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CSX Defends Itself From Shareholder's Criticism

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By RON WORD, The Associated Press

Published: November 17, 2007

JACKSONVILLE - CSX Corp. defended itself Friday from criticism from a major investor who called for changes in the rail giant's operations.

Michael Ward, chairman, president and chief executive of the Jacksonville-based transportation company, said CSX has a "strong record of financial performance, shareholder returns and corporate governance."

"If you look at any of the standards, one would say this is well-run company," Ward said in a telephone interview Friday.

In mid-October, The Children's Investment Master Fund sent a letter to the CSX board asking for several changes, including separating the roles of chairman and chief executive officer, adding new directors with railroad experience, presenting a plan to improve operations, and improving labor relations.

"It is our view that CSX management does not fully understand the economics of the business, is cavalier about potential risks, is undisciplined about spending, is unrealistic about future prospects, is complacent about operational under-performance and unnecessarily adversarial toward labor, shippers and shareholders. We hold the board accountable for these failings," the Oct. 16 letter from TCI said.

Ward said the CSX board disagrees with the suggestions and criticisms of the London investment group. CSX answered the criticisms in a seven-page letter released Friday.

The letter notes that CSX Surface Transportation's operating income had nearly doubled since the current management team took over in 2004; that the stock price had risen 150 percent; that CSX had outperformed all major North American railroads and the broader market; and that it had increased safety and customer service.

It is common, Ward said, for a company to have one person in the role of chairman and chief executive officer. About two-thirds of companies in the S&P 500 combine the two positions.

Ward said a proposal to change CSX's leadership system was rejected by shareholders in 2006 by a vote of 5-1.

"The Board supports the CEO and the management team in their effective efforts to deliver shareholder value, which also serves the company's other stakeholders," the letter stated.
CSX reported that its third-quarter profit rose 24 percent and it earned $407 million, or 91 cents per share, compared with $328 million or 71 cents per share in the same quarter of 2006.
CSX shares were up 23 cents per share at $43.82 in early afternoon trading.

TCI is a London-based asset manager that owns 17.8 million shares, or 4.1 percent, of CSX stock.
CSX owns companies providing rail, intermodal and rail-to-truck loading services, connecting river, ocean and lake ports, as well as more than 200 short line railroads.

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