Posts Tagged ‘CSX management structure’

Foote Named Permanent CSX CEO

December 23, 2017

James M. Foote had the word “acting” removed from his title on Friday after the CSX board of directors unanimously voted to name him the company’s permanent president and chief executive officer.

James Foote

Foote had been named acting CEO on Dec. 14 after E. Hunter Harrison was placed on medical leave. Harrison died two days later.

In a news release, CSX said that Foote will also join the board of directors.

“Jim has decades of railroading experience and the board is confident of his ability to lead the company,” says CSX Chairman Edward J. Kelly III in a statement. “He has already had a markedly positive impact. The board looks forward to working with him.”

Foote said in the same statement that his intends to continue to implement Harrison’s model of precision scheduled railroading, saying that its implementation is well underway, with the most critical components of the implementation completed and beginning to generate measurable operating improvement.

“We look forward to providing an update on our strategic progress and to showcase our deeply talented management team at our upcoming investor day in March,” Foote said.

Before joining CSX last October, Foote was president and CEO of Bright Rail Energy, a technology company formed in 2012 to design, develop, and sell products that allow railroads to switch locomotives to natural gas power.

He previously served as executive vice president of sales and marketing at Canadian National, which he had joined in 1995 as vice president of investor relations to assist the company’s privatization.

Foote began his railroad career in 1972 as a laborer in the mechanical department with the Soo Line Railroad in Superior, Wisconsin.

For nine years, he worked in operating positions with the Soo Line and the Chicago & North Western fulltime while earning his undergraduate and law degrees.

Advertisements

What Now for CSX? Foote Seen by Analysts as Staying as CEO, at Least in the Short Term

December 19, 2017

It remains an open question whether James. M. Foote will lead CSX long term, but many analysts believe the CSX board of directors will keep him in the short term as acting CEO in order to provide stability.

Foote became the acting CEO last Thursday after CEO E. Hunter Harrison took a medical leave of absence for a still undisclosed illness. Harrison died at his Florida home on Saturday.

“I do expect Jim to be named CEO, although I also think the board will proactively study (and look to fill) any gaps in the team,” said Taylor Glasebrook, associate portfolio manager at Neuberger Berman, the No. 8 shareholder in CSX with 10.5 million shares.

“We believe that Mr. Foote’s presence in the senior leadership team provides an important source of continuity,” Cherilyn Radbourne, a TD Securities analyst, wrote in a note to clients.

But Radbourne also noted, as have others, that Foote lacks experience in operations, having spent most of his four decade railroad career in marketing and sales.

“Our biggest concern is that Mr. Foote’s primary area of expertise is sales and marketing versus operations, and the senior management team now lacks a member with an operating background,” Radbourne wrote.

“He is a competent, experienced railroader who is familiar with precision railroading,” said John Larkin, an analyst with Stifel Equity Research. “He has been in place for a couple of months and has a head start on any others. The company has underdone enough uncertainty over the past couple of years and needs some stability.”

What Harrison’s death means for CSX in the long term is being debated by railroad industry observers.

“Harrison’s legendary ability to redesign a rail network with his Precision Scheduled Railroading model created the two most efficient operations in North America and we believe his legacy will continue at CSX,” J.P. Morgan analyst Brian Ossenbeck wrote on Sunday.

But Renny Ponvert, CEO of Management CV Inc., which analyzes top hires for money managers, told The Wall Street Journal, that hiring Harrison “was a classic triumph of short-term thinking over long-term sustainability.”

Povert said the CSX board “took a high-beta risk that appeared to pay off for the first six months. Now, they’re stuck with a consequence that could expose long-term shareholders.”

Bloomberg columnist Brooke Sutherland summed up what happened in the lead to her story this way: “CSX Corp. shareholders paid $84 million for Hunter Harrison. They’re now getting James Foote.”

In January when word got out that Harrison and the Mantle Ridge hedge fund were targeting CSX, the company’s stock value jumped 23 percent in one day.

One news report said CSX stock value has risen 48 percent this year and about 6 percent since March when Harrison took over.

The stock value fell on Friday about 10 percent, but then stabilized. On Monday CSX stock value rose 1.25 percent to $53.42.

Investors will be looking to a January CSX announcement of its fourth quarter 2017 performance for clues as to what the company plans to do going forward.

