John Cleghorn and Fred Green- Date unknown Andy Clark Reuters.

20 January 2012

CP Railway CEO Vows Unrelenting Efforts to Improve Amid Proxy Battle

Calgary Alberta - Canadian Pacific Railway CEO Fred Green is telling employees that the company has the right plan and will continue "unrelenting efforts to achieve further improvement."
 
The letter comes amid much public pressure from Pershing Square Capital Management's Bill Ackman on the board of directors to deliver better operating results.
 
Ackman, who wanted Green ousted and replaced with ex-Canadian National Railway chief executive Hunter Harrison, is launching a proxy fight because the CP board, led by chairman John Cleghorn, voted unanimously to stand behind Green.
 
"Even though we did not choose to be the target of Pershing Square's public demands, there is a silver lining," writes Green in a four-page letter sent to employees on Friday. "The situation shines a spotlight on CP as we continue with our efforts to achieve superior performance for the benefit of both our customers and shareholders."
 
The letter touched on plans to improve the company's operating ratio, a measure of efficiency in the railway industry. Pershing Square argues CP could get to 65 by 2015, from 78 in 2010. CP will release its ratio for 2011 next Thursday when it reports fourth-quarter earnings.
 
CP has promised to get to the low 70s in the next three years, as part of a multi-year plan to improve performance. Green said Pershing's ratio target "has never been achieved by any railway management team."
 
He argued that it took seven years for CN's Harrison to lower its ratio from 75 to 65, which came during a strong economy and revenue growth for CN due to acquisitions.
 
Green also told employees that Cleghorn and other board members are meeting with shareholders to discuss CP's response to Pershing Square.
 
The letter said the chairman has made it clear to shareholders that the company expects "meaningful improvements" to the operating ratio beginning in the first quarter of 2012.
 
"We have reiterated to our shareholders that this is only the beginning, and as we achieve our goals, we will continue to set and work toward new targets," Green said.
 
Vanessa Lu.