry Pearl at

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