CSX also plans to hold an investors conference next March. By then the board may have already named Foote the permanent CEO and hired a chief operating officer.

Before his death, Harrison had purged the top executive ranks of most CSX holdovers.

Most of that shakeup came in late October and also brought Foote to the company to oversee operations and marketing.

Harrison had also been bringing in former Canadian National managers who understand his precision scheduled railroading model.

During a series of “Hunter camps,” which were intensive seminars led by Harrison himself that explained the concepts of precision scheduled railroading, he had identified what he termed “rock stars” who showed promise of understanding the model and being able to implement it.

CSX has signaled that it intends to continue to operate on the PSR model but some analysts have been debating whether it has the management team it needs to continue to oversee it.

Foote contended last Friday before Harrison death that most of the work in implementing PSR has been done and CSX had the people in place to fine tune things.

Some believe Foote and the current CSX management team might be better suited than was Harrison to soothe relations with shippers and employees who were upset at the rapid pace of change that Harrison brought to CSX and which resulted in service issues during the summer and early fall.

Yet some continue to doubt that Foote is the long-term answer for CSX.

“Even though Jim Foote is a capable leader we do not see him as the long-term solution as the CEO given his strength is marketing and the company is embarking on an operations-focused turnaround,” Cowen and Co. analyst Jason Seidl said in a note.

There has also been speculation in the wake of Harrison’s death that some CSX shareholders might launch litigation against the CSX board for breach of duty for having hired a CEO they knew had health issues.

The board had initially demanded that Harrison submit his medical records for review by an independent physician.

Harrison refused and the board backed down after Harrison submitted a letter from his doctor saying he was fit for the job.

One news account quoted two unnamed corporate attorneys as saying it might be difficult to win such a lawsuit because of Harrison’s known medical condition.

Harrison on Medical Leave From CSX

December 15, 2017

CSX announced Thursday night that CEO E. Hunter Harrison has taken a medical leave of absence and Chief Operating Officer James Foote is serving as acting CEO.

E. Hunter Harrison

The announcement said Harrison is dealing with complications from a recent illness.

A conference call was to be held on Friday morning to discuss the situation.

Harrison has been thought to have health issues for some time. It was reported earlier this year that he sometimes uses supplemental oxygen and that due to an undisclosed illness he has curtailed his traveling.

Concerns about Harrison’s health had been an issue early this year after hedge fund Mantle Ridge acquired a block of CSX stock and pushed for the company to make him CEO.

The CSX board of directors had demanded that Harrison’s medical records be examined by independent physicians, but he declined and the demand was later dropped.

Foote worked with Harrison years ago at Canadian National and was brought to CSX this past October with the idea of eventually succeeding Harrison as CEO of CSX.

“Hunter is a good friend and has been a colleague of mine for many years. He is an icon in the industry and we pray for his speedy recovery,” Foote said in a statement. “I have been following the CSX story very closely since January, but did not realize just how much progress Hunter and CSX’s able team have made replicating the transformation we effected at Canadian National some years ago.”

Harrison agreed to a four-year contract when he agreed to become CEO of CSX.

In his statement, Foote said that the precision scheduled railroading operating model is well in place at CSX and “the company has amassed the critical talent – through education of the internal team and supplementation with a complement of strong PSR operating veterans and a strongly supportive Board – sufficient to follow through and execute on the PSR operating plan.”

CSX Management Shakeup Spooks Some Investors

October 27, 2017

The fallout over a CSX executive leadership shakeup has spooked some investors and sent the railroad’s stock price tumbling.

At close of business on Thursday, the CSX price per share had dropped 2.60 percent to $52.92. In after-hours trading, the decline increased to 3.82 percent, to $50.92.

Cowen and Company Managing Director Jason Seidl told Railway Age magazine that his firm has received numerous calls from investors about the changes, which have Chief Marketing Officer Frederick Eliasson, Chief Operating Office Cindy Sanborn, and General Counsel Ellen Fitzsimmons leaving CSX in mid November.

CSX also canceled an Oct. 30 investors meeting that was to have been held in Florida and used as a forum to discuss the railroad’s future operating plans.

“There was no specific reason given for the Investor Day cancellation, but one would have to imagine the sudden departure of CSX’s CMO, COO and general counsel are primary factors,” Seidl said.

At the same time that CSX announced the departures of three top executives, it said it was bringing on board a former Canadian National manager who worked there with CSX CEO E. Hunter Harrison.

