(CSX Corporation issued the following on February 14.)
JACKSONVILLE, Fla. — CSX Corporation today sent the following letter to The Children’s Investment Fund (TCI):
Chris Hohn, Managing Partner
The Children’s Investment Fund
7 Clifford Street
London, England
Dear Mr. Hohn:
The CSX Corporation Board of Directors has received the letter from The Children’s Investment Fund (“TCI”) dated February 7, 2008. The Board takes its responsibilities to CSX shareholders seriously and has reviewed the letter and considered your proposal to allow shareholders the right to request special meetings for the purpose of electing directors throughout the year.
CSX’s recent Bylaw amendments reflect the Board’s commitment to high standards of corporate governance. These Bylaw amendments enable 15 percent of shareholders to request special meetings, well below the 25-33 percent level in similar bylaw provisions recently implemented by a number of other public companies.(1) This new right for CSX shareholders is in addition to the strong rights CSX shareholders already have with respect to governance and director elections.
Every CSX director stands for election every year and is subject to a majority voting standard that empowers shareholders to “vote out” a director, even in an uncontested election year. As the term implies, “special” meetings are the place for shareholders to consider extraordinary matters, not the regular annual business of director elections. The recent CSX Bylaw amendments avoid the disruption and diversion of resources associated with the potential for multiple director elections each year. The CSX amendments strike the appropriate balance between giving a small minority of shareholders the ability to request special shareholder meetings and protecting the interests of all shareholders. Against this background, TCI’s criticism of the CSX Bylaw amendments is both unwarranted and disingenuous. Under the guise of providing shareholders with a voice, TCI seeks to undermine the functioning of the CSX Board in furtherance of TCI’s own purposes. TCI wants the ability to initiate a perpetual “recall” contest through special meetings as a tool to pressure the Board to implement TCI’s proposals, regardless of their merit. Taken together with TCI’s nomination of candidates to fill five of CSX’s twelve Board seats, TCI’s criticism of the CSX Bylaw amendments makes it clear that TCI’s interest is not in good corporate governance, but in achieving effective control of the company notwithstanding its ownership of only 4% of the shares.
The CSX Board and management team are proud to stand on a record of outstanding performance. Since 2004, the performance of CSX has improved sharply on virtually every performance and safety measure to levels at the forefront of the industry. Moreover, the value of CSX stock has increased nearly 150 percent, providing shareholders with a return better than the rest of the North American rail industry and 94 percent of all S&P 500 companies during this same time period. We remain committed to protecting, and advancing, the interest of all shareholders. On behalf of the CSX Corporation Board of Directors, Edward J. Kelly, III, Presiding Director, CSX Corporation (1) These companies include Colgate-Palmolive, JPMorgan, Bank of America, Allegheny Energy and El Paso Corp. About CSX
CSX Corporation, based in Jacksonville, Fla., is one of the nation’s leading transportation companies, providing rail, intermodal and rail-to-truck trainload services. The company’s transportation network spans approximately 21,000 miles, with service to 23 eastern states and the District of Columbia, and connects to more than 70 ocean, river and lake ports. More information about CSX Corporation and its subsidiaries is available at the company’s web site, http://www.csx.com/.
(1) These companies include Colgate-Palmolive, JPMorgan, Bank of America, Allegheny Energy and El Paso Corp.