Canadian National Railway Co. said Friday it's cancelling almost $40 million in future pension and other benefit payments to retired CEO Hunter Harrison, who has said he wants to take the top job at rival Canadian Pacific Railway Ltd.
The Montreal-based railway said it outlined to Harrison what it expected of him to keep payments of his pension and other benefits.
"All Harrison had to do to get those payments was to provide discovery to confirm that he has not already breached his agreements and renounce his intention to breach in the future by accepting employment at or other involvement with CP," CN said in a statement.
"Harrison, by ignoring CN's warnings and engaging in affirmative efforts to become the CEO of CP, has breached his agreements with CN and has thereby forfeited his rights to his pension, restricted stock unit and other benefits."
CN said Harrison's restricted stock units are now calculated to be worth more than $17.8 million and the value of his pension is approximately $20.6 million and its board voted unanimously to cancel them.
"By virtue of his participation in and public statements at an investor meeting held by Pershing Square Capital Management LP. in Toronto on Feb. 6, 2012, and his actions and conduct leading to and association with that meeting, CN believe that Mr. Harrison breached his non-compete and other employment obligations to the company."
CN said it has filed an amended court filing to obtain a declaration confirming its right to cancel Harrison's pension and other benefits.
Harrison left CN in 2009
Last month, Montreal-based CN said it had suspended pension and other payments to Harrison in response to overtures involving Canadian Pacific.
The 67-year-old Harrison stepped down as CN's chief executive in 2009. Harrison has said CP shareholders of should give him a chance to come out of retirement and overhaul the struggling railway.
Bill Ackman, head of the Pershing Square activist fund that holds a 14 per cent stake in CP, hosted a meeting on Monday in Toronto for hundreds of CP shareholders.
Ackman outlined why and how to vote to turn over the CEO role from Fred Green to Harrison and appoint five new directors to its board when the company holds its general meeting in May.
Harrison, who made a $5-million investment in CP last week, told the meeting that creating a more efficient railroad operation means more than just change in the management ranks, which appear to be confused as to "what they really want to do and accomplish."
He has said he will focus on cost-cutting, downsizing and taking care of fewer assets as another way to bring down the company's operating ratio, a statistic that has been at the heart of criticism over CPs performance.