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Health of New CSX Chief in Focus Ahead of Compensation Vote



​Railroad executive

Hunter Harrison

was lured with fanfare​to revive CSX Corp., but an undisclosed medical condition has forced him to work from home many days, according to people familiar with the matter, and he sometimes uses an oxygen machine to help him breathe.

The 72-year-old’s health has become a critical question for investors and analysts ahead of a vote on June 5, when CSX shareholders are being asked to bless an $84 million payment for the railway maverick. The sum compensates Mr. Harrison for money he left behind when he quit his job at a rival railroad to join an activist investor’s fight and take the helm of CSX.

Since Mr. Harrison joined CSX in March, company watchers have been puzzled by the executive’s low profile. He appears no more than a few days a week at the company’s Jacksonville, Fla., headquarters and has been spotted using a portable, over-the-shoulder oxygen system, say people familiar with the matter.

Mr. Harrison insists he is able to lead a turnaround of the big U.S. railroad.



“I’m having a ball and I’m running on so much adrenaline that no one can stop me,” Mr. Harrison told The Wall Street Journal in an interview. “Don’t judge me by my medical record, judge me by my performance.” Mr. Harrison took a medical leave in 2015 after leg surgery and a bout of pneumonia. He has a four-year contract with CSX but has threatened to quit if his pay package is rejected.

The boards of many public companies have struggled with how much to tell shareholders when a CEO is faced with health challenges. Board members must balance the executive’s right to privacy against investors’ right to material information that could cause share-price moves.

The situation at CSX is unique. In railroading, there is no individual more key to a company’s fortunes—and its share price—than Mr. Harrison, who in more than five decades as a railroader has turned around three railroad networks. CSX’s shares jumped 30%, adding $10 billion in market value, after news broke in January that Mr. Harrison would quit his CEO job at a Canadian railroad to vie for the top job at CSX.

Mr. Harrison said he has been cleared by his doctors to work and that his fellow CSX board members are aware of his medical condition. He declined to discuss the details of his condition and said the board has decided the matter isn’t sufficiently material to the company’s performance to disclose.

“There are times when I get a little shortness of breath so I take oxygen and it helps. Sometimes I get a cough and the oxygen makes it go away,” said Mr. Harrison.

CSX spokesman Rob Doolittle said Mr. Harrison “has been and continues to be actively and deeply involved on a daily basis” but declined to discuss the CEO’s medical condition. “In the absence of performance questions, as a matter of policy we do not comment on health-related matters of any CSX executive.”

Edward Kelly,

an independent CSX director who will take over as the company’s chairman at the annual meeting, declined to comment.

Most boards disclose a CEO’s illness only when it is incapacitating, said Douglas Chia, executive director of corporate governance at the Conference Board. But given the looming shareholder vote, CSX directors should inform investors about Mr. Harrison’s health, he said. The CEO’s current and future health conditions “are likely a material factor for the purposes of voting on that particular pay package,’’ Mr. Chia said.

“The board fully considered Mr. Harrison’s age as well as his experience in hiring him as for this position, and addressed the associated risks in his employment agreement,” CSX’s Mr. Doolittle said.

The topic of Mr. Harrison’s health was broached during initial discussions earlier this year between CSX and activist hedge fund Mantle Ridge about installing Mr. Harrison as CEO. Mr. Harrison declined CSX’s request that an independent physician chosen by the company’s board review his medical records. The two sides reached an agreement in March that allowed Mantle Ridge to nominate five new directors, including Mr. Harrison, to its current board.

Mr. Harrison said he has sharply curtailed travel and headquarters appointments since he recovered from pneumonia and other health issues in 2015, when he was CEO of

Canadian Pacific Railway
Co.

During his final two years at CP, he used the portable oxygen system and rarely traveled to the company’s head office in Calgary, Alberta, because the high altitude made breathing difficult, people familiar with the company said.

For many years he has conducted most of his business from his home office near West Palm Beach, Fla. Lately, he has been monitoring the progress of new train schedules and cost cutting at CSX rail yards and dispatch centers from computer screens.

Mr. Harrison said he plans to attend next month’s shareholder meeting.

As part of his CSX contract, Mr. Harrison was granted options to buy 9 million shares, at $49.79, that will vest over four years. Mr. Harrison personally acquired 300,000 CSX shares for more than $15 million last month, fulfilling one of the company’s corporate-governance requirements. In the company’s proxy filing for its annual meeting, CSX said one risk investors should consider is that Mr. Harrison may not be able to serve out the entire four-year contract.

CSX shares fell 3.2% to $49.47 on Wednesday.

One institutional investor with a CSX stake who declined to be identified said he is troubled about the lack of a clear explanation of Mr. Harrison’s health. “We will want to hear from him,” he said, before deciding whether to approve the pay package next month.

CSX executives, including Chief Financial Officer

Frank Lonegro

and Chief Operating Officer

Cindy Sanborn,

are scheduled to appear at bank-sponsored conferences over the next few days and are likely to face questions about the state of their CEO’s health.

Despite the health concerns, shareholders may be reluctant to vote down the pay proposal, as Mr. Harrison has said he would resign if the board won’t grant the compensation package. “If you’re an investor, there’s really no option B to pick, not unless you want to see your investment tank,” Cowen & Co. analyst Jason Seidl said.

Write to Jacquie McNish at Jacquie.McNish@wsj.com, Paul Ziobro at Paul.Ziobro@wsj.com and Joann S. Lublin at joann.lublin@wsj.com

Appeared in the May. 18, 2017, print edition as ‘Health Issue Looms Over Celebrated CSX Chief.’



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