News analysis
Joy, trepidation and fear at CP - all at the same time
Hunter Harrison (pictured) has finally been named president and CEO of Canadian Pacific. This was the final piece in the jigsaw in Pershing Square’s battle for control of the railway, explains Larry Kaufman.
HE worst-kept secret in the North American railway industry for more than a month has been the identity of the new chief executive of Canadian Pacific Railway (CP). For the record, Mr Hunter Harrison was named president and CEO of CP on June 29. It is a bit of a puzzle why it took the newly-constituted CP board more than a month to determine that Harrison was the right person to take over Canada’s second-largest railway and one of just seven Class I railways in North America.
T IRJ August 2012
Some thought he would be named to the dual posts after the May 17 resignations of Mr Fred Green, the previous CEO and Mr John Cleghorn, CP’s board chairman. Few call it a resignation; most accept that the two top executives were dismissed after a several- month, vigorous proxy battle for control. Green and Cleghorn were on the losing side. The assault on propriety, as some Canadians might call it, came after activist New York investor Mr Bill Ackman and his Pershing Square Capital
Management hedge fund acquired 14% of CP’s common stock. CP had turned in a dreadful operating ratio above 90% in the first quarter of 2011. Ackman called for the dismissal of Green and offered a slate of director candidates that would give him effective control of CP. A properly- managed CP would earn more and Ackman’s investment would be worth more. The CP board unanimously supported Green. But when two prominent institutional shareholder advisory services
recommended that shareholders vote for the Ackman slate, the battle was effectively over. What went wrong? CP was long considered the better railway than its larger competitor Canadian National (CN), although its sterling reputation probably outlasted reality by several years. But CP only had to be a little better than CN to be considered the gold standard of Canadian railroading. And that is what it turns out to be - just a little better. If one wishes
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