On June 5, 2017, CSX shareholders overwhelmingly approved an $84M reimbursement to Mantle Ridge (\u201cMR\u201d). MR was the activist investor who foisted the new CEO, Hunter Harrison, upon the CSX Board. With only 4.9% of the outstanding common shares, MR was able to engineer a virtual takeover of the company, largely with the help of over $1B in stock appreciation since the announcement of Mr. Harrison\u2019s arrival was in the offing.<\/p>\n
Not only was 4.9% enough to install Mr. Harrison, but it got MR 4 board seats which was enough to persuade CSX\u2019s board to confirm an unusually large executive package. This package included a reimbursement of $84M which represented the amount Mr. Harrison gave up by \u201cretiring\u201d early from Canadian Pacific, his previous employer, but which MR had fronted pending the takeover.<\/p>\n
The CSX Board approved the shareholder vote on June 16, formalized by its 8K filing with the SEC, which concluded with this ominous disclosure:\u00a0 \u201cThe pace of implementing Mr. Harrison\u2019s business strategies . . . depends on numerous factors, including his continued availability and service.\u00a0 Continued availability and service can never be guaranteed for any individual and is a particular risk in the case of Mr. Harrison, who is 72 years old and has experienced medical issues at various times, including a respiratory condition that requires him to use supplemental oxygen.\u201d<\/p>\n
Since Mr. Harrison\u2019s arrival, about 1,000 jobs have been eliminated, with yet another possible 1,000 jobs on the near term chopping block. He has closed numerous yards, and consolidated a number of facilities. On time train performance has skyrocketed, but unlike most other major railroads whose volumes are up significantly this year, CSX is flat.\u00a0In the meantime, CSX\u2019s stock has flattened out after its meteoric rise which occurred during the period of Mr. Harrison\u2019s\u00a0rumored<\/strong>\u00a0arrival.\u00a0 Both the industry, the board, and other shareholders will be watching closely!<\/p>\n DISCLAIMER:<\/strong>\u00a0The opinions expressed in this article are the author\u2019s own and do\u00a0not r<\/em>eflect the views\u00a0of Consolidated Rail Corporation, CSX, or Norfolk Southern<\/p>\n Jonathan Broder is Vice President and Chief Legal Officer of Conrail.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":" Jonathan Broder (LAW \u201983) provides an update on CSX since Hunter Harrison was foisted as the new CEO<\/p>\n","protected":false},"author":5,"featured_media":1159,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[12,14],"tags":[368,350,156,277,369,354,198],"coauthors":[2,63],"class_list":["post-1261","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-alumni-authored","category-corporate-governance","tag-canadian-pacific","tag-corporate","tag-csx","tag-faculty","tag-hunter-harrison","tag-public-relations","tag-sec","masonry-post","generate-columns","tablet-grid-50","mobile-grid-100","grid-parent","grid-33"],"yoast_head":"\n
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