News Wire: CSX board set to adopt proposal on CEO physical exam requirement

[Brian Schmidt]

JACKSONVILLE, Fla. – CSX Transportation’s board of directors next month will adopt a rule requiring the railroad’s CEO to undergo an annual physical exam that the board will review. The move, first reported in The Wall Street Journ...

http://trn.trains.com/news/news-wire/2018/01/23-csx-board-set-to-adopt-proposal-on-ceo-physical-exam-requirement 

[samfp1943]

Sort of a knee-jerk reaction, like "...closing the barn after the cattle have escaped...", or looking for fire insurance, after the fire has taken place? 

 

[Murphy Siding]

You know what they say: A day late and $84 million short.

[Semper Vaporo]

samfp1943

Sort of a knee-jerk reaction, like "...closing the barn after the cattle have escaped...", or looking for fire insurance, after the fire has taken place? 

At least, MAYBE it won't happen again!

[Paul_D_North_Jr]

They don't 'need' a rule - the had the power to require a physical when they negotiated EHH's contract, but waived it.  If the law wasn't so deferential to business decisions by boards, I'd expect a shareholder's suit against them.  Who knows, maybe it'll happen anyway. 

- PDN. 

[BaltACD]

Brian Schmidt

JACKSONVILLE, Fla. – CSX Transportation’s board of directors next month will adopt a rule requiring the railroad’s CEO to undergo an annual physical exam that the board will review. The move, first reported in The Wall Street Journ...

http://trn.trains.com/news/news-wire/2018/01/23-csx-board-set-to-adopt-proposal-on-ceo-physical-exam-requirement 

The Board should RESIGN enmasse - they DID NOT perform their fiduciary duty in hiring Harrison without a physical and giving him $84M on top if it all.  The Board has failed the company and the stockholders.

As a Stockholder - I want my money back.

[BaltACD]

Semper Vaporo

 

samfp1943

Sort of a knee-jerk reaction, like "...closing the barn after the cattle have escaped...", or looking for fire insurance, after the fire has taken place?   

At least, MAYBE it won't happen again!

With the Board in the pocket of a faction - anything can be waived.

[Murphy Siding]

Paul_D_North_Jr

They don't 'need' a rule - the had the power to require a physical when they negotiated EHH's contract, but waived it.  If the law wasn't so deferential to business decisions by boards, I'd expect a shareholder's suit against them.  Who knows, maybe it'll happen anyway. 

- PDN. 

 

I'd say that a shareholder's lawsuit would have a pretty darn good chance in front of a jury.

[Paul_D_North_Jr]

Front-page article (lower right) about this in today's print edition of the Wall Street Journal.  It also mentions several similar situations in other companies, including when CEO Oscar Munoz of United Continental Holdings (airline) had a heart attack and transplant, and was out for about 6 months.  Before that, Munoz was Chief Operating Officer of CSX . . . . . . do you suppose there's something in the CSX water in Jacksonville . . . ?   

- PDN. 

[Dakguy201]

This board is like a cathouse madam who leads the church choir on Sunday morning!

[Deggesty]

The horse has been stolen; now the barn door will be locked.

[BaltACD]

The ones that need examined and tested are the Board members for entertaining EHH in the first place.

[Deggesty]

BaltACD

The ones that need examined and tested are the Board members for entertaining EHH in the first place.

 

And the examiners wear white coats and have a supply of nets with them?

[BaltACD]

Deggesty

 

BaltACD

The ones that need examined and tested are the Board members for entertaining EHH in the first place. 

And the examiners wear white coats and have a supply of nets with them?

As well as a supply of jackets whose sleves fasten in the back.

[Overmod]

Paul_D_North_Jr

. . . do you suppose there's something in the CSX water in Jacksonville . . . ?

... and who put it there?  Does Dmitri Kovtun have a position in CSX stock?

[PJS1]

Murphy Siding

  

I'd say that a shareholder's lawsuit would have a pretty darn good chance in front of a jury. 

The plaintiffs could have a a steep hill to climb.

