Tue, Oct 19, 2021 6:37 PM
By JOSH FUNK, AP Business Writer
OMAHA, Neb. (AP) — Canadian National's CEO is retiring instead of staying to fight against an investor who has been pushing for his ouster.
The Montreal-based railroad on Tuesday announced JJ Ruest's decision to retire at the end of January without mentioning the pressure it is facing from the London-based investment firm TCI Fund. The fund is also seeking several operational changes at Canadian National in the wake of its failed attempt to acquire Kansas City Southern railroad.
A special shareholder meeting has been scheduled for March 22 to vote on TCI's demands.
“I have been honored to lead CN during my time as chief executive officer, and I am confident that the Company is well positioned to continue to thrive following my retirement,” Ruest said in a statement.
CN Board Chairman Robert Pace said Ruest delayed discussing his retirement plans while the railroad was trying to acquire Kansas City Southern this summer and until after the railroad announced a new strategic plan last month. Ultimately, Kansas City Southern chose to accept a rival $31 billion buyout offer from Canadian Pacific railroad after regulators rejected part of CN's acquisition plan.
Canadian National has urged investors to back its own strategic plan that calls for cutting $550 million in costs, reinstating stock repurchases and delivering 20% growth in earnings per share in 2022.
TCI has said Canadian National hasn’t been doing enough to improve its own operations and it shouldn’t have pursued Kansas City Southern. TCI, which owns 5% of CN’s stock, has nominated four new directors who would then help choose a new CEO for the railroad. TCI said Tuesday it will continue to press for changes after Ruest's retirement.
“Dismissing the same CEO that the Board put in place just three short years ago is a good start, but it does not address the fundamental problem of a lack of leadership, failed strategic oversight, and the vacuum of operational expertise at the board level,” said Chris Hohn, TCI's founder and portfolio manager. “Putting a new plan out a month ago without having the CEO needed to implement it is a massive corporate governance failure and puts the future of the Company at risk.”
TCI urged Canadian National to consider hiring the CEO candidate it is backing but the railroad said it plans to conduct a global search for its next leader.
Canadian National is one of the largest railroads in North America and it operates nearly 20,000 miles of track crossing Canada and crossing the U.S. Midwest south to the Gulf Coast.