After weeks of negotiations, Hunter Harrison became CEO of CSX Corp. Monday — but he could still walk away if shareholders don’t approve his full compensation package.
Harrison, former CEO of Canadian Pacific Railway Ltd., took over immediately, the company said in its late Monday announcement.
Former CSX CEO Michael Ward, who was planning to retire in May, will act as a consultant to the company.
CSX last month said Harrison was seeking a total compensation package worth more than $300 million and the Jacksonville-based railroad company was planning a special meeting to let stockholders vote on it.
In the Monday announcement, CSX said shareholders will still get an advisory vote on one part of Harrison’s package at the company’s regular annual meeting.
He told CSX he will resign after the annual meeting if he doesn’t get that payment, the company said.
CSX also said it agreed with hedge fund Mantle Ridge, which was working with Harrison, to put Harrison, Mantle Ridge CEO Paul Hilal and three other new directors on the company’s board.
Harrison has a reputation for cost-cutting and improving performance as CEO of major North American railroads Canadian Pacific and Canadian National Railway.
Even before his appointment, CSX last month announced it was cutting about 1,000 management-level jobs, with a majority of those in Jacksonville. CSX expects that move to save $175 million a year.
The company’s stock has soared since word leaked in January that Harrison was seeking to replace Ward, rising by $12.91 to $49.79 as of Monday’s close.
That represents a total gain of about $12 billion in CSX’s market value, which is why many analysts say large investors will be willing to approve a compensation package for Harrison worth $300 million.
CSX did not give the total value of Harrison’s contract Monday but said the sticking point, which will be put to a shareholder vote, is $84 million in compensation and benefits forfeited when he left Canadian Pacific to pursue the CSX job.
Since it is an advisory vote, the board of directors does not have to act on the shareholders’ decision, but CSX said the board intends to “act promptly” after the annual meeting, based on the vote. No date has been announced for the meeting.
The board will include Harrison, Hilal and three new directors who were named Monday: Dennis Reilley, retired CEO of Praxair Inc., Linda Riefler, a Morgan Stanley executive; and John Zillmer, former CEO of Univar.
Three incumbent CSX directors will leave the board after the annual meeting, leaving the size of the board at 13. Ward has already said he will be retiring from the board, but CSX did not name the other two directors who are leaving.
CSX also said Edward Kelly, a director since 2002, is succeeding Ward as chairman of the board. Hilal will become vice chairman.