(Reuters circulated the following story by Scott Malone on October 16.)
CAMBRIDGE, Mass. — An activist hedge fund on Tuesday called on railroad company CSX Corp to make a number of management changes, including separating the roles of chairman and chief executive and bringing in directors with more industry experience.
CSX shares rose nearly 2 percent following news of the letter from The Children’s Investment Master Fund, but later fell into negative territory.
“Michael Ward has been the highest compensated CEO in the rail industry over the past two years, despite CSX being operationally outperformed by its peers,” wrote the London-based investment manager, known by the acronym TCI, which owns 17.8 million CSX shares, or a 4.1 percent stake.
“The company has received the letter from TCI and we are reviewing it,” said CSX spokesman Garrick Francis. CSX is expected to report quarterly results this afternoon.
Shares of the U.S. railroad are up 24 percent this year, outpacing the 7 percent increase in the Dow Jones transportation index (.DJT: Quote, Profile, Research).
TCI also called on CSX to change its bylaws to allow shareholders to call special meetings, to tie executives’ long-term compensation to returns on capital, to present a plan to improve its operations, and to justify its capital spending plan for the period 2007-2010.
It also said CSX should take steps to improve its relations with labor, shippers and shareholders. “The board and management have taken an unnecessarily adversarial relations instead of collaborative solutions,” it said.
CSX’s financial results have risen this year as the company has raised prices and improved the speed at which freight moves along its network.
TCI in 2005 publicly criticized Deutsche Boerse’s approach for the London Stock Exchange, eventually forcing out the German exchange’s CEO and torpedoing the bid.
CSX shares were down 33 cents to $42.09 in morning trade on the New York Stock Exchange after rising as high as $43.23 earlier in the session.