James Foote will assume the post of CSX chief operating officer and replace both Sanborn and Eliasson.

Akron Railroad Club member H. Roger Grant told Trains magazine that a management shakeup of the scale of that which occurred at CSX this week is unprecedented in the industry.

“I can’t think of another example of such a sweep of top executives,” said Grant, a professor of history at Clemson University and author of several books about railroads.

The changes will leave only Chief Financial Officer Frank Lonegro from the management team of former CSX CEO Michael Ward.

Siedl said some investors believe there is more going on at CSX than has been disclosed thus far.

“We do not think the departure of these three people, long-tenured executives at the firm, came on completely amicable terms,” he said. “We think their departure could further disenfranchise additional employees, many of which may blame current management for their departures. This would be something the railroad does not need as it attempts to improve its well-publicized service issues. We expect CSX shares to underperform those of its peers in the near-term or until an explanation is given that can assuage investors’ anxieties.”

In a news release announcing the management changes, CSX said that Sanborn and Eliasson were leaving to pursue other opportunities.

That wording is often used by companies to mask a firing or an employee otherwise leaving involuntarily. Fitzsimmons was said to be retiring.

Trains reported that some industry observers were surprised that the management changes were disclosed less than a week before the investor day event and while the railroad remains under scrutiny of the U.S. Surface Transportation Board in the wake of a summer of service disruptions.

Yet others said they were surprised that Harrison, who became CEO in March, waited this long to make major management changes.

The management shakeup mirrors what Harrison did when he became CEO at Canadian Pacific in bringing in executives from Canadian National, where Harrison had also served as the top executive, to oversee the transition to the precision scheduled railroading operating model.

However, Trains reported that at CP changes in top executives occurred over a five-month period and not in a single day.

The magazine said that concerns about Harrison’s health — he has an undisclosed medical condition that limits his travel and forces him to rely on supplemental oxygen — may have had something to do with the timing of the changes.

Harrison had said during a conference call to discuss CSX’s third quarter earnings that the issue of who would succeed him might be addressed during the investor conference in late October.

At CN, Foote was the carrier’s chief sales and marketing officer between 2000 and 2009. He left CN after Claude Mongeau was named to succeed Harrison as CEO.

Foote, who is now president and CEO of Bright Rail Energy, which oversees converting locomotives to be powered by natural gas, does not have railroad operating experience even though Harrison wrote in a memo to CSX employees that Foot “has a proven track record with implementing precision scheduled railroading and  . . . more than 40 years of railroad industry experience.”

One Wall Street analyst told Trains that Foote knows Harrison’s operating philosophy and what’s expected at a Harrison-led railroad.

“Foote could be the trusted, proven railroader that could be a solid backup for Hunter,” said John Larkin, an analyst with Stifel Equity Research. “Just being part of the senior team at CN was kin to accumulating operating experience.”

Yet Trains quoted another source as saying lack of direct operating experience could be a liability.

“Credibility with ops people comes from working day and night in the field,” said the source, who was not named. “If, for example, you haven’t changed a knuckle 50 cars from the head-end in blinding rain at 2 a.m., you won’t have much credibility among the ranks of T&E personnel, superintendents, and trainmasters. These are the people who get trains over the road and want to be led by people who know their daily grind.”

Larkin said Foote might be a short-term successor while CSX grooms Lonegro to be its next CEO if Harrison has to step down or he does not continue after his four-year contract ends.

Foote is not the first former CN manager hired by Harrison at CSX. Approximately 15 people who worked at CN have been hired in operations at CSX.

In return for being released early from his contract at CP, Harrison had to agree not to poach any of that carrier’s top managers.

However, he was able to bring from CP Mark Wallace, who is now CSX’s executive vice president and chief of staff.

3 High-Level CSX Executives Leaving Company

October 26, 2017

Three high-ranking CSX executives will leave the company on Nov. 15. Departing are Executive Vice President and Chief Operating Officer Cindy M. Sanborn; Executive Vice President and Chief Sales and Marketing Officer Fredrik J. Eliasson; and Executive Vice President Law and Public Affairs, General Counsel and Corporate Secretary Ellen M. Fitzsimmons.

A CSX news release used the proverbial “to pursue other interests” boilerplate to describe the reason why Sanborn and Eliasson are leaving while Fitzsimmons was described as retiring.

