CSX Chief Says Health Isn't an Issue -- 2nd Update

By Paul Ziobro Features Dow Jones Newswires

RICHMOND, Va. -- CSX Corp. Chief Executive Hunter Harrison addressed the railroad's shareholders on Monday and reassured them that he is able to lead a turnaround despite an undisclosed medical condition that requires supplemental oxygen.

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Mr. Harrison walked through the lobby of the historic Jefferson Hotel here using an oxygen machine and was connected to the device on stage at the annual shareholder meeting. He told the audience that the board is "fully apprised with my medical condition" and that his doctor has cleared him to work.

The 72-year-old hasn't disclosed details of his condition, but shareholders overwhelmingly voted to approve an $84 million payment tied to his decision to join CSX earlier this year. CSX said more than 93% of the votes cast were in favor of the reimbursement. All of the company's directors were also approved at the meeting.

Chairman Edward Kelly, the only director to sit on stage with Mr. Harrison, said: "The board is satisfied there is no health issue with respect to Hunter's performance."

In an interview following the meeting, Mr. Harrison said that his condition doesn't allow him to travel as much as he would like but isn't impeding his plans to transform CSX. "Hopefully, I continue to improve," he said, between sips of black coffee.

The payout is tied to compensation that Mr. Harrison gave up as part of his exit from Canadian Pacific Railway Ltd. in January, freeing him to join activist investor Mantle Ridge LP in a bid to revamp CSX. Mantle Ridge agreed to cover $84 million in lost compensation as part of a consulting agreement with Mr. Harrison and then asked CSX to reimburse the expense.

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Mr. Harrison, who became CEO in early March, had said he would resign from CSX if the reimbursement wasn't paid. CSX shares have surged more than 50% this year, boosted by news that Mr. Harrison was looking to join the company. Shares fell 42 cents to $54.12 in Monday trading.

The top proxy advisory firms Glass, Lewis & Co. and Institutional Shareholder Services Inc. had recommended that shareholders vote for the reimbursement, despite some reservations.

One issue has been Mr. Harrison's health. The executive took a medical leave in 2015 after leg surgery and a bout of pneumonia. He also frequently works from home instead of the railroad's Jacksonville, Fla., headquarters.

In a few months at the helm, Mr. Harrison has already made big changes at CSX, one of two major railroads in the Eastern U.S. In recent weeks, CSX has changed the way it sorts long trains at about half of its yards, and changed the routes and schedules for many of its trains.

The results are faster trains that are spending less time idling at yards and improvements in on-time performance. Still, there are pockets of the railway that are resistant to changing the way business is done, according to the CSX chief.

"There are going to be some people that don't like change," Mr. Harrison said in the interview. "That's human nature."

Mr. Harrison is making changes using a so-called precision railroading strategy that at its core involves better utilization of assets and running trains on a tighter schedule. He has run the plan at past stops leading Canadian Pacific and, before that, Canadian National Railway Co.

While analysts and advocates for Mr. Harrison insist his presence is necessary to turnaround CSX, some people have questioned his appointment. "He wrote the book on precision railroading but I'm not sure you need to hire the author to execute the plan," said Renny Ponvert, CEO of Management CV Inc., which analyzes top hires for money managers.

Write to Paul Ziobro at Paul.Ziobro@wsj.com

(END) Dow Jones Newswires

June 05, 2017 14:22 ET (18:22 GMT)