CSX board restructured as Harrison takes charge
USA: Former Canadian Pacific Chief Executive E Hunter Harrison was confirmed as the new Chief Executive Officer of CSX Corp on March 6. He succeeds Michael Ward, who had announced his decision to retire as Chairman & CEO on February 21 and will now become a consultant.
CSX has also reached agreement with the Mantle Ridge investment group to reconstitute its Board of Directors. This sees the appointment of five new directors, including Harrison and Mantle Ridge founder Paul Hilal, while three existing directors will stand down at the forthcoming annual shareholder meeting, leaving a 13-strong board. CSX’s current Presiding Director, Edward J Kelly III becomes Chairman, with Hilal serving as Vice Chairman.
CSX had been in discussion with Mantle Ridge over its succession plans since Harrison left CP in mid-January. However, it had expressed concerns that the proposed reforms would ‘grant effective control’ to a shareholder with a stake of less than 5%, and proposed to discuss this with its shareholders at a special meeting on March 16 which will not now take place.
Following the agreement, Hilal said the CSX board was ‘united behind a shared goal – creating value for shareholders and all stakeholders’. This would be achieved by implementing at CSX the Precision Scheduled Railroading model that Harrison had developed during his successive appointments at Illinois Central, CN and CP. Harrison, said this approach was ‘proven to improve safety, create better service for customers, produce a proud and winning culture for employees, and generate exceptional, lasting value for shareholders’.
According to CSX, ‘Harrison is the most effective and successful railroad leader of our times, having successfully led the turnaround of three major railroads over the last 25 years. In his last two undertakings at Canadian National and Canadian Pacific, he delivered 321% and 350% total shareholder return, respectively.’
As part of the deal, Harrison is to receive incentive options to purchase 9 million shares in CSX stock over four years. A request for reimbursement of US$84m in benefits forfeited when he stepped down from CP and a related tax indemnity is to be put to a shareholder vote at the annual meeting, but Harrison ‘has indicated that he will resign’ if these are not provided.