CSX Corp. (CSX.O) shareholders approved a proposal on Monday to reimburse an activist investor, Mantle Ridge Partners LP, US$84 million for arranging the hiring of new Chief Executive Hunter Harrison.
Owners of CSX shares overwhelmingly approved the reimbursement, with at least 93 per cent voting in its favor, the company said in a statement, citing preliminary voting results.
Harrison has said he would resign if the company fails to reimburse Mantle Ridge, a new activist fund that partnered with Harrison in the effort to install him as CSX's chief executive.
CSX, based in Jacksonville, Florida, is a US$50 billion company that runs a 21,000 mile freight rail network along the U.S. east coast.
Mantle Ridge, founded by ex-Pershing Square Partner Paul Hilal, is one of CSX Corp's biggest shareholders with a stake of 4.9 per cent. The New York-based hedge fund had made the payment to extract Harrison early from his previous employer, Canadian Pacific Railway (CP.TO), where he had led a turnaround as CEO.
CSX's management team did not recommend for or against the reimbursement, putting the matter in the hands of shareholders. The company has estimated that Harrison's overall pay could be worth around US$300 million if he hits all targets.
The company named him chief executive in March, signing him to a four-year contract.
CSX's vote gained attention due to the unique circumstances around Harrison's hiring and the large pay package involved.
Shareholders who opposed the pay arrangement with Mantle Ridge risked seeing their shares sink if they rejected the repayment and Harrison resigned, as promised.
The shareholder approval is non-binding, and it is now up to the board to make the final decision on the US$84 million reimbursement charge.
CSX shareholders also voted all 13 of the company's nominees to the board, including Harrison and Hilal.
Harrison, 72, is a respected railroad veteran known for leading the turnarounds of several struggling rail companies.
CSX shares have jumped 50 per cent since Jan. 18, when news of Harrison's early departure from Canadian Pacific broke.
On Monday, the stock was up 0.2 per cent at US$54.64.
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