Chipotle investor CtW Investment Group has written a scathing letter to activist Bill Ackman urging him to fix the restaurant chain’s “grave failures.”
The letter, written by CtW executive director Dieter Waizenegger, casts doubt on Chipotle’s sales recovery and accuses the company of failing to restore customer trust since the E. coli outbreak that sickened hundreds of customers last year.
Chipotle’s sales have fallen for three consecutive quarters since the outbreak. In the most recent quarter, same-store sales, or sales at restaurants open at least a year, fell 22%.
Waizenegger says he wrote the letter in hopes that Ackman — the CEO of Pershing Square Capital Management and one of Chipotle’s largest shareholders with a 10% stake in the company — will push the company toward making his recommended changes. Last month, The Wall Street Journal reported that Ackman could soon get a seat on Chipotle’s board.
In the letter, Waizenegger says Chipotle is in dire need of a management shakeup on its board of directors, and highlights the fact that the median tenure on the board is 18 years.
“Chipotle tells investors that it is ‘in the process of’ refreshing its board, but change has been painfully slow, and the current board has not been able to provide the sort of decisive — and effective — leadership that seems important to put the lingering effects of the food safety crisis behind us,” Waizenegger writes.
He also urges Ackman to split the dual role of CEO and chairman of the board of directors, so CEO Steve Ells doesn’t serve in both positions. He writes:
“The company’s stuttering public response to the food safety crisis of 2015 clearly demonstrates why strong independent oversight is so needed at the company. After discrediting Chipotle’s central value proposition of ‘food with integrity’ and shedding half of the company’s market capitalisation since October 2015, Chipotle has yet to debut a convincing, comprehensive approach to repairing the brand. We believe a lack of independent oversight has contributed to the company’s grave failures of risk management.”
Chipotle dismissed the letter’s accusations in a statement emailed to Business Insider on Tuesday.
“We are already on record saying that we have been interviewing board candidates as part of an effort to refresh our board, and expect to share details on new directors soon,” Chipotle’s statement said.
Here’s the full letter from CtW:
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