CN Rail taking ex-CEO Harrison to court
By Nicole Mordant
(Reuters) - In another twist to a battle brewing in Canada's usually staid rail sector, Canadian National Railway (CNR.TO: Quote) said on Monday it has halted pension and other payments worth nearly $40 million to its former chief executive, Hunter Harrison.
CN said it has stopped the payments because it believes Harrison, who retired as president and chief executive on December 31, 2009, had breached or intended to breach his non-compete and confidentiality obligations to the company, which is Canada's biggest railway.
CN has asked an Illinois district court to rule on whether it can reasonably and lawfully stop paying Harrison. It has also asked the court to decide whether Harrison has breached his contract with CN.
Harrison, who is lauded for turning CN into North America's most efficient railroad during his tenure as CEO, is suddenly back in the spotlight because of a looming proxy battle at CN's smaller rival, Canadian Pacific Railway (CP.TO: Quote).
Activist shareholder William Ackman, whose Pershing Square Capital Management owns a 14.2 percent stake in CP and is its biggest shareholder, wants to install Harrison as CEO of CP as part of a plan to turn around the railroad.
Harrison has expressed enthusiasm for the job in several press interviews.
"CN has a reasonable basis to believe ... that Harrison was in breach of his non-disclosure and noncompete undertakings sometime in 2011," CN said in a court filing.
CN said that, on his retirement, Harrison agreed that his retirement and pension benefits would be paid on the condition that he not compete with CN for five years - until December 31, 2014. Continued...