Investment Fund Seeks Changes at CSX

The Associated Press
Tuesday, October 16, 2007; 5:02 PM

JACKSONVILLE, Fla. -- A major CSX Corp. investor asked the railroad operator Tuesday to make changes to improve the company's performance, saying executives do "not fully understand the economics of the business."

The Children's Investment Master Fund, which owns a 4.1 percent stake in CSX, proposed separating the roles of chairman and chief executive officer and adding new directors with railroad experience.

In a letter to the CSX board, it also asked that the company present a plan to improve operations and labor relations.

The fund also wants the Jacksonville-based company to allow shareholders to call special meetings and align management compensation with shareholder interests.

"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 towards labor, shippers and shareholders," the letter said.

It said it will hold the board "accountable for these failings."

The fund known as TCI is a London-based asset manager that owns 17.8 million shares of CSX stock. A portion of TCI's profits goes to The Children's Investment Fund Foundation, a nonprofit organization focusing on improving the lives of children living in poverty in developing countries.

CSX did not immediately respond to the letter.

"The company has received the letter from TCI and we are reviewing it," said Garrick Francis, a company spokesman.

It was scheduled to release third-quarter earnings after the bell Tuesday, hoping to rebound after reporting a second-quarter drop of 17 percent from the previous year when the company saw a gain from insurance recoveries related to Hurricane Katrina.

CSX shares rose 41 cents to close at $42.83 Tuesday.

CSX owns companies providing rail, intermodal and rail-to-truck loading services, connecting more than 70 river, ocean and lake ports, as well as more than 200 short line railroads.


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