Dive Brief:
- The directors of CSX Corp. are being investigated by fiduciary litigation law firm Kahn Swick & Foti, representing stockholders who question whether the board of directors withheld information on former CEO E. Hunter Harrison's medical condition.
- Harrison's sudden death last month gave motive to the investigation, after investors — who had bet on the CEO's model and leadership — were left without the figurehead of a promised CSX turnaround.
- "Harrison was hired (in 2017) despite refusing the Company's request for an independent doctor to review his medical records," the law firm said in a press release. The operational problems, service disruptions and sudden illness that followed "raised questions" over whether directors had failed their fiduciary responsibilities by withholding information on the executive's condition.
Dive Insight:
It has been nearly a month since Harrison's leave of absence and subsequent death, but questions still linger over the future of CSX.
The corporation swiftly appointed James Foote as CEO, who — as a longtime associate of Harrison's — pledged to maintain the old railroad magnate's legacy. The transition to precision scheduled railroading (PSR) would not be affected, he said, to detractors' dismay.
It's not the first time CSX has been investigated in the past years. The Surface Transportation Board (STB) investigated the company in October after numerous complaints of service disruptions by shippers. At the hearing, a few speakers also noted they had filed lawsuits to recover the costs of lost business due to these disruptions.
Still, the most recent investigation by Kahn Swick & Foti is different as it focuses on a group that had firmly stood by the corporation despite reports of disruption: investors.
It was investors who boosted CSX's stock on the news three-time CEO Hunter Harrison would take over the railway. To this day, share prices remain 58% higher than they were prior to Harrison's tenure. In fact, they reached an all-time high on Jan. 8, 2018.
The result of the investigation will not be known for months, nor is it likely to affect operations. But, it would provide a further reprieve to investors while answering a key question on Harrison's succession: was CSX prepared for a Harrison-less future? And if so, who was the internal force pushing for a PSR-empowered railway?