From January 25, 2013 through January 19, 2018, the market price of CSX common shares increased from $22.44 per share to $59.25 per share before falling back to $56.74.  The increase was 164 percent, which was double the increase in the S&P 500 Index over the same period. 

[Overmod]

JPS1

Murphy Siding 

I'd say that a shareholder's lawsuit would have a pretty darn good chance in front of a jury. 

The plaintiffs could have a a steep hill to climb.

 

Not at all.  The suit in question would have nothing whatsoever to do with 'shareholder value'; it would have to do with fiduciary duty in authorizing a blanket $84 million in essentially extorted payments to someone in known ill health without an examination -- even a rudimentary examination -- indicating that the return on such a payment could be recovered over a reasonable period.

 

Now, if I recall correctly, this payment had to be confirmed with a stockholder vote, and was approved on that basis.  And in my opinion a more appropriate 'venue' for corrective action for this board would be a proxy fight at the next meeting(s) for election of directors, rather than a civil action for 'damages' that, as indicated, might be difficult to substantiate sufficiently.

 

It will certainly be interesting to see what percentage of the stockholders who 'followed the money' into bringing EHH aboard are now going to 'follow the money' to try to get the eighty-odd millions back now that there's no value from it all.  I am not sure I really feel that sorry for them as they try.

[rrnut282]

If there is a suit brought against the board, it will further drain resources if the company defends them.  

As a CSX shareholder, I voted NO! But what do I know?

[PJS1]

Overmod

 

JPS1

Murphy Siding 

I'd say that a shareholder's lawsuit would have a pretty darn good chance in front of a jury. 

The plaintiffs could have a a steep hill to climb.

 

 

 

Not at all.  The suit in question would have nothing whatsoever to do with 'shareholder value'; it would have to do with fiduciary duty in authorizing a blanket $84 million in essentially extorted payments to someone in known ill health without an examination -- even a rudimentary examination -- indicating that the return on such a payment could be recovered over a reasonable period. 

 

I am not a lawyer, but I believe the plaintiffs would have to show that the board knew Harrison was in poor health and, therefore, probably would not be able to fulfill his duties.  That would be a very steep hill to climb. 

 

Equally difficult would be the need to show that Harrison's compensation package was an outlier for similar experience in a like kind industry.

 

I have sat on 18 juries.  Once the bell rings, facts tend to run for the exits and emotionalism runs rampant.  Defense counsel would, I suspect, point out that the shareholders, at the end of the day, suffered no long term damage because of the board's decisions and, in fact, seem to have benefited from Harrison's presence albeit short as it was.    

 

I worked for several Fortune 500 companies.  Although I was not an executive, I reported to the CEO and the executive committee.  I knew many of the board members and sat in on lots of board meetings.  We had one shareholder law suit after the other.  None of them were successful.

[BaltACD]

JPS1

I am not a lawyer, but I believe the plaintiffs would have to show that the board knew Harrison was in poor health and, therefore, probably would not be able to fulfill his duties.  That would be a very steep hill to climb. 

Anyone that drags around a oxygen bottle to do their daily duties is in poor health!  Not much of a hill.

[NP Eddie]

Baltimore ACD:

Congratulations on your retirement--I have been gone for 14 years from my railroad. I attended a wake for a section foreman who died one year after he retired! His dad was an NP section foreman and his son is a section foreman/track inspector at Nothtown.

Since EHH is gone, what sort of things have been done to correct his changes?

Ed Burns

1-763-234-9306

[Euclid]

Can sombody cite some documentation that shows how the payment of this $84 million has been paid out, or if it is due to be paid out in full?

[PJS1]

BaltACD

 JPS1 I am not a lawyer, but I believe the plaintiffs would have to show that the board knew Harrison was in poor health and, therefore, probably would not be able to fulfill his duties.  That would be a very steep hill to climb.  

Anyone that drags around a oxygen bottle to do their daily duties is in poor health!  Not much of a hill. 

I know several people in the retirement community where I live who take periodic hits on supplemental oxygen and have lived a long time.  Equally important they have not been mentally impaired by their need for oxygen.

