Canadian Pacific Railway CEO Green is out following proxy vote by company’s largest shareholder
May 17, 2012
Class I railroad carrier Canadian Pacific Railway Ltd. said ahead of its annual shareholder meeting earlier today that Fred Green, president and CEO, has left the company.
This move comes in the wake of a proxy vote by activist investor Bill Ackman, head of Pershing Square Capital Management, and the single largest CP shareholder with a 14.1 percent stake in the company.
Green also stepped down as a CP director along with CP Chairman of the Board John Cleghorn and four other directors. And when Pershing Square nominates its seven director nominees there will be 16 available candidates for the 16 available board positions, the company said.
Tension between CP and Pershing Square had been brewing for several months, with Ackman calling for a proxy vote when the CP board declined to replace Green as CEO, according to a Wall Street Journal report.
The report noted that Ackman laid blame on Green and the board member that have left for fledgling efficiency and stock market performance over the last six years. It has been widely speculated that Ackman plans to tab Hunter Harrison, former CEO of Canadian National Railway as Green’s replacement. Harrison stepped down from CN in 2009 and served in his role there for seven years and was widely known for his focus on “precision railroading,” which requires cargo to be ready when rail cars arrive for loading or risk being left behind, the Journal said.
A Globe and Mail report said that in recent weeks Ackman had gathered tremendous support from CP shareholders and proxy advisory firms to elect a dissident slate of seven directors, which would lead to management changes and cost-cutting at CP, which the report observed “is underperforming its peers.”
CP’s first quarter operating ratio was 80.1 percent, whereas most other Class I railroads operating ratios are in the 60s.
On May 9, CP said that it was successfully executing on its Multi-Year Plan, which was focused on driving operational improvements, and it highlighted some of the inroads the company had made, including: a 45 percent improvement per car miles per day to an all time record; a 23 percent improvement in terminal dwell time to an all time record, and a 25 percent improvement in train speed, among others.
CP said at the time the its board “unanimously believes Pershing Square’s demand that the Company replace Fred Green with Hunter Harrison would delay and damage CP’s value-generating plan, and put the progress and momentum the Company has built at significant risk.”
It added that Pershing Square admitted that this plan amounts to nothing more than replacing one CEO with another, adding that Pershing Square’s nominees have failed to provide any strategic or operational plan that would lead to an improved operating ratio or achieve the unprecedented or unrealistic rate of operating ratio reduction that Pershing Square has promised to shareholders.
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