Prairie farmers can expect one of their two main railways to press harder for wider profit margins under a quick regime change announced Thursday.
Canadian Pacific Railway’s embattled CEO Fred Green announced his resignation Thursday morning, hours ahead of a shareholder vote in Calgary on nominations to the company’s board, put forward by an activist stockholder that wanted Green gone.
Five of CP’s board members also suddenly announced Thursday morning that they would not stand for re-election, clearing the path for the candidates nominated by New York investment firm Pershing Square Capital Management.
Pershing Square in January named its own slate to run for the board and vowed, if successful, to replace Green, a 34-year veteran of CP, with retired Canadian National Railway (CN) CEO Hunter Harrison.
One of the Pershing nominees, Stephen Tobias, the former chief operating officer at U.S. railway Norfolk Southern, was named Thursday as CP’s interim CEO.
The new board said Thursday it has named "a search committee to identify a permanent CEO."
"Should the board determine that I am the best candidate to lead the company, I would be honoured to serve," Harrison said in a Pershing Square release in January.
Calgary-based CP said Thursday that its previous board members John Cleghorn, Tim Faithfull, Edmond Harris, Michael Phelps and Roger Phillips decided not to run again after taking into account the "views expressed by shareholders about the desire for board change."
Along with Tobias, Pershing Square’s other nominees are its own CEO Bill Ackman; one of its partners, Paul Hilal; CRS Inc. president Gary Colter, a former board member at Saskatchewan Wheat Pool; former Alberta Treasury Branches CEO Paul Haggis, now chairman of Alberta Enterprise Corp.; Rebecca MacDonald, a founder of Toronto-based Just Energy Group; and former Onex executive Anthony Melman, now CEO of advisory firm Nevele Inc.
The departure of five expected nominees left 16 nominees for the 16 spots on the board, among whose other members are Hartley Richardson, chairman of Canada’s No. 2 grain handler Richardson International, and former federal finance minister John Manley.
Another incumbent board member, Madeleine Paquin, CEO of Montreal-based cargo-handling firm Logistec, was elected Thursday as the new board’s acting chair.
Pershing Square, whose funds own 24.2 million CP shares, now worth about $1.8 billion, has for months ripped both Green and the incumbent board for overseeing what it called "the worst managed and poorest performing Class I railway."
CP’s operating ratio has "deteriorated" from 79.6 per cent to 80.1 per cent during Green’s tenure, Ackman said in a letter to CP shareholders last month. The operating ratio of other Class I railroads "improved, on average," from 77.9 per cent to 71.4 per cent in the meantime, he said.
The new board said in a statement Thursday it is "confident in the depth and breadth of this board and its ability to work with the management and all CP employees to serve our customers and communities. We are looking forward to working together to build value for our shareholders."
"The great majority of Canadian Pacific’s employees are extremely talented and dedicated," Harrison said in January. "With the right board and executive leadership, I believe Canadian Pacific can achieve just as dramatic a turnaround (as CN’s) and enjoy its rightful position as a leader in the North American rail industry."
The new board could hit its first obstacle as early as Wednesday, when the railway’s unionized engineers, conductors, traffic controllers, trainmen and yardmen officially are in strike position.
The workers, who are represented by the Teamsters Canada Rail Conference and have been without a labour agreement since Jan. 1, voted last month 95 per cent in favour of authorizing their bargaining committee to launch a strike "if necessary."