Skip to main content
Canada’s most-awarded newsroom for a reason
Enjoy unlimited digital access
$1.99
per week
for 24 weeks
Canada’s most-awarded newsroom for a reason
$1.99
per week
for 24 weeks
// //

CN’s announcement came less than a day after its second-largest investor, TCI Fund Management, gave the company 21 days to call a shareholder meeting at which TCI plans to oust CN’s chairman, chief executive officer and two directors.

DARRYL DYCK/The Canadian Press

Canadian National Railway Co. has moved to fend off a battle for control of the company’s boardroom, rolling out a list of investor-friendly plans Friday that includes share buybacks, layoffs and reduced spending.

CN unveiled the changes, including the sale of non-rail businesses and other steps intended to boost profit and improve productivity, as it defended its actions in the failed takeover of U.S. railway Kansas City Southern .

CN’s announcement came less than a day after its second-largest investor, TCI Fund Management, gave the company 21 days to call a shareholder meeting at which TCI plans to oust CN’s chairman, chief executive officer and two directors.

Story continues below advertisement

Mathieu Gaudreault, a CN spokesman, said the company received TCI’s meeting requisition notice and will respond later.

British billionaire Chris Hohn, who owns TCI, said CN is poorly run by people with little or no rail experience. Mr. Hohn said the failed attempt to buy Kansas City Southern underlined CN’s “flawed decision making” and “a basic misunderstanding of the railroad industry and regulatory environment.”

Ben Walker, a partner in TCI, dismissed CN’s Friday announcement as “reactive” and said it does not change the plans to wage a boardroom fight. The dissatisfaction with CN’s leadership precedes the failed KCS bid, he said, pointing to CN’s underperformance in recent years compared with its rivals.

“A lot of the things they’re doing should have been done already as part of a continuous improvement plan and efficiency optimization,” Mr. Walker said by phone. “We’re hopeful that shareholders will vote for our slate of independent, high-quality nominees.”

KCS agreed to a cheaper bid from rival Canadian Pacific Railway Ltd. and is awaiting regulatory approval.

On a conference call with analysts Friday, CN executives defended their handling of the KCS bid and said the company’s management and board were the best people to lead the company.

“We have the right leadership team and management team to execute our strategic plan, both in the short term and the long term,” said Jean-Jacques Ruest, CN’s chief executive officer. “We have a vision for the industry which is forward-looking, not backward-looking.”

Story continues below advertisement

Mr. Ruest said the non-rail businesses that could be sold or shut down include its Great Lakes commodity ships, freight forwarding business and Winnipeg trucking company TransX Group, which CN bought in 2019.

“There is no sacred cow at CN,” Mr. Ruest said on the call. “Do they fit in the long-term strategy? Do they also contribute to feeding the beast or bringing business to the railroad?”

CN said it will eliminate 650 management jobs and 400 unionized positions in train operations.

Walter Spracklin, a Royal Bank of Canada stock analyst, said CN’s “strategic refocus” was inevitable.

“It is clear to us that CN’s operating efficiency has deteriorated over the past several years and the company has gone from industry leader to industry laggard,” Mr. Spracklin said. “That said, as an early pioneer of [precision scheduled railroading], we believe the company has the potential to achieve … efficiency levels that are among the best in the industry.”

TCI’s nominees to CN’s board include former CN and Union Pacific Railroad executive Jim Vena as CEO.

Story continues below advertisement

The US$40-billion hedge fund, launched in 2003 by Mr. Hohn, owns more than 5 per cent of CN’s shares, worth about $4-billion. TCI is also the largest owner of CP shares, at 8 per cent, and owns almost 3 per cent of Union Pacific.

In 2008, TCI led a boardroom fight at U.S. railway CSX Corp., replacing four of 12 directors.

Among the steps CN announced Friday:

  • Resuming share repurchases to reach $1.1-billion by the end of January, 2022;
  • Increasing shareholder returns, including share buybacks of $5-billion for 2022;
  • Replacing two directors in 2022, including chairman Robert Pace, whose planned retirement was previously announced;
  • Improving the operating ratio, which compares sales with costs, to 57 per cent; and
  • Increasing train length and speed.

Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening. Sign up today.

Your Globe

Build your personal news feed

  1. Follow topics and authors relevant to your reading interests.
  2. Check your Following feed daily, and never miss an article. Access your Following feed from your account menu at the top right corner of every page.

Follow the author of this article:

Follow topics related to this article:

View more suggestions in Following Read more about following topics and authors
Report an error Editorial code of conduct
Tickers mentioned in this story
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

If you do not see your comment posted immediately, it is being reviewed by the moderation team and may appear shortly, generally within an hour.

We aim to have all comments reviewed in a timely manner.

Comments that violate our community guidelines will not be posted.

UPDATED: Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies