A New York investment firm calling for new management at Canadian Pacific Railway (CP) has named a slate of nominees to run for the railway’s board in May.
CP shareholder Pershing Square Capital Management has named its own CEO Bill Ackman; one of its partners, Paul Hilal; and three Canadian businesspeople to run in director elections at CP’s annual meeting of shareholders, scheduled for May 17 in Calgary.
"With a revitalized board and new management, we will help CP transform from the worst to one of the best performing Class I railroads in North America," Ackman said in a release Tuesday.
Ackman’s firm has pledged to try and install retired Canadian National Railway (CN) CEO Hunter Harrison as a replacement for CP’s current chief executive, Fred Green.
"As transportation experts and analysts have said in recent days, there is no executive who is as qualified to lead a turnaround of CP — to build value for shareholders and to improve performance for the hundreds of Canadian clients and communities it serves," Ackman said.
"Together, we can transform CP into the railroad its customers, employees and shareholders deserve," Harrison said in the same release. "I would be proud to help lead CP to that victory. Should (CP’s) board determine that I am the best candidate to lead the company, I would be honoured to serve."
According to media reports Tuesday, CN is now suing in a U.S. court for what it describes as a breach of the non-compete agreement Harrison signed upon leaving the company. CN is now also reportedly suspending Harrison’s retirement benefits.
The three Canadians Ackman has committed to run for CP’s board include:
- Gary Colter, president of corporate restructuring and management consulting firm CRS Inc. and a former board member (2003-06) at Saskatchewan Wheat Pool (now part of Viterra);
- Rebecca MacDonald, a founder of Toronto-based Just Energy Group, which markets deregulated gas and electricity; and
- Anthony Melman, CEO of advisory firm Nevele Inc. and a former executive at Onex Corp. during the latter company’s bids for Labatt, Air Canada and Beatrice Canada, among others.
For its part, CP responded Tuesday to Pershing Square’s plan by saying its own current board has reviewed and verified a multi-year plan which is "underway and already producing results."
The Calgary-based company further said it believes "through an ongoing commitment to safely delivering excellent customer service and increasing asset velocity, efficiency and productivity, CP will achieve an annual operating ratio in the low 70s in the next three years, with further improvement thereafter."
CP said earlier this month that Pershing Square has been calling for an "unrealistic operating ratio reduction at (a) pace never before achieved by any railway management team," and added that CP "fully supports" Green and his management team.
"We continue to stand by our offer to have Mr. Ackman join our board," CP chairman John Cleghorn said in the same release Tuesday, "so that a constructive board-level dialogue based on all the relevant facts and information can commence and so that we can work together for the benefit of all shareholders."
One of CP’s unions recently warned that the battle for the company’s governance must not lead to dangerous cost-cutting.
CP "had one of the worst personal injury safety records last year, as well as a history of dangerous commodity derailments causing evacuations and death," said William Brehl, president of the Teamsters Canada Rail Conference’s maintenance of way employees division, in a Jan. 10 release.
"This could be linked to CP’s previous attempts at lowering their operating ratio and if so, the pressure being put on them now could create a very dangerous environment."
The union, he said, would urge the government and Transport Canada "to be more vigilant than ever over the next months to ensure CP Rail is running the railway in a safe manner and not cutting corners in the name of shareholder value and efficiency."