The release also said all three executive  “will remain engaged in supporting the transition until early 2018.”

Replacing Sanborn will be James M. Foote, a former executive at Chicago & North Western, and Canadian National.

Foote most recently was the president and CEO of Bright Rail Energy. During his time at CN, he worked under current CSX CEO E. Hunter Harrison as CN’s executive vice president sales and marketing.

In a statement, Harrison cited Foote’s experience with precision scheduled railroading.

CSX Vice President Risk Compliance and General Counsel Nathan D. Goldman will be promoted to executive vice president, chief legal officer and corporate secretary, replacing Fitzsimmons.

The management shakeup follows a period of several months in which CSX experienced severe service issues that raised the ire of shippers and led the U.S. Surface Transportation Board to hold a public hearing on the railroad’s service.

The STB began monitoring CSX’s performance in July, requiring the company to submit weekly progress reports.

Harrison said at the STB hearing that CSX will continue to implement the precision scheduled railroading model and has been making progress in overcoming its service issues.

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 Said to be Talking With Harrison

January 31, 2017

The Wall Street Journal reported on Monday that CSX and E. Hunter Harrison are in negotiations about the railroad’s CEO position.

CSX logo 3Harrison has presented to CSX management his plans to revamp CSX. The former CEO of Canadian Pacific, Canadian National and Illinois Central, is teaming up with Paul Hilal of the Mantle Ridge hedge fund to seek a management shakeup at CSX.

Mantle Ridge was reported to be seeking three seats on the 12-seat CSX board of directors, a demand that may be a source of conflict the Journal reported.

News reports indicate that Harrison met with CSX officials last Friday in Atlanta.

If CSX, Harrison and Mantle Ridge are unable to reach an agreement, then the hedge fund has until Feb. 10 to nominate candidates to the CSX board. CSX usually holds its annual meeting in May.

It is not clear what plans that Harrison and Mantle Ridge have for revamping operations at
CSX.

In the past year, CSX management under current CEO Michael Ward has retooled rail operations. Among other steps, CSX has emphasized longer trains and focusing capital expenditures on core routes.

In 2015, Ward said he planned to remain the CSX CEO for three more years after Oscar Munoz, who was expected to replace Ward, left to head United Airlines.

While at CP last year, Harrison unsuccessfully sought a merger with Norfolk Southern.

Some analysts on Wall Street believe CSX will be receptive to having Harrison as CEO because of his experience in leading other class 1 railroads.

CSX Make Changes to Top Management

May 24, 2016

CSX has announced a realignment of its top management ranks that will take effect on July 1.

Cressie Brown, currently vice president of labor relations, will become senior vice president and chief administrative officer. After joining CSX in 1988, Brown held leadership roles in operational and support functions, including technology, finance, service design and customer service.

CSX logo 3 Kathleen Brandt, currently head of the company’s information technology subsidiary, will become senior vice president and chief information officer. She joined CSX in 1985 in information technology.

Zachery Jones has been appointed vice president of labor relations to succeed Brown. He worked at the National Mediation Board before joining CSX in 2010 where he rose to the position of assistant vice president of employee services.

CSX also announced that Lisa Mancinia, the current vice president and chief administrative officer, will retire on July 1.

She joined CSX in 2003 and is a member of CEO Michael Ward’s executive team. Mancinia is responsible for people functions, procurement and real estate.

Both Brown and Brandt will join the executive management team and report directly to Ward.

“These promotions underscore the importance of continuing to develop our highly skilled and committed employees, while accelerating CSX’s next-generation technologies and performance in safety, service and efficiency,” Ward said in a statement.

In other management changes that are effective on June 1, Mike Smith will assume a new role of vice president-PTC and strategic implementation. He is currently vice president-network operations and in his new position will oversee implementation of positive train control and other network-wide initiatives.

Bob Frulla will become vice president-network operations for the northern region. His experience includes time as division manager in several locations and as general manager-network operations.

Smith and Frulla will report to Executive Vice President and chief operating officer Cindy Sanborn.

Jermaine Swafford, who has been managing the southern region, will become vice president-northern region. John Bradley, currently Chicago division manager, will become vice president-southern region. Both will report to Mike Pendergrass, vice president and chief transportation officer. Robert Holtz, assistant division manager in Chicago, will become division manager.