Is Hunter too old to run NS?

Hunter Harrison raised the issue in an interview we did yesterday: He fears winning a proxy battle for control of Norfolk Southern’s board of directors and not being able to go there as its chief executive. You can read the Trains News Wire story here. Now that Harrison has brought the subject out of the realm of email and blog debates and fully into public view, let’s examine it.

What Canadian Pacific Railway has proposed is to buy Norfolk Southern. NS directors have rejected three offers for their railroad. So the plan appears to be to replace a majority of NS directors with ones friendly to the idea of merging with CP. Then, while the issue of a now-friendly merger is before the Surface Transportation Board, one of the two railroads (probably CP) would be put into a voting trust, and Harrison would cut his ties with Canadian Pacific to become Norfolk Southern’s chief executive.

Except!

Except that Harrison is 72 years old. The bylaws of Norfolk Southern state that the chief executive officer will be a member of the board of directors. Norfolk Southern’s Guidelines for Corporate Governance state that directors must leave the board at the company’s annual meeting that follows his or her 72^nd birthday. This would seem to preclude Harrison from going to NS. As he put it in our interview: “One of my concerns is that we can win a proxy contest but they can keep me out of the show.” He continued: “The bylaws would have to be changed. I’m told the law in Virginia is more liberal about what corporations registered there can do or cannot do. We could put up a slate, we could run and maybe win. But we don’t want to win and the shareholders lose. So if we aren’t convinced we have the team and the players, which includes me, to run both organizations. . . . until we feel we can do this and make it work, I’m not going to pull the trigger.” As stated in the Trains News Wire story, CP or its Wall Street allies have until February 14 to nominate a slate of directors to challenge those put forth by NS.

I’ve read the bylaws of Norfolk Southern and the Guidelines for Corporate Governance, both of which you can download from its web site. The Guidelines were both adopted and amended by the NS board, most recently on January 1. So it appears to me that by a majority vote, the Guidelines can be amended at will by directors to state a later retirement age or eliminate it. Should a slate of directors friendly to the idea of merging with CP and having Harrison take the helm of Norfolk Southern be elected in May, nothing I read in the bylaws prohibits it from changing the Guidelines by majority vote.

All this begs another question: Is Harrison too old to once again physically manage and transform a Class I railroad? Reasonable men and women can disagree. I am his age, or will be in a few days. I’m of the opinion that if I am not too old to think and write in ways that provoke people to say wild things in response, then neither is this man who rides horses as a pastime.—Fred W. Frailey