CN's three-month stock chart on the TSX. (CBC)

The battle for control of one of Canada's most storied companies took a new twist on Tuesday as a dissident Canadian Pacific Railway shareholder tried to install himself on the board, while the former CEO of fierce rival CN threw his hat in the ring for the top CP job.

Peter Ackman, head of New York-based activist firm Pershing Square Capital Management, lobbied to have himself and a hand-picked slate of directors installed on the board of Canadian Pacific Railway, one of Canada's oldest transportation companies.

Ackman has pushed hard for reform at CP, whose shares have underperformed compared with rivals such as Canadian National and others. With 24 million shares, Pershing is the largest single shareholder in CP, controlling 14 per cent of the votes.

'I would be proud to help lead CP to that victory.' —Former CN head Hunter Harrison

"With a revitalized board and new management, we will help CP transform from the worst to one of the best performing Class I railroads in North America," Ackman said in the statement Tuesday.

Ackman is a fan of former CN president Hunter Harrison, and has spearheaded a campaign to get Harrison, who retired from CN at the end of 2009, to come back and head up CP.

Harrison had remained coy on the plan, only hinting that he would consider working at CP if the right opportunity came along.

That all changed Tuesday, when Harrison came out with his strongest support yet for the campaign, saying he would love to be part of a turnaround plan at his former rival.

"I'm proud of the work we did at CN, and the positive impact that improving its performance had on shareholders, employees, customers and Canada," Harrison said in the same release that announced Ackman's pitch for a seat on the board.

"The great majority of Canadian Pacific's employees are extremely talented and dedicated. With the right board and executive leadership, I believe Canadian Pacific can achieve just as dramatic a turnaround and enjoy its rightful position as a leader in the North American rail industry. Together, we can transform CP into the railroad its customers, employees and shareholders deserve. I would be proud to help lead CP to that victory."

CN alleges that among the agreements Harrison signed when he retired included a non-compete clause. Harrison said he has lived up to the terms of his retirement, as the non-compete clause expired on Dec 31, 2011.

Undeterred, CN moved to cancel all of Harrison's pension, restricted stock units and other benefits worth roughly $40 million earlier this week.

CN hikes dividend

The power struggle comes as CN announced positive earnings on Tuesday, announcing a plan to raise its quarterly dividend by 15 per cent on Tuesday.

The hike comes after a strong end to 2011 but despite a forecast increase in pension expenses in 2012 and beyond.

The Montreal-based company announced Tuesday it had $592 million of net income in the fourth quarter, the equivalent of $1.32 per share. That's up about 18 per cent from $503 million or $1.08 per share in the fourth quarter of 2012.  

The railway's fourth-quarter revenue was 12 per cent higher than a year before, rising to $2.38 billion — a record for the company.  

"With a strong balance sheet and solid prospects for earnings and free cash flow generation, I'm pleased to announce that our board of directors has approved a 15 per cent increase in CN's 2012 quarterly common-share dividend," company president Claude Mongeau said in a release that made no mention of the power struggle.

The next quarterly dividend will rise to 37.5 cents per share, payable on March 30 to shareholders of record at the close of business on March 9.

CN is hoping to grow its profit by up to 10 per cent in 2012, despite an additional pension expense of about $120 million this year.

With files from The Canadian Press