I believe there are four styles of railroad management.
1. Highest priority is service to the community, with stockholder income secondary.
2. Long-term stockholder income primary, seasoned management
3. New face, innovative management, possible self promotion
4. Corporate raiding for quick profits.
The New Haven went from 1, under Dumain, to 3, under McGinnis. I would place all the "Big 6" firmly in catagory 2. The prewar and wartime transit systems in the Twin Cities and in Providence, RI were firmly in 1, then were taken over and pushed into 4. There are a number of short lines owned by industries and local governments firmly in catagory 1.
What about this fund's attempt to seat members of the CSX board? The best impression is catagory 3, in my opinion, and there are suspicions of catagory 4. The Fund itself would lose money if successful, because customers like a long-term commitment to good service, and even if the Fund's success did not adversely affect investment in capacity and improved service, some customers may get the impression it will, and may take their business elsewhere.
I think many folks believe that TCI is indeed in the #4 category you indicate in your post above. Also, I believe that if that is true, in that case TCI would not lose because they would (theoretically) (A) get in, (B) do some stuff that jacks up the value of the company short term, then (C) get the heck out with a nice profit. Meanwhile, the stuff that was done in part B would leave CSX in a worse position than they were in prior to part A taking place. These types of activities can be found throughout the history of the corporate world. What leads me to believe this is what TCI has planned is the number of anti-CSX regulars that seem to be siding with the railroad this time around. Jamie
PS: If you would like a pretty good Hollywood take on this type of corporate activity, check out the 1987 Oliver Stone film "Wall Street."
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Pasadena Sub wrote: I think many folks believe that TCI is indeed in the #4 category you indicate in your post above. Also, I believe that if that is true, in that case TCI would not lose because they would (theoretically) (A) get in, (B) do some stuff that jacks up the value of the company short term, then (C) get the heck out with a nice profit. Meanwhile, the stuff that was done in part B would leave CSX in a worse position than they were in prior to part A taking place. These types of activities can be found throughout the history of the corporate world. What leads me to believe this is what TCI has planned is the number of anti-CSX regulars that seem to be siding with the railroad this time around. JamiePS: If you would like a pretty good Hollywood take on this type of corporate activity, check out the 1987 Oliver Stone film "Wall Street."
Never too old to have a happy childhood!
A little blurb about TCI (The Children's Investment Fund)
"
TCI has a reputation for aggressive shareholder activism.[1] It has taken an active role in most situations to promote its own agenda under the guise of sound corporate governance and increase shareholder value. TCI has been a major shareholder of the German stock exchange Deutsche Börse where it forced the resignation of the CEO after he refused to abandon his plan to take over the London Stock Exchange. In 2007, after acquiring 1% of the shares of major Dutch bank ABN AMRO, TCI led an attack demanding the bank split up or sell to the highest bidder to produce shareholder value.[2]. In June 2007, TCI failed in its attempt to get the Japanese utility J-Power, in which it had acquired a 10% stake, to boost its dividend. The general meeting of shareholders rejected the proposal, prompting a severe selloff in the stock.
In Japan, the fund remains unwelcome and unsuccessful in unlocking value. Often, the likes of TCI are seen as nuissance or gadfly trying to make a "quick" buck in a society that highly values long-term investments. TCI's claim that 3 to 5 years is long term seems like a light joke in a country that typically sees investments of ten years or more.
Source: http://en.wikipedia.org/wiki/The_Children's_Investment_Fund
I agree with eralier statements that most hedge funds are not looking for any 'long term' value, and like the perviously mentioned movie will "gut the cow" after telling everyone otherwise. Too much effort is placed in stock price in N America, the middle class is eroded there are very few large companies that have any outlook over 5 years. The high turnover in most companies managment supports this as well as bounus based on stock value/options. There are very hard times on the horizion for many. But I digress...
my 2 cents
PFS wrote: A little blurb about TCI (The Children's Investment Fund)"TCI has a reputation for aggressive shareholder activism.[1] It has taken an active role in most situations to promote its own agenda under the guise of sound corporate governance and increase shareholder value. TCI has been a major shareholder of the German stock exchange Deutsche Börse where it forced the resignation of the CEO after he refused to abandon his plan to take over the London Stock Exchange. In 2007, after acquiring 1% of the shares of major Dutch bank ABN AMRO, TCI led an attack demanding the bank split up or sell to the highest bidder to produce shareholder value.[2]. In June 2007, TCI failed in its attempt to get the Japanese utility J-Power, in which it had acquired a 10% stake, to boost its dividend. The general meeting of shareholders rejected the proposal, prompting a severe selloff in the stock.In Japan, the fund remains unwelcome and unsuccessful in unlocking value. Often, the likes of TCI are seen as nuissance or gadfly trying to make a "quick" buck in a society that highly values long-term investments. TCI's claim that 3 to 5 years is long term seems like a light joke in a country that typically sees investments of ten years or more." Source: http://en.wikipedia.org/wiki/The_Children's_Investment_Fund I agree with eralier statements that most hedge funds are not looking for any 'long term' value, and like the perviously mentioned movie will "gut the cow" after telling everyone otherwise. Too much effort is placed in stock price in N America, the middle class is eroded there are very few large companies that have any outlook over 5 years. The high turnover in most companies managment supports this as well as bounus based on stock value/options. There are very hard times on the horizion for many. But I digress...my 2 cents
There are still railroads in which lifers attain high executive positions; look at CP or NS. But from what I've read by and about TCI, I agree with most other posters that "long term" has almost no meaning for them.
I believe it was Robert Townsend, the former CEO of Avis Rent-a-Car (of the "We try harder" slogan fame) who said in his management book Up the Organization that:
"For investment bankers, 'long-term' is anything over 48 hours." [or similar to that effect]
- Paul North.
PFS wrote:A little blurb about TCI (The Children's Investment Fund)"TCI has a reputation for aggressive shareholder activism.[1] It has taken an active role in most situations to promote its own agenda under the guise of sound corporate governance and increase shareholder value. TCI has been a major shareholder of the German stock exchange Deutsche Börse where it forced the resignation of the CEO after he refused to abandon his plan to take over the London Stock Exchange. In 2007, after acquiring 1% of the shares of major Dutch bank ABN AMRO, TCI led an attack demanding the bank split up or sell to the highest bidder to produce shareholder value.[2]. In June 2007, TCI failed in its attempt to get the Japanese utility J-Power, in which it had acquired a 10% stake, to boost its dividend. The general meeting of shareholders rejected the proposal, prompting a severe selloff in the stock.In Japan, the fund remains unwelcome and unsuccessful in unlocking value. Often, the likes of TCI are seen as nuissance or gadfly trying to make a "quick" buck in a society that highly values long-term investments. TCI's claim that 3 to 5 years is long term seems like a light joke in a country that typically sees investments of ten years or more." Source: http://en.wikipedia.org/wiki/The_Children's_Investment_Fund I agree with eralier statements that most hedge funds are not looking for any 'long term' value, and like the perviously mentioned movie will "gut the cow" after telling everyone otherwise. Too much effort is placed in stock price in N America, the middle class is eroded there are very few large companies that have any outlook over 5 years. The high turnover in most companies managment supports this as well as bounus based on stock value/options. There are very hard times on the horizion for many. But I digress...my 2 cents
daveklepper wrote: I believe there are four styles of railroad management.1. Highest priority is service to the community, with stockholder income secondary.2. Long-term stockholder income primary, seasoned management3. New face, innovative management, possible self promotion4. Corporate raiding for quick profits. The New Haven went from 1, under Dumain, to 3, under McGinnis. I would place all the "Big 6" firmly in catagory 2. The prewar and wartime transit systems in the Twin Cities and in Providence, RI were firmly in 1, then were taken over and pushed into 4. There are a number of short lines owned by industries and local governments firmly in catagory 1. What about this fund's attempt to seat members of the CSX board? The best impression is catagory 3, in my opinion, and there are suspicions of catagory 4. The Fund itself would lose money if successful, because customers like a long-term commitment to good service, and even if the Fund's success did not adversely affect investment in capacity and improved service, some customers may get the impression it will, and may take their business elsewhere.
It's interesting that you mention Providence (I live in RI)... the Trolley/Trolleybus era were well before my time but I've read about the apex and decline of the service. All we have now for "instate" commuting(RI does have MBTA commuter rail service to Boston) is an underfunded Statewide Bus system (now headed by an old friend of mine's father who is a retired VP of Textron, maybe he can turn it around)...I've always thought it was unfortunate that the NY,NH & H couldn't/didn't rebuild the areas electric interurban commuter system that was wiped out in the 1938 Hurricane (the Providence, Warren & Bristol which ran from the capitol through Bristol County all the way to Fall River, Ma.). However I realize that even if that had happened it is unlikely it would have lasted long enough to evolve into a modern light rail operation...
"I Often Dream of Trains"-From the Album of the Same Name by Robyn Hitchcock
Larry Resident Microferroequinologist (at least at my house) Everyone goes home; Safety begins with you My Opinion. Standard Disclaimers Apply. No Expiration Date Come ride the rails with me! There's one thing about humility - the moment you think you've got it, you've lost it...
Management doing #1 apart from #2 should be fired. The only reason a person would buy stock in a company is to make money. Companies that put anything other than stockholder value on top are guilty of malfesance.
Management that can't do #2 may very well will wind up facing #4. ...which is what's going on at CSX. Sometimes, when long term prospects are weak, liquidation is the right thing to do.
TCI would have had a leg to stand on if they'd come around a few years (or decades) earlier, but not now. CSX is actually headed in the right direction with their current mgt.
-Don (Random stuff, mostly about trains - what else? http://blerfblog.blogspot.com/)
Thanks for the link to the Lou Dobbs video, very interesting, if not just for the CSX video footage
Couple of observations....
1. Did the reporter call CSX by the letters "CXS" a few times?
2. Was anyone else a bit "disturbed" by the TCI spokesman saying something like "...and even if we could disclose who the other 5% of the investors are, you would see there are no security risks." He sounded way too much like a used car salesman.
I used to think this whole TCI thing was just a big bunch of nothing. Now it is getting interesting...veeeeeeeeery interesting.
Found this on the CSX website awhile ago, very interesting reading.
http://www.csx.com/share/media/media/docs/CSX_Release_6_11_08_(00223355)-REF24370.pdf
http://www.trainboard.com/railimages/showgallery.php/cat/500/ppuser/4309
oltmannd wrote:Management doing #1 apart from #2 should be fired. The only reason a person would buy stock in a company is to make money. Companies that put anything other than stockholder value on top are guilty of malfesance.
I disagree, the management's first priority is following the articles of incorporation and have the duty to tell the stockholders to take a flying leap if and when necessary. Keep in mind that RR stockholders are the recipients of two subsidies. The first is the limited liability for the stockholders in that the stockholders are only liable for the value of their stock. The second is having been granted the power of eminent domain, where they are allowed to acquire land for less cost than a truly free market.
You may recall that the Norfolk Southern had an accident involving the release of chlorine a couple of years ago and the damages were sufficient to cause some concern for the solvency of the corporation. You may also recall that TCI was calling for a reduction in CSX's capital expenditures with a potentially adverse affect on safety. Now suppose that CSX management follows TCI's wishes, defers some vitally needed route upgrade and a derailment involving highly toxic material (be it chlorine, methyl isocyanate, lutefisk...) causes hundreds of deaths and billions of dollars in damages. Since the CSX management was free to say "No!" to TCI, all TCI loses is its investment in CSX stock. On the other hand, if you believe that CSX has no right to tell TCI "No", then I would ask you why TCI shouldn't also be held liable - and since they have deep pockets, they could end up paying a good portion of their assets in damages.
If I happened to be a CSX stockholder, after hearing both sides I think I would vote for the current management.
That being said, I think I would welcome TCI's interest in that it just might serve to sharpen management effectiveness and Board supervision. By peer comparison it does not appear that CSX has been a leader in the industry while being very generously compensated. If TCI's attention is viewed as the wolves starting to follow the sleigh, so much the better!
tpatrick wrote:Lutefisk!!??? By rail!!!??? Oh, the horror!!!
Yeah - chlorine and methyly isocyanate will dissapate after a while but lutefisk will stick around for a l-o-n-g time....
Perhaps a more succint way of making my point is that management needs to make money for stockholders in the confines of the law as opposed to obeying the law in the confines of making money.
RE TCI & Japan. As T Boone Pickens found out many many years ago, the Japanese do not allow loose cannons to play in their markets.
rgds ign
erikem wrote: tpatrick wrote:Lutefisk!!??? By rail!!!??? Oh, the horror!!!Yeah - chlorine and methyly isocyanate will dissapate after a while but lutefisk will stick around for a l-o-n-g time....Perhaps a more succint way of making my point is that management needs to make money for stockholders in the confines of the law as opposed to obeying the law in the confines of making money.
Well put.
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