Hunter Harrison, the bombastic former head of both major Canadian railways and current president and CEO of CSX Corp. is on medical leave from the Florida-based railroad due to what the company called “unexpected complications from a recent illness,” shaving one-tenth off the value of its shares Friday morning.
CSX wouldn’t disclose the nature of the illness that had afflicted Harrison, 73, who was hired in March after several years leading Canada’s two biggest railways — Montreal-based Canadian National (TSX:CNR) and Calgary-based Canadian Pacific (TSX:CP).
The Nasdaq-listed company fell as low as US$51.63, down about 10 per cent, after the company said chief operating officer Jim Foote would fill in as CEO on an interim basis. Shares recovered to close at US$52.80, off 7.86 per cent.
Foote — who worked with Harrison for 11 years at CN Rail and joined him at CSX a few months ago — said Harrison fell ill after a multi-day training exercise for the company’s managers.
“Beyond that, out of respect to his family, that’s all we can say at this time,” Foote said on a Friday morning conference call with analysts.
In a statement, he said he expects Harrison’s positive influence on CSX’s performance will continue.
“I believe that the battleship has turned … Because the team has implemented a foundation consistent with Hunter’s vision, I do not see any reason to diminish our expectations concerning the pace and magnitude of our future progress.”
Questions about Harrison’s health were raised earlier this year when the Wall Street Journal reported that he often works from home and occasionally uses oxygen because of an undisclosed health issue.
Harrison did have medical issues while employed at CP Rail, transportation analyst Walter Spracklin of RBC Dominion Securities pointed out in a report on Friday.
“However, it did not require him to step down … which means from a risk perspective, we believe it appropriate at this point to assume for now that Mr. Harrison will not be returning to his post,” he said, adding that suggests efficiency improvements at CSX will likely take place more slowly.
CP Rail CEO Keith Creel said he wished Harrison a “speedy recovery” in a statement issued Friday.
“Hunter built a strong foundation for success at CP in our precision railroading operating model — we continue to build on that foundation,” Creel said. “He led a transformational turnaround at CP, helping restore an iconic company back to its rightful place among leaders in the Class 1 space.”
When Harrison left CP Rail to join CSX, CP Rail chairman Andrew Reardon said his time at CP Rail would be recalled by some as “the greatest corporate turnaround in history.”
He was credited with generating significant profits at both CP Rail and CN by employing tighter train schedules and leaner expenses through a management philosophy known as “precision scheduled railroading.”
But he enraged CP railway’s unions by cutting 6,000 jobs over four years. His use of managers to run trains was criticized by unions as unsafe and was cited by the Transportation Safety Board of Canada as a factor in its investigation of a 2015 incident where a train operated by managers made an unauthorized eight-kilometre trip near Cranbrook, B.C.
Harrison’s compensation package was criticized by shareholders and soon after he left, the railway announced it would cut perks for its top executives and change the way they’re paid.
Harrison’s compensation in 2016 was $18.8 million, including $719,000 for unlimited personal use of the company jet.
The company restricted incoming CEO Keith Creel’s use of the jet to business commuting and family visits within North America.
The company also reduced the influence of operating ratio, a key measure of efficiency in the railway industry, in determining executive compensation, instead basing certain bonuses on safety and operating income.
The operating ratio improved for five straight years under Harrison’s watch as CEO.
CP said Harrison gave up stock options and other compensation worth a total of $122.9 million to go to CSX, part of a deal that set aside his promise not to work for a competitor.
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