CSX: An Industry Veteran Takes Over

Hunter Harrison has moved quickly at CSX since he became the CEO of the Jacksonville, Florida railroad in March. In just three months, trains were running faster, with improved on-time rates. In a July call with analysts, the company reported efficiency gains of $90 million for the second quarter and earnings of $510 million, an increase of $65 million over last year.

His move was encouraged by a CSX activist investor.

Harrison—who resigned from Canadian Pacific Railway in January to pursue the CSX job—is well known in the industry for increasing efficiency and strengthening the bottom line at a number of railroads over the years. With that history, investors had high expectations for the new CEO: The company’s stock rose significantly, and at the company’s annual meeting in June, investors agreed to an $84 million reimbursement payment to cover compensation Harrison forfeited when leaving Canadian Pacific.

Nevertheless, the company’s stock dropped 5% following the July earnings call. In part, that may have been a matter of Harrison running into the challenges that come with a strong reputation and high investor expectations. On the call, he said that his tenure would be relatively brief: “I’m a short-timer” and an “interim person” at CSX, he said—hardly words of comfort to investors who warmly welcomed his arrival a few months ago.

“The CSX story points out the upsides and risks associated with hiring an external industry expert as CEO,” says Jeff Kirschner, a partner with RHR International. “By investing in a short-term fix instead of planning long-term for CEO succession by developing internal candidates, the company has achieved incremental improvement.” It still, however, “must address investors’ questions about the future.”

Hunter Harrison is No. 264 on Chief Executive and RHR International’s CEO1000 Tracker, a database of the CEOs of the top 1,000 public/private companies.

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