The campaigning has begun to win the votes of CSX shareholders as to whether new CEO E. Hunter Harrison should be reimbursed for the money he gave up when he retired early from Canadian Pacific.
Not surprisingly, the hedge fund Mantle Ridge is supporting giving Harrison the money. Mantle Ridge lured Harrison away from CP by promising to pay him what he would give up by leaving early. Now Mantle Ridge wants to be reimbursed for what it paid Harrison.
Mantle Ridge has launched a website, www.csxadvisoryvote2017.com to make its case.
“We believe that Mr. Harrison is the most effective and successful railroad leader of our times, having led the dramatic turnaround of three major railroads over the last 25 years,” Mantle Ridge founder and CEO Paul Hilal wrote in a letter to shareholders. “In those undertakings, he drove operating ratios to industry-leading levels while delivering total shareholder returns of 450 percent, 353 percent, and 319 percent, respectively.”
CSX stockholders will vote at the annual meeting on June 5 in a non-binding referendum on the reimbursement. Harrison has said he will resign if he doesn’t get the additional compensation.
The referendum seeks approval for CSX to pay Mantle Ridge $55 million and Harrison $29 million, which would pay his tax bill.
Hilal said the cost of the reimbursement amounts to less than 12 cents per share.
Papers filed with regulatory authorities last week indicate that Harrison gave up $89 million in salary and benefits to win release from his CP contract.
Many analysts expect the referendum to win approval because of the value that hiring Harrison has added to CSX stock.
The shares jumped in value by $12.91, an increase of 35 percent, after CP said it would allow Harrison to retire early.
The value of CSX stock rose against last week after the company announced its first quarter 2017 financial performance.
The CSX board of directors has not taken a position on the Harrison compensation referendum, but before hiring him the board had expressed concern about the size of the compensation package that he wanted.
The board did approve a statement to stockholders outlining the pros and cons of voting in favor of the compensation.
After acknowledging Harrison’s track record at Illinois Central, Canadian National and CP, the advisory noted that other side of the argument is that there is a risk that Harrison won’t be able to serve the full four years of his contract due to the potential for death, disability or other reasons.
It also said that Harrison may not be able to achieve results similar to those at IC, CN, and CP.
The board said it would take the referendum into account and “ . . . act promptly in the exercise of its fiduciary duties with respect to whether to commit to the reimbursement after the shareholders have voted.”