CSX Transportation’s battle with dissident hedge funds was nearing a key boardroom vote when the railroad received what it called an “astonishing and disturbing” report from an influential proxy advisory service.
RiskMetrics this month sided with The Children’s Investment Fund and 3G Capital Partners, recommending that stockholders install four of the five hedge fund nominees to the CSX board at the company’s annual meeting starting last week in New Orleans.
CSX found RiskMetrics’ recommendation “inexplicable” and defended its management performance, saying the advisory service excused illegal behavior by the hedge funds’ nominees.
“In its attempt to dismiss the opinion of the federal court, RiskMetrics has sub-
stituted its own uninformed judgment for the court’s conclusions,” CSX said in a statement, referring to a June 11 court decision that the hedge funds violated disclosure laws while building stakes in the railroad.
“We believe the RiskMetrics recommendation is superficial, and that RiskMetrics has reached the wrong conclu-
The Surface Transportation Board rebuffed shipper requests for a delay to September and instead set July 22 for a hearing on railroads’ liability risks from hauling certain dangerous cargoes.
The board on June 4 first said it would hear the issues July 16, but shipper groups said they needed more time to meet with members to prepare. The STB rejected ideas of taking it into autumn, or even extending the date another week to July 29.
Intermodal firm Pacer International revamped how it structures a key part of its business, creating new positions of president for both its retail and wholesale customer operations.
That new organizational structure “is the next logical step for Pacer,” said Chairman and CEO Michael Uremovich. “It reflects our core strategy of placing additional emphasis on our retail customer and door-to-door services.”
Effective June 30, the company is bringing in Daniel Avramovich as president of its retail intermodal services. Avramovich left Kansas City Southern on March 31, where he was executive vice president for sales and marketing.
Pacer is promoting Adriene Bailey to president of the wholesale intermodal operations. Most recently Pacer’s executive vice president for strategy and development, she has been with the company eight years.
Both will report to Don Orris as interim president of intermodal services.
In other changes, Val Noel moves from president of Pacer Cartage, a position he has held since 2004, to executive vice president of street operations, focused on boosting pickup/delivery service and capacity. Doug Matthew becomes executive vice president for network logistics and Brian Kane will be senior vice president of corporate finance, overseeing all finance and accounting functions.
sion in failing to recommend the election of all of CSX’s highly qualified directors,” CSX said.
The advisory firm said it weighed the dissident nominees’ “track record, skill sets and experience” against what it said was CSX’s “lagging operational performance and the troubling governance implications of the company’s aggressive proxy fight defense.
It urged investors to vote for TCI Managing Partner Christopher Hohn, 3G Managing Director Alexandre Behring, former Conrail CEO Timothy O’Toole and former Illinois Central Chairman Gilbert Lamphere.
It held back from endorsing minority nominee Gary Wilson, a former chairman at Northwest Airlines, as he is a current director at Yahoo! and RiskMetrics will soon have to issue a vote recommendation on that firm as well.
The funds, predictably, appplauded the same report, saying they were “very pleased” the advisory recommended “our superior candidates.”
But they also urged shareholders to vote for the entire slate of five minority directors. “We remain concerned that CSX will not reach its full potential to create shareholder value unless all five” are added to the board, they said.
CSX had some victories in the weeks leading up to the crucial meeting. Egan-Jones Proxy Services recommended the company slate in the vote, while Proxy Governance backed only two of the activist directors.
But CSX also saw a federal district judge reject its request to block TCI and 3G from voting some of their shares, and then an appeals court denied the injunction request as well.
The company had allies in the nation’s capital, where six U.S. senators urged Treasury Secretary Henry Paulson to convene an interagency review to see if the foreign-based funds’ actions were in effect launching a foreign takeover of key infrastructure.
RiskMetrics threw in a rebuke to CSX for what it called its “Washington strategy.”
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