CN board yanks Harrison’s pension
It says EX-CEO has breached obligations by seeking top job at rival
Canadian National Railway is moving to permanently pull nearly $40 million in pensions and other payments owed to former chief executive Hunter Harrison because he is now openly courting the top job at rival Canadian Pacific Railway.
The board of directors of CN Rail voted unanimously Friday to cancel Harrison’s future pension payments along with yet unpaid restricted stock units and other benefits, as well as recover $3 million previously paid, saying Harrison has breached his noncompete agreement and other obligations to the company.
At a town-hall meeting in Toronto this week, Harrison told CP investors he’s keen to take the job, and outlined how he would turn around the flailing company.
CP Rail is in the middle of a proxy battle, led by Bill Ackman and his hedge fund, Pershing Square Capital Management, which owns 14.2 per cent of CP. “Mr. Harrison’s employment agreement with CN requires him ‘not to engage in or in any way be concerned’ with the principal competitor of the company,” said CN in a statement, noting Harrison, who retired in 2009, had been warned on Jan. 30 that it would take action, not merely suspend payments, if he proceeds to seek the CP Rail job.
Last month, CN filed a lawsuit in Illinois to suspend payments, but amended its court filings Friday, to seek a declaration that it has the right to cancel Harrison’s payments. CN said it has not sought an injunction to block Harrison, because it is unclear if Pershing’s slate of nominees will be elected at the May annual general meeting and whether Harrison will be installed as CEO. “But if and when those events come to pass, CN will consider appropriate relief,” the court filing says. The filing also points out that Har- rison was “intimately involved in every detail of CN’S business,” and would be able to take that knowledge, not all of it confidential, to help its main competitor.
Harrison’s lawyer, Gregory Joseph, could not be reached for comment. In an earlier interview he called the suit “frivolous.”
Pershing has said it would indemnify Harrison against the CN lawsuit, promising to cover the payments. Earlier Ackman said “we think the probability that we have to pay is extremely small” because he hasn’t violated his agreement.
In Pershing’s presentation to shareholders, Ackman and Harrison both argued CP could be much more profitable if it were run better, citing the need for leadership change at the very top.
Harrison talked about implementing a war on bureaucracy and bringing in precise scheduling, which results in lower costs.
CP’S board is refusing to budge, standing unanimously behind the current CEO Fred Green. It says the company has a multi-year plan to boost performance, raise volumes and cut costs.
In a message to CP employees after Pershing’s town hall, Green fought back, defending policies ranging from management targets and the decision to buy a railroad in the U.S. Midwest.