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Full steam ahead?
Railroad CSX has named industry veteran Hunter Harrison as its new chief executive and appointed five new directors to its board under an agreement struck with activist investor Mantle Ridge.
Mr Harrison, who walked away from a lucrative job running Canadian Pacific Railway to offer his services to CSX, had been the company board’s desired candidate to replace former chief executive and chairman Michael Ward, who announced his decision to retire on February 21 and will stay on as a consultant.
But the move to put Mr Harrison at the railroad’s helm hit a rough patch amid questions about pay and governance. He, CSX and Mantle Ridge had been in talks to smooth over their differences. Those discussions also included how many board members Mantle Ridge would help select.
According to a statement from CSX on Monday, Mr Harrison will receive as part of his compensation package an award of incentive options to buy 9m CSX shares at its current trading price, 8m of which will be part of an inducement award under Nasdaq listing rules. The options will vest over a period of four years, the statement said, with half based on service and the other half based on whether certain goals are achieved during that period.
CSX said it will seek shareholder input on two additional proposals: the payment of the $84m in compensation and benefits that Mr Harrison walked away from when he left Canadian Pacific – which Mantle Ridge has agreed to protect “on an interim basis” – as well as the requested assumption of a related tax indemnity.
Mr Harrison will resign after that meeting if those two measures are not provided by CSX, and “return to Mantle Ridge to protect his reimbursements,” the company said in a statement.
The five new board members will include Mr Harrison, Mantle Ridge’s founder and chief executive Paul Hilal, Dennis Reilley, Linda Riefler and John Zillmer. The board’s current presiding director, Edward Kelly, will become the board’s chairman, while Mr Hilal will serve as vice-chair.
Mr Harrison said in a statement:
“I am proud to join the dedicated and talented railroaders at CSX. Together, we will implement Precision Scheduled Railroading – a model proven to improve safety, create better service for customers, produce a proud and winning culture for employees, and generate exceptional, lasting value for shareholders.”