Canadian Pacific Railway Ltd. paid Hunter Harrison C$49.2 million ($48 million) last year after recruiting him as chief executive officer following a proxy fight by activist investor William Ackman.
Harrison’s compensation for 2012 included about C$1 million in salary, a pension guarantee valued at C$16 million and C$18.6 million in “make-whole payments” to compensate for restricted share units that Harrison, once the chief of rival Canadian National Railway Co., forfeited when he agreed to join the company, Canadian Pacific said today in its proxy filing.
Harrison, 68, took over in June after Ackman’s Pershing Square Capital Management LP won a proxy fight to oust Harrison’s predecessor. He is trying to reduce the company’s operating ratio, an industry benchmark that compares expenses to sales and is the worst of the large North American railroads.
The new CEO “has nearly 50 years of railroad experience and leadership,” Canadian Pacific said in the filing. “CP is now benefiting from his strong track record of service reliability, efficient asset utilization, strategic capital expenditure and his focus on safety and the development of people.”
Canadian Pacific has surged 78 percent in Toronto since June 27, the day before Harrison took over, topping the 12 percent gain by Canada’s benchmark Standard & Poor’s/TSX Composite Index. The stock trades at more than an 80 percent premium to Canadian National, on a price-to-earnings basis.
Harrison’s annual base salary has been set at C$2.1 million, an amount that includes compensation for C$1.5 million in lost yearly Canadian National pension payments.
“Based on the mandate from CP shareholders, the board sought and secured the best possible CEO in the industry,” Ed Greenberg, a Canadian Pacific spokesman, said in an e-mailed message. “Mr. Harrison is a veteran railroader who is one of the most respected and successful leaders in the industry and has brought with him to CP an enviable track record.”
The spokesman said Harrison “has taken this railway to new levels of operational excellence.”
Harrison’s direct compensation amounted to about C$4.1 million, while hiring costs made up the rest of the C$49.2 million total, Greenberg said.
The new CEO received C$1.8 million in stock awards, C$10 million in options awards, C$1.3 million in annual incentives, a special housing allowance of C$46,341 and use of company aircraft valued at C$277,200, the filing shows.
Canadian Pacific said it “prefers that the CEO use the company aircraft for personal as well as business use.”
Fred Green, who resigned before the May 17 shareholder meeting, had total compensation of C$8.8 million in 2012, the filing shows. The amount includes about C$4 million in severance pay, about C$537,000 in salary and C$3.5 million in share and options awards.
Canadian Pacific’s next shareholder meeting will take place May 1 in Toronto, the Calgary-based company said in the filing.