James Ginns to take over from Simon Large as Cathay Pacific Cargo director
Simon Large, director of cargo at Cathay Pacific, is to leave the freight arm to ...
North America rail turnaround king Hunter Harrison has moved a step closer to taking the top job at CSX.
The carrier’s board called a meeting to discuss his potential appointment as chief executive, along with activist investor fund Mantle Ridge taking a 5% share of the company.
Mantle Ridge has an exclusive contract with Mr Harrison after he resigned as chief executive of Canadian Pacific and has been promoting his appointment to CSX.
CSX has been planning the succession of 39-year company veteran chairman and chief executive Michael Ward, a process that may have been accelerated by Mr Harrison’s availability.
Last week, the CSX board held a five-hour meeting with Mantle Ridge and Mr Harrison, during which the fund made two demands: that it gets substantial representation on the CSX board; and Mr Harrison becomes CEO.
In a statement this week, the carrier said: “It became apparent that CSX would be unable to retain Mr Harrison unless it acceded to Mantle Ridge’s requests with respect to the composition of the CSX board and the governance of CSX, in addition to agreeing to Mr Harrison’s terms of employment at a total cost which CSX estimates to exceed $300m.”
CSX’s initial proposals included: Mr Harrison’s appointment as chief executive, with “suitable compensation”; the appointment of Mantle Ridge chief executive Paul Hilal and three other mutually agreed individuals to its board; the retirement of four CSX directors over the next three years; board chair and committee composition to be determined by the newly constituted board; and no standstill agreement between CSX and Mantle Ridge.
Mantle Ridge and Mr Harrison turned these down, however, and CSX returned with another set of proposals.
These include a four-year contract for Mr Harrison, with a package totalling of $300m and a 1% share of CSX’s common stock; the immediate retirement of Mr Ward; the appointment of four additional Mantle Ridge employees to the CSX board, alongside Mr Hilal and Mr Harrison; the retirement of three CSX directors in 2017, followed by the retirement of presiding director Edward Kelly in 2018; director John Breaux to be ineligible to stand for re-election following 2018’s annual general meeting; Mr Hilal to succeed Mr Kelly as chairman after a year as vice chairman; the chairs of the carrier’s compensation and governance committees to be selected by Mantle Ridge, with “heavy” representation on both bodies.
However, CSX also had concerns over these conditions, namely that they would grant effective control to a shareholder that actually holds less than 5% of its stock, and that Mr Harrison’s remuneration was largely in the form of an upfront payment with only a portion based on performance.
A statement said: “The CSX board believes such an employment arrangement for an incoming chief executive is exceptionally unusual, if not unprecedented.”
A special meeting will be held on 16 March with a vote on the proposals.
Mr Harrison resigned from Canadian Pacific at the beginning of the month, handing back $90m in benefits in the process to free himself from any non-compete clauses in his contract.
The shock decision buoyed CSX investors, with heightened speculation that he would be joining the carrier, replacing Mr Ward.
Renowned as the man that turned around the post-privatisation fortunes of Canadian National, Mr Harrison joined CP in 2012 after an approach from activist investor Bill Ackman. Current CP chairman Andrew Reardon said he had left the carrier with a strong foundation for future success.
Should Mr Harrison’s move to CSX be confirmed, this would not be the first time he has flirted with the US railroad, having placed an unsuccessful bid to merge CP with CSX in 2014.
That move launched a quest to create a transcontinental carrier that then led to a $28bn bid for Norfolk Southern in 2015, which, had it succeeded, would have been the largest railroad merger ever.
However, a combination of NS’s dissatisfaction with the proposed offer and its insistence that the US Surface Transportation Board would never greenlight the move led to it being aborted last April.