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Hunter Harrison has been appointed CEO of Canadian Pacific.

Bill Ackman's coup is complete.

After a bitter proxy battle led by Mr. Ackman over the future of Canadian Pacific Railway Ltd., a crucial piece of the brash activist investor's plan has fallen into place, with the appointment on Friday of railway veteran Hunter Harrison as the company's president and chief executive officer.

The months-long fight pitted Canada's second-largest railway against Mr. Ackman, who heads Pershing Square Capital Management LP. Since last fall, CP's board of directors stood behind Fred Green, insisting that the CP lifer was the best leader for the freight carrier. But Mr. Green, who took over as CP boss in 2006, abruptly resigned hours before CP's annual meeting in Calgary on May 17.

Now, the worst-case scenario for CP's old guard has unfolded. Mr. Harrison, the former Canadian National Railway Co. boss, also joined CP's board, leaving the railway with eight directors from the Pershing Square side and seven CP incumbents.

Paul Haggis, appointed three weeks ago as CP's new chairman, said the railway followed a thorough CEO selection process that identified Mr. Harrison's wealth of experience and leadership.

Mr. Haggis, Mr. Ackman and five others backed by the New York-based hedge fund were elected to CP's board in May. Only seven CP-backed board members remain, after two CP nominees resigned as directors this month, which followed the departures of six CP incumbent directors in May.

The Memphis-born Mr. Harrison's return to work after a short semi-retirement underscores a resounding victory for Mr. Ackman, who disclosed last fall that Pershing Square had become the railway's largest shareholder.

Mr. Harrison now faces an arduous quest to spot and wring out inefficiencies at underperforming CP. He has signed a four-year contract, agreeing to guide the Calgary-based company through a recovery process, though he said he's open to staying an extra year if required in a transition to the next leader.

"Early on in the four years, we've got to get this railroad turned the right direction first," Mr. Harrison said in an interview from his family's Connecticut horse farm. "My second focus will be on starting to work on the succession plan and who will be next in line, and where might they be, external or internal."

Within 18 months, he expects CP will name an executive who will effectively be second-in-command, with Mr. Harrison grooming that person for the top job.

"Phase one is probably four to six months of making some pretty tactical decisions that support the longer-range strategies," said Mr. Harrison, 67, who served as CN's president and CEO from 2003 to 2009. "The second phase will be the implementation, the fine-tuning and attacking other opportunities."

Acknowledging the uncertainty over CP's future during the proxy contest, Mr. Harrison also issued an internal memo to staff Friday, saying it is a privilege to serve as the new CEO while also urging patience. "There is no magic formula," he wrote.

Pershing Square, which holds what is now a 14.2-per-cent stake in CP, had been touting Mr. Harrison as the best candidate to replace Mr. Green. Mr. Green, former CP chairman John Cleghorn and four other railway directors agreed not to stand for re-election the day before CP's annual meeting after early vote results showed they had insufficient shareholder support.

Relations between CN and Mr. Harrison quickly deteriorated after he emerged as the leading candidate to become CP's CEO.

In a court filing this year, CN sought a declaration that it is reasonable and lawful for the railway to cancel Mr. Harrison's pension benefits with a present value of $20.6-million (U.S.) and restricted share units worth $17.9-million. The Montreal-based railway alleges that Mr. Harrison ran afoul of his non-compete pact.

CN congratulated Mr. Harrison on his new appointment, but added that its legal case against its former CEO continues. "CN intends to monitor events, and, if it appears that Mr. Harrison is using confidential CN information, CN might seek injunctive relief at that time."

In the interview, Mr. Harrison said he appreciated CN's statement that it looks forward to fair and vigorous competition. "I was very proud to see that they had those nice kind words, and I'm also very cognizant of the sensitivity of my agreement not to release any confidential information, and I will continue to live up to that agreement," he said. "Time heals all wounds."

Analysts have pointed to Keith Creel, CN's chief operating officer, as a potential candidate to join CP's executive ranks next year, once a non-solicitation clause associated with Mr. Harrison's CN retirement contract expires.

"I think the world of Keith Creel. He's one of the top operating minds in North America. But look, I would imagine he's happy with his position at CN and I don't know if he would be available," Mr. Harrison said.