 

I have not been able to find any definitive information on the exact cause of Harrison's death.  Most of the news articles attribute it to complications associated with a recent illness.  He could have been carried away by any number of micro-organisms due to a moderate condition that had weakened his ability to fend off bacterial infections. 

 

This year in Texas more than 2,300 people have been killed by the flu.  It can kill a person in a matter of hours.  It tends to take young people and old people who have other issues, but the medical community does not know in advance who will be taken down by the flu.

 

The notion that the board members - individually and collectively - knew about Harrison's health is a bit of a stretch.  Unless you were privy to any board discussions regarding the employment of Harrison, all you have in your corner is speculation.

 

I began my business career with a Wall Street Bank in 1964.  Physical exames were required for new and existing key employees, i.e. professional employees, managers, executives, etc.  Moreover, most key employees were required to have an annual physical examination, which was paid for by the company.   

Many if not most companies have stopped employment and annual physical exams, other than for drug testing, for two reasons.  They are not very effective,  as all of my doctors have admitted, and they run afoul of privacy laws.  

[PJS1]

Euclid

Can sombody cite some documentation that shows how the payment of this $84 million has been paid out, or if it is due to be paid out in full? 

Here is a link to a starter:  http://fortune.com/2017/03/24/csx-hunter-harrison-pay/

Without access to Harrison's employment agreement, it is impossible to know the exact terms of his employment contract.

Folks seem to be worked up about the $84 million paid to Harrison to compensate him for the deferred CP compensation that he left on the table when he left CP.

It needs to be put into perspective.  Assuming it is being or was to be amortized over four years, the money paid to get Harrison to join CSX would be equal to 70/100s of one percent of the companys 2016 cash flows from operations.  It is not much in the scheme of things.  More importantly, if Harrison or his legacy brings about the improvements anticipated by the board, the $84 million plus his compensation package will have been well worth the investment. 

[Euclid]

Thanks JPS1.  I will read the link, but your comments are what I was getting at.  I can't believe they just handed over 84 million to someone who only promised to come to work the first day. 

[BaltACD]

JPS1

 

BaltACD

 JPS1 I am not a lawyer, but I believe the plaintiffs would have to show that the board knew Harrison was in poor health and, therefore, probably would not be able to fulfill his duties.  That would be a very steep hill to climb.  

Anyone that drags around a oxygen bottle to do their daily duties is in poor health!  Not much of a hill.  

I know several people in the retirement community where I live who take periodic hits on supplemental oxygen and have lived a long time.

Living in a Retirement community and running a Forbes 500 company are worlds apart in the meaning of being healthy.

Ackman cashed out of CP in August 2016 and EHH left (or was shown the door) shortly thereafter.  Was CP telling EHH he was not physically fit enough to continue - without making the news public and without allowing him to rake in his various bonus payments.  Hilal, Ackman's protege taps the invalid to spearhead his play for CSX.  Two sick individuals.

[Murphy Siding]

JPS1

 

The notion that the board members - individually and collectively - knew about Harrison's health is a bit of a stretch.  Unless you were privy to any board discussions regarding the employment of Harrison, all you have in your corner is speculation.

 

 

From the CSX article linked above:

Harrison had refused to submit to a company physical or provide his medical records to the board before he was hired in March.

It was later revealed that Harrison had an undisclosed medical condition that required him to use supplemental oxygen.


       This suggests that at least some on the board had been asking about his health prior to hiring him. It also suggests he was hiding his health issues. When the details were later revealed, at least one board member had to pipe up and say "See!  I told you so!" I think it's hard to say that it's all 20/20 hindsight when CSX gives these clues that they knew his health might have been an issue.

[Euclid]

The Newswire piece insinuates that Harrison misrepresented his health, collected an $84-million payment for a term of contract, and then died before completing his obligations under the contract.  It almost makes it seem like a crime was committed. What are the actual facts here?

[Norm48327]

When you find the facts please let us know.  Criminals are a dime-a-dozen whether they wear coats and ties or hoodies.

[Euclid]

Norm,

You are always a stickler for people providing the facts.  I think this is a great example of missing facts.  So I am surprised at your indifference.