"My doctors have cleared me to work, and that's good enough for me." - CSX CEO Hunter Harrison
RICHMOND, Va. — CSX Corp. CEO Hunter Harrison breathed with the assistance of a portable oxygen machine Monday at the Jacksonville-based company’s annual shareholders’ meeting.
Just one shareholder asked him about it.
“My doctors have cleared me to work, and that’s good enough for me,” responded Harrison, 72.
Before the meeting, Harrison declined to answer questions about his health as he walked through The Jefferson Hotel in Richmond, Va., with the oxygen machine.
The 90-minute shareholders meeting started at 10 a.m. Harrison sat on the stage next to CSX Chairman Edward Kelly.
Kelly said health was something “the board was focused on for some time” and that there were “no concerns moving forward.”
After the meeting, Cindy Sanborn, CSX executive vice president and COO, said she wasn’t concerned with Harrison’s health, either.
“I spend as much time with him as anyone, as you can imagine being in an executive role,” she said. “He brings a lot of energy from nine o’clock in the morning to nine o’clock at night.”
Shareholders interviewed after the meeting voiced little concern about Harrison’s health, which has generated headlines.
The Wall Street Journal reported Monday that CSX has faced questions about how much it knew about Harrison’s health.
The financial newspaper reported that Harrison sometimes uses the oxygen machine and often works from home because of an undisclosed medical condition.
Still, shareholders want the veteran railroad turnaround expert to lead CSX for the next four years, which is the length of his contract.
On Monday, 93 percent of the shareholder votes cast supported the payment of $84 million to Harrison to make up for the money he forfeited when he left Canadian Pacific Railway Ltd. to seek the CSX job.
Harrison said he would quit without the reimbursement. The board has about two weeks to approve the deal.
According to the company’s 2017 proxy statement, $55 million will be reimbursed to hedge fund Mantle Ridge LP, which “protected Mr. Harrison on a contingent basis,” during his resignation from Canadian Pacific.
Harrison would retain $29 million as a one-time, upfront payment.
While he spoke at a slow pace during the meeting, Harrison didn’t seem to have trouble answering shareholders’ questions or providing a brief statement on the operations of the company.
Harrison took on the CEO role March 6 after the company announced former CEO Michael Ward planned to retire.
Kelly said Harrison and Mantle Ridge “had made a number of concessions during negotiations” when asked by a shareholder if the payment was appropriate.
The terms of his annual compensation were not disclosed, although Mantle Ridge has said in SEC filings it is worth $17 million a year.
While the shareholders’ vote is a substantial show of support, the CSX board of directors has the final say on the payment.
CSX spokesman Rob Doolittle said the board will have 15 days to approve the payment and other business discussed at the shareholders meeting.
Doolittle said it “was an advisory, non-binding vote by shareholders, but the board will absolutely take that into consideration.”
Aside from health, Harrison spent about five minutes talking about the company’s operations during his short time there.
“I have been involved in turnarounds before, and in my 50 years of railroading, I don’t think I’ve been more excited about the opportunities that lay ahead,” said Harrison.
Harrison said that shareholders “should not expect the status quo” and that “we have to make some changes.”
Before Harrison came onboard, CSX announced it would cut about 1,000 people. Those layoffs, including 500 Jacksonville-based management jobs, were completed.
While Harrison didn’t speak directly to those layoffs, Sanborn said the company doesn’t have any immediate plans for more job cuts, saying only that CSX would “adjust as needed.”
Harrison also said he would focus on controlling costs, “asset utilization” and safety and would improve services.
At least a dozen people from Jacksonville attended, although most were CSX staff and executives. Steve Halverson, CEO of Jacksonville-based Haskell Co., attended as a board member.
About 100 people attended the meeting, including up to 80 shareholders, which Doolittle said was twice the usual turnout.
Other shareholders questioned plans for operations in different parts of the country and one asked for a breakdown of the $84 million payment.
Kelly said the meeting was held in Richmond because the city was in rotation.
Richmond, where CSX was based before it relocated its headquarters to Jacksonville, holds a “special place in the company’s history and portfolio,” he said.
Shareholders voted on five items during the meeting:
• Elected the 13 director nominees to the company’s board of directors.
• Approved Ernst & Young LLP as the company’s independent registered public accounting firm in 2017.
• Approved a non-binding vote to approve compensation for the company’s executive officers.
• Supported an advisory resolution on annual future advisory votes on executive compensation.
• Approved Harrison’s reimbursement arrangement.
CSX provides rail, intermodal and rail-to-truck transload services in the Eastern U.S. It said it links more than 240 short-line railroads and more than 70 ocean, river and lake ports.
CSX stock has risen from $36.88 in January when Harrison’s interest in the CSX job came to light to a high of $55.06 last week. It closed Monday at $54.03, down 51 cents on the day.
Harrison’s track to CSX CEO
Jan. 19: Hunter Harrison resigns as CEO of Canadian Pacific Railway Ltd. Reports say he wants to become chief executive of CSX.
Feb. 10: CSX extends deadline for nominating directors to its board, confirming reports the company is negotiating with Harrison.
Feb. 14: CSX says it will hold a special meeting to vote on Harrison’s proposal to become CEO.
Feb. 21: CSX says Michael Ward will retire as chairman and CEO. Company also says it will cut 1,000 management-level jobs.
March 6: Hunter Harrison becomes CEO, contingent on him receiving $84 million in compensation he forfeited when he left Canadian Pacific.
March 9: CSX says it cut 800 management jobs, including 500 in Jacksonville. In April, it said the remaining 200 positions were eliminated.
April 3: CSX sets shareholder meeting date for June 5.
April 20: CSX reports better-than-expected first-quarter earnings.
June 5: Shareholders approve Harrison’s $84 million payment.