* Former CNR boss is Ackman's nominee for CEO job at CP
* Harrison says would tackle CP bureaucracy, costs
* Ackman, Harrison speaking at rare town hall-style meeting
* CP backs current CEO Fred Green
* CP shares rise 1.7 pct
By Allison Martell and Pav Jordan
TORONTO, Feb 6 Hunter Harrison, the former
railroad boss that an activist investor wants to take charge of
Canadian Pacific Railway, said on Monday CP has to
transform its complacent company culture if it wants to improve
its lagging operating performance.
At a town hall-style meeting hosted by William Ackman's
Pershing Square Capital Management in support of his proxy
battle with CP, Harrison said he has invested $5 million of his
own money in Canada's No. 2 railway. He said the investment
showed he was confident in his ability to make CP click.
"Ninety percent of this is about people," Harrison told a
packed ballroom at a Toronto hotel, where an audience of about
300 investors, lawyers and journalists took in more than two
hours of presentations and questions.
"It's a wonderful franchise that's got a lot of potential
and a lot of opportunity. The problem is execution, and we've
just got to get to a point where we can make the cultural shifts
that need to be made to get the railroad to execute like it
should be," said Harrison in his Southern drawl.
Pershing is pushing Harrison, credited with turning around
rival Canadian National Railway during his tenures as
operating chief and CEO, as a remedy for CP's worst-in-class
The closely watched New York hedge fund holds a 14.2 percent
stake in the railway. It called the Toronto meeting, branded "CP
Rising," to promote Harrison as well as its minority slate of
nominees for CP's board.
CP said in a statement after the meeting that Pershing
Square "continues to offer no plan or clear timetable to improve
CP's operations, or even any concrete suggestions." It repeated
that it was sticking to its own multi-year plan for improving
performance under Fred Green, the current CEO.
Initial reactions to the meeting, an open-house event that
is rare in corporate Canada, were positive. CP's stock rose 1.7
percent to C$74.71 on the Toronto Stock Exchange.
The atmosphere in the room remained friendly even as Ackman
and his colleagues laid out tough criticism of Green's record.
Then Harrison joined Ackman on stage, and sat with Ackman to
discuss his record at Illinois Central and CN.
"I thought they did the meeting in a very professional
manner. They didn't discredit Fred Green and the board. They
were just laying out the facts," Edward Jones analyst Brian
One dissenting voice was Ron Tepper, chief executive of
Fastfrate, a local transport and logistics company that is a
longtime CP shareholder and customer.
Green has "been a great partner to work with and he's very
very focused on customer retention and customer satisfaction.
That is something Hunter is not, no matter what he says," said
Tepper at the meeting.
PERSHING "IN IT TO WIN"
While Ackman and CP may not see eye-to-eye, their fortunes
are bound together by Pershing's investment. The $11 billion
fund, which slipped 2 percent in 2011, has 16 percent of its
capital in the railway.
"We own a large, illiquid position in the company. We've
made the bet that we're going to be successful," Ackman said at
a press conference. "We're in it to win."
The boyish looking Ackman, known for its investments in J.C.
Penney Co Inc, Wendy's and Fortune Brands Home &
Security Inc, among others, lost his last proxy fight,
at Target Corp in 2009.
"On Target, we waited way too long before we told other
shareholders what we had in mind, and that was a mistake,"
Ackman told Reuters after the CP event. "By having this town
hall today, we're letting shareholders know what the opportunity
Ackman, known for his shock of prematurely gray hair, said
he expected CP's board would "get a few phone calls from
shareholders" after Monday's meeting. "That might accelerate the
process," he said.
CP BOARD SAYS IT SUPPORTS GREEN
Ackman said he was not claiming the current board was
incompetent, otherwise he would have been trying to remove all
"These are smart people ... who unfortunately have not been
able to get the job done," he said.
Paul Hilal, a partner at Pershing and one of its nominees
for CP's board, said that under Green's 5-1/2 year tenure, cost
control was weak, assets were poorly utilized and labor
Pershing's nominees include Ackman and his partner, Hilal,
management consultant Gary Colter, energy industry executive
Rebecca MacDonald and former Onex Corp executive Anthony Melman.
Ackman believes Harrison, 67, who turned CN into one of
North America's top railroads, can repeat that with CP.
With only a minority slate up for election, Ackman will need
to win over at least part of CP's current board. The company
will hold its annual meeting and board vote on May 17 in
Directors have publicly backed Green and his plan to improve
the railway's operating ratio - a key industry measure - to 70
to 72 percent in 2014. The current operating ratio, at 81.3
percent, is the weakest of North America's six big railroads.
A lower operating ratio, which measures what percentage of
revenue is needed to run a railway, indicate more efficient and
generally more profitable carriers. Best-in-class CN boasts a
ratio of just 63.5 percent.
Much of its efficiency gains came during Harrison's tenure,
first as chief of operations and then as CEO. He retired in