Posts Tagged ‘CSX executives’

Harrison Has Medical Condition That Often Has Him Working From Home, Not CSX Headquarters

May 19, 2017

The Wall Street Journal reported this week that CSX CEO E. Hunter Harrison has a medical condition that often forces him to work at home.

E. Hunter Harrison

The newspaper gave few specific details about the condition and the 72-year-old executive said that he should not be judged by his medical record.

“I’m having a ball and I’m running on so much adrenaline that no one can stop me,” Harrison told the Journal. “Don’t judge me by my medical record, judge me by my performance.”

Harrison acknowledged that he carries a portable oxygen system, but his doctors cleared him for his position.

“There are times when I get a little shortness of breath so I take oxygen and it helps,”
Harrison said.” Sometimes I get a cough and the oxygen makes it go away.”

CSX Chief Financial Officer Frank Lonegro told an investor conference that Harrison is fully engaged in his job.

“We’re really running to play catch up with him,” Lonegro says. “He’s a 24-hour-a-day, seven-day-a-week kind of guy.”

Trains reported that CSX was well aware of Harrison’s medical condition when it hired him.

However, that was a point of contention at one point when CSX demanded that independent physicians review Harrison’s medical records, a request that Harrison refused.

CSX said it would not comment on Harrison’s health.

The Journal said that during his last two years at Canadian Pacific, Harrison frequently worked from home rather than in his CP office in Calgary.

Harrison is the New CSX President, Too

April 24, 2017

E. Hunter Harrison has added another title to his resume at CSX. He is now the president of the company as well as its chief executive officer.

Harrison replaced Fredrik Eliasson, who was named CSX president on Feb. 21 after serving as the railroads’s chief marketing officer.

Eliasson will now become executive vice president and chief sales and marketing officer for CSX.

The moves in the executive suite mean that CSX has had three presidents in less than four months.

The year began with Clarence Gooden as president. The original plan was for Gooden to step down at the end of May when then-CEO Michael Ward also would retire.

Harrison assumed the CEO post on March 6. The good news for Eliasson is that he will get to keep the pay increase that he received when he was named president.

“There were no compensation adjustments associated with these title changes,” CSX said in a regulatory filing.

Harrison’s Compensation at CSX Outlined

March 9, 2017

Hunter Harrison and CSX agreed to a base salary of $2.2 million, the railroad said this week in a regulatory filing.

The compensation package also includes an annual target bonus opportunity of up to $2.8 million, with that amount as a guaranteed bonus this year.

Harrison will receive options on 9 million shares of CSX stock, which is valued at $448 million at its current price of $49.79 per share.

Half of those options will hinge on his continued employment and the other half are tied to his meeting a series of performance targets.

The agreement to hire Harrison as its CEO also came with a number of changes in the CSX board of directors.

Clarence Gooden is no longer vice chairman and board member Timothy O’Toole has resigned immediately.

CSX’ has amended its corporate bylaws to separate the roles of CEO and chairman of the board as well as to change the mandatory retirement age of 75. Harrison is 72.

Although it remains to be seen how Harrison’s management philosophy will play out at CSX, analysts expect that he will further thin the number of managers and employees at the company, close yards and shops, and sell off some rail routes.

These measures will be aimed at improving operations, reducing expenses and boosting profitability.

Some have noted that CSX is far different than were Canadian National and Canadian Pacific when he took over as CEO at those railroads.

The Canadian roads were linear systems whereas CSX has a more complex route network.

That will challenge Harrison to impose his precision scheduled railroading philosophy, which he developed as CEO of the Illinois Central Railroad in the 1990s.

One decision Harrison will need to make will be whether to continue the CSX of Tomorrow strategy, which emphasized intermodal and merchandise traffic while focusing on its major routes operating in a triangle operating from Chicago to New Jersey to Florida and then back to Chicago.

CSX, Harrison Reach Agreement on CEO Post

March 6, 2017

CSX said Monday afternoon it has reached an agreement to hire E. Hunter Harrison as its CEO effective immediately.

Current CEO Michael Ward, who had announced on Feb. 21 that he would retire on May 31, will become a consultant to CSX.

The railroad also said it has reached a pact with hedge fund Mantle Ridge to reorganize the CSX board of directors.

In a news release, CSX said it would appoint five new directors agreed upon by Mantle Ridge and current CSX management.

