(Reuters circulated the following on June 18.)
NEW YORK — CSX Corp. Wednesday criticized a major proxy group’s advice to vote in favor of four board nominees backed by a dissident shareholders’ group, the latest blast in one of the most hotly contested proxy battles this year.
Proxy advisor RiskMetrics Group (RMG.N: Quote, Profile, Research, Stock Buzz) on Tuesday recommended that shareholders vote for four out of five candidates put forward by two hedge funds, Children’s Investment Fund Management (TCI) and 3G Capital Partners.
RiskMetrics cited the U.S. railroad’s “lagging operational performance” and the dissident nominees’ “track record, skill sets and experience” for its recommendations. It also said CSX’s “aggressive proxy fight defense” raised “troubling corporate governance implications.”
CSX fought back, calling the RiskMetrics recommendation “superficial.”
“RiskMetrics has reached the wrong conclusion in failing to recommend the election of all of CSX’s highly qualified directors,” CSX said.
The two hedge funds have fought an acrimonious battle to have their minority slate elected to the CSX board at its annual shareholders meeting on June 25.
RiskMetrics, which owns ISS Governance Services, is generally considered the most influential of major proxy research firms, which advise institutional stockholders on how to vote in proxy situations.
But others, including Proxy Governance and Glass, Lewis & Co, also carry sway. Proxy Governance previously recommended that CSX shareholders back two of the five dissident nominees. A Glass, Lewis recommendation is expected later on Wednesday.
Another proxy service, Egan-Jones Proxy Services, advised shareholders to reject all the dissident nominees.
PITCHED BATTLE
CSX has waged a strenuous battle to discredit the two hedge funds, including suing them in federal court in a so-far unsuccessful effort to strip them of voting rights and force them to sell some holdings.
But while a New York-based federal judge this month found the hedge funds broke securities laws by evading disclosure requirements, a finding the hedge funds deny, he said he couldn’t bar them from voting their shares.
In its report, RiskMetrics said it didn’t find the hedge funds’ actions in the case “particularly egregious” when balanced against “the positive effect” that dissident directors would have on the CSX board.
“TCI/3G have shown a particularly in-depth understanding of the company and the railroad industry throughout the proxy campaign,” said RiskMetrics. “In fact, in our experience covering proxy fights, we cannot recall an activist investor platform as detailed and nuanced as TCI/3G’s.”
RiskMetrics also questioned whether CSX was behind a congressional campaign to investigate the implications of foreign ownership of key U.S. assets, a charge CSX has denied.
Earlier this month, a group of six U.S. lawmakers asked the U.S. Treasury Department to conduct a national security review of the CSX holdings by the Children’s Investment Fund, or TCI, which is based in London.
“We find it hard to believe that CSX has not played a role in generating governmental interference with respect to this proxy fight,” said RiskMetrics.
“CSX investors reasonably can question whether the board is truly accountable to shareholders,” the research group concluded.
CSX shares were recently trading at $64.56, up $1.19 or 1.9 percent, on the New York Stock Exchange.