CSX Corp. acknowledged yesterday that all four nominees of two activist hedge funds received more votes than management’s board candidates, but continues to refuse to seat two of them.
The U.S. railroad said that the election of Christopher Hohn, founder of The Children’s Investment Fund, and Timothy O’Toole, managing director of the London Underground, hinge on an upcoming court decision.
CSX is appealing a lower-court ruling that refused to strip the hedge funds, TCI and 3G Capital Management, of their voting rights for securities law violations. The U.S. Circuit Court of Appeals in New York is to hold an expedited hearing on the case on Aug. 25. TCI and 3G own a combined 6.4% stake in Jacksonville, Fla.-based CSX.
According to the railroad, if the hedge funds’ votes are not counted, neither Hohn nor O’Toole would be elected to the board. CSX is also challenging an inspector’s failure to count a half-million votes cast by union-sponsored 401(k) plans, which, if they are counted, would keep Hohn off the board.
CSX has already seated two other nominees backed by the hedge funds, 3G’s Alexandre Behring and Gilbert Lamphere, a former director at Canadian National Railway Co. The company said it hoped to resolve the issue before the annual meeting resumes on Sept. 24.
For their part, TCI and 3G demanded that Hohn and O’Toole be seated immediately.
“They bring valuable railroad and management experience to the CSX board and look forward to working constructively with their fellow directors for the benefit of all CSX stakeholders,” the hedge funds said in a statement.