Four Directors to Depart From Chipotle Board

This is part of a series of stories that comprise TheStreet's Blue Chip Studio, which will illuminate issues related to corporate board performance, activism, dealmakers and personalities revealed by analysis of data generated by BoardEx, a business unit of TheStreet.

Four members of Chipotle Mexican Grill's (CMG) 12-person board will not run for reelection at the fast food chain's annual meeting on May 25. The decision comes just three months after activist investor Bill Ackman pressured the company to add four new directors, including one from Ackman's hedge fund Pershing Square Capital Management.

Directors John Charlesworth, Patrick Flynn, Darlene Friedman and Stephen Gillett have determined that they will not stand for reelection this year. Their decisions are "not related any disagreement with Chipotle or Chipotle's operations, policies or practices," according to a filing with the U.S. Securities and Exchange Commission. The four directors will continue to serve through the date of the annual meeting.

Three of these four directors are overtenured, having served for roughly two decades apiece, according to BoardEx data. BoardEx is a business unit of TheStreet.

A director since 1999, Charlesworth is currently the sole owner/member of Hunt Business Enterprises LLC and EZ Street LLC, operators of car care facilities and commercial properties, according to an SEC filing. He previously spent 26 years working with McDonald's (MCD) , which was Chipotle's majority shareholder before divesting its stake in 2006.

Flynn joined the board in 1998, and worked with McDonald's for 39 years before retiring in 2001. Friedman has been a director since 1995, when she retired after 19 years in management positions at pharmaceutical company Syntex Corp. Gillett, who has been with the board for just two years, recently became a senior executive leader at Alphabet's  (GOOGL) innovation lab Google X.

"We appreciate the dedication and service all of our outgoing directors have provided during their respective tenures, and respect their decisions not to seek reelection," Chris Arnold, Chipotle's communications director, said in an email. He noted that board changes "simply represent good corporate governance."

The directors' decision to leave the board comes after Chipotle's largest shareholder, Pershing Square, successfully pressured the company to add four new board members in December. Pershing Square held a 10% stake in Chipotle as of March 3, according to the SEC.

From Pershing Square, Ali Namvar was elected to the board. Namvar is a partner at the hedge fund with more than $11 billion in assets under management.

Matthew Paull, former CFO of McDonald's, also serves on the board as of December. He was CFO of the fast food giant from 2001 until 2008.

Joining Namvar and Paull are media executives Paul Cappuccio and Robin Hickenlooper. Cappuccio has served as Time Warner's (TWX) executive vice president and general counsel since 2001. Hickenlooper, meanwhile, is senior vice president of corporate development at Liberty Global (LBTYA) .

"The addition of these new directors strengthens our board of directors, and gives us the oversight, accountability and leadership we need as we continue our efforts to reestablish Chipotle as the leader we have been for much of our history," CEO Steve Ells said in a December statement.

Ackman, at the time, said the company had taken the important step of refreshing the board, which will position the company for continued growth and long-term success. "We look forward to working with the board and management to create sustained value for all shareholders for many years to come," Ackman said in a statement.

However, diversity on the board is still lacking. With Friedman's upcoming departure, Hickenlooper will become the only woman on the board. Furthermore, there are no minorities on the board, according to data from ISS Analytics, a division of corporate government adviser Institutional Shareholder Services.

"We added four new directors last year and will continue our ongoing efforts to find new board members as warranted," Arnold said. "We will share any details regarding changes to our board in a timely fashion when those changes are made."

Pershing Square's director of communications, Fran McGill, declined to comment on the news that four directors were departing Chipotle. Notably, Ackman cannot launch a proxy contest until 2018, after reaching an agreement with Chipotle in 2016.

Chipotle shares have fallen about 37% since the fast food chain was first tied to an E. coli outbreak in October 2015, currently trading at almost $402 each.

More from Corporate Governance

Divestitures at Newell Expected in Weeks: Wells Fargo

Divestitures at Newell Expected in Weeks: Wells Fargo

When Titans Collide: Starboard's Jeff Smith Challenges Carl Icahn at Newell

When Titans Collide: Starboard's Jeff Smith Challenges Carl Icahn at Newell

Deutsche Bank's Stock Gains as New CEO Points to Further Job Cuts

Deutsche Bank's Stock Gains as New CEO Points to Further Job Cuts

Deutsche Bank Replaces CEO as German Lender Struggles to Find Profits

Deutsche Bank Replaces CEO as German Lender Struggles to Find Profits

GE Shareholders Urged to Kick KPMG to the Curb by ISS, Glass Lewis

GE Shareholders Urged to Kick KPMG to the Curb by ISS, Glass Lewis