They are Paul Hilal, who founded Mantle Ridge, Harrison, Dennis Reilley, Linda Riefler and John Zillmer.

Three incumbent directors will complete their terms at or before the conclusion of the CSX 2017 annual meeting. The CSX board will then have 13 members.

Edward J. Kelly, III, the current presiding director, will become chairman of the board and Hilal will become vice chairman.

Harrison will receive an award of incentive options to purchase nine million shares of CSX stock at its current trading price, eight million of which will be granted as an inducement award under the Nasdaq listing rules, CSX said in its news release.

The options will vest over four years with half of the options vesting based on service and half vesting based on the achievement of designated performance goals over the four-year period.

However, the CSX board will still seek shareholder direction with regard to an $84 million payment to cover compensation and benefits that Harrison forfeited by retiring early from Canadian Pacific.

CSX said that Harrison, 72, has said that his acceptance of the CEO position is subject to CSX ultimately providing this replacement protection initially offered by Mantle Ridge upon his departure from CP.

If he does not receive the reimbursement and tax indemnity that he is seeking, Harrison will resign after the 2017 CSX annual meeting.

CSX said it will ask CSX shareholders to conduct an advisory vote during the annual meeting.

A previously announced special stockholders meeting will not be conducted.

The news that CSX, Harrison and Mantle Ridge has reached an agreement was reported in various news outlets, including the Wall Street Journal, before it was formally announced by CSX.

CSX, Harrison Reported Close to a Deal

March 4, 2017

News reports on Friday indicated the CSX and E. Hunter Harrison are closed to reaching a deal for the former Canadian Pacific head to become CEO of CSX.

CSX logo 1Bloomberg News reported that an announcement could be made as early as next week although the talks between CSX and hedge fund Mantle Ridge over the composition of the CSX board of directors could still collapse.

The reports indicated the two sides were close to reaching an agreement whereby Harrison would begin work immediately for CSX and receive a four-year contract.

CSX shareholders would vote on whether to reimburse Mantle Ridge the $84 million that it paid Harrison to walk away early from CP.

Back in January, several news reports indicated that Harrison agreed to forego tens of millions of dollars to get CP to grant him a limited waiver of a non-compete clause.

CSX and Mantle Ridge have refused to comment on the report.

CSX Extends Board Nominee Deadline Again

February 24, 2017

CSX has again extended the deadline for nominations of candidates to its board of directors.

CSX logo 1The railroad has been in talks with hedge fund Mantle Ridge about installing E. Hunter Harrison as its CEO as well as the composition of the CSX board.

Mantle Ridge owns slightly less than 5 percent of CSX stock and acquired it with the goal of shaking up CSX management.

CSX earlier said it would hold a special meeting of stockholders to discuss and vote on the Mantle Ridge demands. A date for that meeting has not yet been announced.

Board candidate nominations will now be due on March 10.

Whether it chooses Harrison or someone else, the CSX board will need to find a new CEO because incumbent head Michael Ward said last week that he plans to retire on May 31.

CSX CEO Ward to Retire on May 31

February 21, 2017

On Tuesday CSX Corp. announced that Chairman and Chief Executive Michael Ward and President Clarence Gooden will retire, effective May 31.

Fredrik Eliasson, a 22-year veteran of the company and current Chief Sales and Marketing

Michael Ward

Michael Ward

Officer, has been appointed as President effective Feb. 15.

The Jacksonville, Fla.-based railroad in a statement described the changes as an “orderly transition” of senior leadership, adding it is continuing discussions with Hunter Harrison and activist investor Mantle Ridge regarding Harrison becoming CEO at CSX.

CSX said that the elevation of Eliasson to the president’s post was not intended to affect the discussions with Harrison of Mantle Ridge, which owns less than 5 percent of CSX stock.

“On behalf of CSX’s Board of Directors, I want to thank Michael and Clarence for their many years of dedicated service and contributions to our company,” said Edward J. Kelly III, Presiding Director. “Michael has helped build CSX into one of the nation’s leading transportation and logistics companies, and Clarence has similarly provided valuable leadership across CSX’s sales, marketing and operations teams. We wish both the best in their retirements.”

Eliasson, 46, will maintain his current responsibilities in his new position. He has served as executive vice president and Chief Sales and Marketing Officer since September 2015, and prior to that was Chief Financial Officer from 2012-15. He joined CSX in 1995.

