The leadership of Canadian Pacific and its largest shareholder engaged in some highly public squabbling Tuesday about the future of the company.
In a letter to investor William Ackman, whose investment company owns 14.2 percent of CP’s stock, CP chairman John Cleghorn complained about an article in last Friday’s Globe and Mail newspaper that said Ackman wants to hire Hunter Harrison, the former CEO of rival Canadian National Railway, to work at CP.
The article in the Toronto-based paper cited sources “familiar with the strategy of Mr. Ackman’s New York hedge fund Pershing Square Capital Management.”
In a letter to Ackman that was filed with regulators including the U.S. Securities and Exchange Commission, CP Chairman John Cleghorn said it was “disappointing and highly inappropriate that Pershing Square made inaccurate comments in an article… We are troubled by the inaccuracies and mischaracterizations that have appeared in the media.”
“Contrary to media reports, including Friday’s Globe and Mail article, no member of CP’s Board of Directors has ‘expressed enthusiasm for Mr. Harrison and requested a meeting with him.’ Indeed, no invitation has been extended by us to Mr. Harrison, either directly or via Pershing Square,” wrote Cleghorn.
He added that “when Pershing Square put forward Mr. Harrison’s name as part of its presentation to the company, CP expressed concern regarding Mr. Harrison’s contract with Canadian National Railway and his ability to engage with CP due to his non-compete arrangements. Further, you made assertions in your presentation and our subsequent discussions regarding possible improvement in CP’s operating performance but you acknowledged you did not have a plan either as formulated by Mr. Harrison or Pershing Square.”
He went on to complain to Ackman that “leaks to the media are counterproductive, and we hope that they are not attributable to you personally.”
Ackman then fired back reply saying that “neither I nor any representative of Pershing Square has made any innaccurate statements to the press” and complained that Cleghorn’s letter “includes a number of statements that should be corrected….”
“Contrary to your statement in the letter that no one at Canadian Pacific expressed an interest in meeting with Mr. Harrison, on the Saturday after our Wednesday, November 2 meeting, you called me at home and asked that I arrange a meeting with him. Neither you nor Canadian Pacific expressed concern about Hunter’s contract with Canadian National at that time. Rather, on that Saturday call and in subsequent communications, it was I who explained to you (and subsequently in communications among our respective counsel) that Hunter was subject to a non-compete agreement which would prohibit him from meeting or speaking with representatives of Canadian Pacific until January 1, 2012.”
“Contrary to your statement in the letter that we ‘acknowledge’ that we have no plan to improve Canadian Pacific’s operating performance, we do have a plan, and we have made that plan clear both in our initial meeting and in subsequent communications with you. Our plan is to transform Canadian Pacific from the worst performing railroad in North America into one of the best by effectuating a cultural and operational transformation of Canadian Pacific which begins with a new leader,” Ackman said.
Ackman said there was “tremendous untapped operating potential” at CP and said “we believe it is the senior-most leadership of the company that must be changed, namely Fred Green, in order for this potential to be unlocked.” Green began his career at CP in 1978, and was promoted to chief operating officer in 2004, president in 2005 and CEO in 2006.
Singing the praises of Harrison, who served as CEO of Canadian National from 2003 to 2009, Ackman said “he can hit the ground running and effect the transformation faster, better and with less risk than any alternative candidate….”
Ackmann asked Cleghorn that the board to “arrange a meeting with Hunter Harrison and our other proposed director candidate so that the board can evaluate Hunter and our second director’s candidacy. Hunter and we will make ourselves available at the time and place of your choosing. We ask that such a meeting take place as soon as practicable. I can’t imagine there is anything more important and time sensitive for this board to consider. “