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Ex-Canadian Pacific CEO Hunter Harrison - Date unknown Photographer unknown.
24 January 2017
Hunter Harrison's Non-Compete Agreement Lets Him Run CSX


Calgary Alberta - Hunter Harrison, the outspoken railroader credited with rescuing Canadian Pacific Railway Ltd. (CP) from the doldrums, is making his early exit from the company with about $52 milllion, even after giving up $118 million in stock and options to pursue a job at U.S. rival CSX Corporation (CSX).
 
According to the separation agreement between Mr. Harrison and CP, the Memphis-born railroader is not allowed to work for the Calgary-based company's three biggest rivals, Canadian National Railway Co. (CN), BNSF Railway Co. (BNSF), and Union Pacific Railroad (UP).
 
But the pact makes no mention of Florida's CSX, the company sources say activist investor Paul Hilal's Mantle Ridge wants Mr. Harrison to run.
 
Mr. Harrison leaves CP at the end of January, earlier than his planned departure date of 30 Jun 2017.
 
He triggered his early exit by asking the company to loosen his employment agreement so he could pursue job opportunities at "certain other Class 1 railroads," CP said.
 
The company formed a special committee to consider his request, and decided to grant him a "limited waiver" as long as Mr. Harrison surrendered certain benefits and stock awards.
 
The 36-month non-compete and non-solicitation agreement says Mr. Harrison, 72, is not allowed to hire any CP employee at the level of manager or higher, excluding the chief of staff.
 
The $52 million Mr. Harrison retains includes $36 million in shares owned by him and his wife, based on CP's share price of about $201 on 24 Jan 2017, according to the most recent Canadian regulatory filings.
 
Mr. Harrison is required to sell the shares by 31 May 2017.
 
Additionally, he is allowed to keep and sell a portion of the 650,000 stock options he was given in 2012 when he forfeited his CN pension and holdings to take the CP job.
 
This is worth about $10 million.
 
Finally, he receives $6.3 million for shares granted in 2014.
 
Not included in that total is his 2016 cash bonus, which is yet to be reported.
 
For 2015, a year in which CP's share price fell by 21 percent, his cash bonus was $6 million and his salary was $2.8 million.
 
"The executive acknowledges that by reason of his employment the services he renders to the company are of a special or unusual character with a unique value to the company, the loss of which the company believes cannot adequately be compensated by damages in an action at law," the agreements reads.
 
A CP spokesman declined to comment.
 
Walter Spracklin, an analyst with Royal Bank of Canada, said the document increases his conviction that Mantle Ridge will propose Mr. Harrison for the CEO job at CSX.
 
Mantle Ridge has declined to comment.
 
CSX said it will listen to Mantle Ridge's views but would not comment on any discussions.
 
In response to the news of Mr. Harrison's plans, CSX's share price has risen by 25 percent.
 
Investors are gambling Mr. Harrison will be able to win the top job and squeeze efficiencies from what is regarded as a well-run railway, albeit one with weak earnings and a dwindling coal business.
 
CP named operating chief Keith Creel as CEO.
 
Mr. Creel worked under Mr. Harrison at CN and CP, and was seen as the heir apparent.
 
Eric Atkins and Janet McFarland.

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