In an other development, Ward said today that 1,000 CSX management positions would be eliminated in a cost cutting move.

The job cuts will affect positions at CSX headquarters in Jacksonville, Florida, as well as various field offices.

Numbers, Numbers. How Much is Hunter Worth?

February 20, 2017

When E. Hunter Harrison retired early from Canadian Pacific, news accounts noted that he left millions of dollars on the table in exchange for a limited waiver of a non-compete clause so he could pursue the CSX CEO job.

As it turned out, Harrison did no such thing.

On TransportationThe hedge fund Mantle Ridge agreed to pay Harrison the money he gave up at CP.

Mantle Ridge in turn wants CSX to reimburse it for the cash it guaranteed Harrison for walking away early from CP.

CSX claims that Harrison is seeking a four-year contract worth $300 million. That $75 million a year would make him not just the highest paid North American Class 1 railroad executive but also place him among the highest-paid CEOs in America.

By comparison, the man Harrison wants to replace, Michael Ward, earned $2.9 million in 2015. Another retired Class 1 CEO, Charles “Wick” Moorman, who agreed to take Amtrak’s top job for $1 a year, although he is also eligible for performance-based bonuses of up to $500,000 a year.

But Mantle Ridge counters that Harrison’s compensation package would actually be worth $200 million of which $120 million are stock options.

Such is life in the rare air of the corporate suite where eye-popping salaries are justified by saying a CEO brings a “unique skill set” to the job.

Executive compensation experts interviewed by Trains magazine said Harrison’s pay demands are at the high end of the scale, but not unreasonable by CEO pay standards.

Once the news broke that Harrison was seeking the top CSX job, the value of CSX stock jumped $10.4 billion, an increase of 30 percent.

Ben Branch, a finance professor at the Isenberg School of Management at the University of Massachusetts, told Trains that CSX stockholders might think Harrison has a “dramatic plan” for improving the company.

“It’s rare,” Branch said. “You don’t have many situations where a CEO almost single-handedly is expected to deliver dramatic improvement.”

Jason Shiel, a managing director of finance firm Cowen and Company, told Railway Age the pay demanded by Harrison is a negotiating point and he is likely to receive less, although not necessarily much less.

Harrison is known for his scheduled precision railroading operating philosophy, which some railroad industry analysts say is similar to what CSX practices now.

Ultimately, some think Harrison’s long game is to engineer a merger that creates North America’s first transcontinental railroad. It is an idea he been peddling for years and failed to pull off last year when he proposed a merger between CP and Norfolk Southern.

For us mere mortals whose primary connection with CSX is watching its trains pass by, all of this talk about eight- and nine-figure executive compensation is nothing more than a parlor game.

The numbers baffle ordinary people who have no chance in their lifetime of ever earning a salary exceeding five figures a year. Most of us can’t fathom how you become a CEO of a Fortune 500 company.

For most CSX employees, having Harrison rather than Ward at the top will make little difference.

They will continue doing what they have been doing even if there may be some changes in how they do it.

Yet it is likely that some may find themselves victims of Harrison’s expected cost cutting.

In the eyes of Harrison and other high-ranking and well-paid railroad executives, labor costs are just another number to be reduced in order to please Wall Street.

How those reductions affect individual CSX employees financially and emotionally won’t be a subject of discussion at the special CSX board meeting. It never is.

All they talk about are numbers and for most of us that is all Harrison’s pay demands are.

Mantle Ridge Disputes CSX News Release

February 18, 2017

Hedge fund Mantle Ridge took issue with some facts contained in a CSX news release issued earlier this week on the subject of E. Hunter Harrison becoming the railroad’s CEO.

CSX logo 3Mantle Ridge head Paul Hilal said he wrote to the CSX Board of Directors to take issue with the news release, in particular the size of the compensation package for Harrison and Hilal’s demands for governance changes for the CSX board.

“We owe it to the shareholders to get a deal done promptly. Let’s do it,” Hilal wrote. “If you are willing, we are glad to meet in person and hammer this out this weekend, hopefully delivering good news to the shareholders early next week.”

In the meantime, Harrison told the Wall Street Journal that he was frustrated with what he described as “chest pounding” between his investment partner and CSX, which has resulted in a stalemate in the negotiations for him take over as CSX as its CEO.

