Chipotle - a Dominant Business Enterprise with a Strong Institutional Ownership - Essay Example

The firm also obtained part of its capital from McDonald's through a share offering. From McDonald's, the firm acquired nearly $360 million that rose to almost $1.5 billion. The company managed to gain huge sales because of their unique top-level management system that was effective towards gaining a competitive advantage offer by their rivals, which is important in raising the profit margin.

The firm was also among the top companies to introduce a sales system in which customers could customize a healthy food of their preferences, at a considerably cheaper price below other restaurants and food vendors without necessarily compromising on the quality. The company has, therefore, become one of the favorite food vending companies among consumers. As a result, the firm has realized a significant increase in size and has subsequently maximized its shareholders, and stakeholders’ value. With the continued growth of Chipotle, a need for the separation between the ownerships, and managerial roles has emerged. Although this can raise serious problems, Chipotle can overcome the challenges by improving their approach to employees’ welfare, critical for gaining synergy, which in turn offers a competitive advantage within the industry. Their agency relationship is reflected by their standard hierarchy, in which restaurant managers report to the regional managers, who subsequently report to the company’s director. After the company’s director gathers all of the regional managers’ reports, they present the report to the company president. This, therefore, shows the critical role of running the day-to-day affairs of the firm. On the other hand, the president of the company only makes critical decisions at the top level but does not directly participate in the firm’s daily operations.

To enhance the effectiveness of the board of directors, Chipotle applies an executive compensation system, n which governance mechanisms seek to address the interests of managers, and owners through salaries, bonuses, among other long-term incentives. Chipotle applies the “Restaurateur Program” that gives the managers opportunities to gain higher wages compared to Chipotle’s directors in the event that they perform exceptionally well. This executive compensation system confers the managers a sense of ownership of the firm since they are aware that generating bigger sales will imply receiving higher wages. Consequently, this improves managers’, and employees’ creativity, and motivation critical for raising sales, as well as reducing the employees’ turnover. This executive compensation continues to be effective at Chipotle.

Additionally, the company strives to apply ethical behavior in their business operation by applying CSR, operating a legal business, and taking community and employees’ needs into consideration. Chipotle realizes that the public’s positive perception is important for the growth of their company. For example, in CSR, they participate in community fundraising to help other society, while building their brand. Additionally, the company also works with US immigration, and Customs Enforcement to fight against undocumented employees. They reduce illegal hiring by investigating all of their branches. The firm also uses ethical ways to process their animal products in accordance with the Control Atmosphere Killing’s (CAK) principles. They also increase the wage escrow in Florida to satisfy their employees.

From my perspective, Chipotle corporate governance is well functioning that gives them a proper governance mechanism that satisfies all its stakeholders. By applying for effective executive compensation, Chipotle can manage agency separation effectively. The company also minimizes internal conflicts by creating a working environment that creates a sense of ownership among the managers and employees, which has significantly helped to improve the sales of Chipotle’s outlets. Furthermore, they engage in CSR and apply ethical business operations. All these efforts have had a positive impact on Chipotle as a household name. The firm’s good corporate governance satisfies the stakeholders, and shareholders, therefore, gaining a competitive advantage in markets.

Chipotle and Chapter 11
Chipotle has a functional structure in their organization structure composed of a Chief Executive Officer and a limited corporate staff, and a functional line of manager that coordinates organizational operations. For example, restaurant managers report to the regional manager, who in turn reports to the company’s director. However, there is a limitation in this functional structure that may arise as a result of communication problems. Nevertheless, the firm handles such challenges by applying for the “Restaurateur Program”. The program aims at giving incentives to managers, and employees, who can guide their branches store to demonstrate the best performance. The firm also gives freedom to all of the managers to lead their branches store, which promotes creativity, and innovation