NYS Office of the Comptroller DiNapoli: Chipotle Needs to Address Concerns Over Racial Equity and Inclusion
NY State Comptroller Seeks Support of Fellow Investors for Shareholder Proposal Calling on Company to Conduct an Independent Racial Equity Audit
New York State Comptroller Thomas P. DiNapoli released a statement on behalf of the New York State Common Retirement Fund (Fund) to fellow Chipotle Mexican Grill Inc. shareholders in advance of the company’s annual meeting on May 18 seeking their support for the Fund’sshareholder proposalcalling for an independent audit of the company’s practices related to civil rights, racial equity, diversity and inclusion, and how these affect the company’s business.
“Chipotle has expressed support for racial equality, but reality tells a different story,” said DiNapoli, Trustee of the Fund. “More than 60% of Chipotle’s employees are people of color and they have borne the brunt of recent controversies involving scheduling, underpaid wages, sick leave and COVID-19 practices. Despite its stated commitment to combatting racial inequity, neither the company nor its board has produced evidence showing they are assessing racial equity. An independent audit looking at these issues is overdue.”
Although Chipotle states it is taking steps to address these issues, it has not disclosed to investors and stakeholders its process for completing this internal review and whether its efforts are working. DiNapoli and the Fund believe it is necessary to have an independent review led by auditors with experience in rooting out discrimination. Failure to assess the risks that corporate racial equity shortcomings pose can impact value and lead to negative implications for companies including customer and employee attrition, negative press, significant fines and regulatory inquiries.
A racial equity audit would follow the model of other large companies where such reviews have already been conducted, including Starbucks, Facebook and Airbnb. More recently, Amazon, JPMorgan Chase, BlackRock and Morgan Stanley announced they would be conducting such audits.
In April 2020, the U.S. Court of Appeals allowed a collective action lawsuit alleging unpaid overtime claims to proceed against Chipotle, involving claims by more than 500 employees;
Chipotle has faced several wage theft claims that seek class-action status including more than 10,000 plaintiffs and has been accused of attempting to delay and obfuscate the claims of thousands of employees who were forced into individual arbitration;
In 2020, Chipotle workers filed a coronavirus-related Occupational Safety and Health Administration complaint claiming that employees aren't told when coworkers are quarantined with coronavirus symptoms. There have also been numerous work stoppages and strikes by Chipotle employees who questioned COVID-19 protocols and their safety at work; and
In April 2021, New York City’s Department of Consumer and Worker Protection filed a complaint against Chipotle seeking $150 million in worker relief for 599,693 violations of the city’s fair workweek law. Under this law, Chipotle could also be held liable for an additional $300 million in civil penalties.
Shareholder Proposal Seeking a Racial Equity Audit
The New York State Common Retirement Fund is one of the largest public pension funds in the United States with assets of approximately $279.7 billion as of Dec. 31, 2021. The Fund holds and invests the assets of the New York State and Local Retirement System on behalf of more than one million state and local government employees and retirees and their beneficiaries. It has consistently been ranked as one of the best managed and best funded plans in the nation.