The newspaper reported that CSX had offered the CEO post to Harrison, but that Hilal, a principle at Mantle Ridge, has refused to give in on compensation and governance demands. Hilal, who is representing Harrison, has conducted most of the discussions with CSX.

Mantle Ridge holds less than 5 percent of CSX stock but wants to name six directors to the railroad’s board of directors and reduce the number of directors to 12,

In the news release, CSX said it is reluctant to allow a shareholder with such a small share of its stock to dictate the composition of its board. CSX also has described the demands to give Harrison a $300 million compensation package as “extraordinary in scope.”

The Journal said that during a recent meeting with Mantle Ridge, some CSX shareholders objected to the number of seats on the board that Mantle Ridge wants.

Hilal reportedly said during the meeting he needs to control six seats so that Harrison “has control and can execute his plan.”

CSX reportedly is objecting to paying Harrison the $89 million he gave up by leaving early as Canadian Pacific’s CEO in return for receiving a limited waiver of a non-complete clause.

Hilal contends that the compensation deal that Mantle Ridge is seeking from CSX is $200 million and includes $120 million of stock options, about half of which are tied to “very real” performance measures.

Another sticking point is the 72-year-old Harrison’s refusal to agree to have a physical exam by an independent physician.

Harrison told the Journal he was willing to negotiate his pay with the CSX board,

In his letter, Hilal contended that Harrison wants $32 million per year over four years – or $128 million – of which $20 million per year is performance-based.

“His package is worth very little unless he performs spectacularly,” Hilal wrote. As for the changes on the CSX board, Hilal said he is only seeking a seat for himself.

Harrison would occupy another seat along with four other independent directors who would be agreed upon by CSX and Mantle Ridge

“Why are we asking that new directors be added? As we’ve discussed, precision scheduled railroading requires dramatic operational and cultural change,” Hilal wrote. “Change like that starts at the top, with significant new blood on the board not wed to the old ways or legacy decisions and with no ties to any previous strategy or anyone.”

CSX Sets Special Board Meeting on March 16 to Consider Mantle Ridge Proposal to Make Hunter Harrison CEO

February 15, 2017

Hunter Harrison and the Mantle Ridge hedge fund will get their day before the CSX board of directors and shareholders.

CSX logo 1The board on Tuesday agreed to call a special meeting for March 16 at a time and place to be named later to consider the hedge fund’s “extraordinary requests.”

Mantle Ridge has proposed making Harrison the CSX CEO. Harrison last month retired early as head of Canadian Pacific so that he could, presumably, seek the top job at CSX.

Harrison and CP sought unsuccessfully to merge with Norfolk Southern l;ast year but that company’s board rejected the overtures.

In a news release, CSX said Mantle Ridge has acquired less than 5 percent of its stock but is seeking compensation and control far in excess of the scope of its stock ownership.

CSX acknowledged that it has held talks with Harrison and Mantle Ridge during which the hedge fund demanded substantial representation on the CSX Board and that Harrison immediately replace current CSX CEO Michael Ward.

The railroad said it has made several offers to Harrison and Mantle Ridge that would have made Harrison the CSX CEO and given Mantle Ridge three seats on the CSX board.

Mantle Ridge has rejected those offers and countered with its own demands, many of which focus on Harrison’s compensation and the composition of the CSX board.

One noteworthy point made in the CSX news release is that Mantle Ridge has agreed to compensate Harrison for the millions of dollars he agreed to forgo when he retired early from CP. Mantle Ridge wants CSX to make up most or all of that.

Harrison has also rejected a CSX request that he take a physical exam.

CSX said in its statement that it is wary of granting control to a shareholder who holds less than 5 percent of its stock and is demanding benefits from CSX that may exceed $100 million.

CSX said the requested reimbursement and tax indemnity could exceed $300 million and are thus extraordinary in scope and structured largely as an upfront payment and as equity grants that would be payable to Mr. Harrison upon his death or disability with only a portion of the equity grant including any performance metrics.

“The CSX Board is committed to being responsive to the interests of its shareholders and has closely observed the market reaction to Mr. Harrison’s possible employment,” the railroad said in its statement.  “Accordingly, in light of the unusual circumstances surrounding Mantle Ridge’s approach the CSX Board has decided to seek guidance from shareholders on whether CSX should agree to Mr. Harrison’s and Mantle Ridge’s proposals.

CSX said it would schedule its regular board meeting, usually held in May, after the special March meeting.