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CSX Corp. has named E. Hunter Harrison chief executive officer, effective immediately, the Class I announced yesterday.Harrison is the former CEO of Canadian Pacific and CN. At CSX, he succeeds Michael Ward, who last month announced his decision to retire as chairman and CEO. Ward will serve CSX as a consultant until he retires on May 31.Additionally, CSX announced it has reached an agreement with Mantle Ridge LP, a hedge fund formed by Paul Hilal, to reconstitute the company's board. Under the agreement, CSX has appointed five new directors, mutually agreed upon by the company and Mantle Ridge, effective immediately. The new directors are Harrison, Hilal, Dennis Reilley, Linda Riefler and John Zillmer, according to a CSX press release.Three incumbent CSX directors intend to complete their board service at or before the conclusion of the 2017 annual meeting. As a result, the board will be made up of 13 members. Current President Director Edward Kelly III will become chairman, and Hilal will become vice chairman.Harrison's compensation will include an award of incentive options to purchase 9 million shares of CSX stock at its current trading price, 8 million of which will be granted as an inducement award under Nasdaq listing rules. The options will vest over four years with half of the options investing based on service and half vesting based on the achievement of designated performance goals over the four-year period.Although Harrison, CSX and Mantle Ridge agreed on those conditions, the board will seek shareholder input on the following proposals: • the requested payment of the $84 million of the amount of compensation and benefits forfeited by Harrison as a result of his separation from CP. To facilitate Harrison's separation from CP on terms that would permit him to work at CSX, Mantle Ridge agreed to protect Harrison on an interim basis with respect to the $84 million.• the requested assumption of a related tax indemnity.Harrison informed CSX that he accepted the CEO position on the condition that the railroad ultimately provides the replacement protection initially offered by Mantle Ridge upon his departure from CP. Harrison indicated he would resign after the 2017 annual meeting if CSX does not provide the reimbursement and tax indemnity. Because Harrison's appointment and the compensation issues will be considered at the annual meeting, CSX canceled a special shareholders meeting that was to be held prior to the annual meeting.Noting that Harrison led the turnaround of three major railroads over the past 25 years, CSX officials described him as the "most effective and successful railroad leader of our times." During his tenure at CN and CP, he delivered 321 percent and 350 percent shareholder return, respectively, CSX officials said.Harrison is known for creating scheduled and precision railroading. He implemented scheduled railroading when he led Illinois Central Railroad. As CEO of CN, he implemented scheduled railroading and later refined it to precision railroading, which he implemented at CP when he was CEO there. He resigned as CP CEO earlier this year.At CSX, Harrison will implement the same process, which he described as a "model proven to improve safety, create better service for customers, produce a proud and winning culture for employees, and generate exceptional, lasting value for shareholders.""I am proud to join the dedicated and talented railroaders at CSX," Harrison said in the press release.
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