Working on the railroads (Part 7) The Hunter Effect
Following is a story that’s been in the making for 20 years. It’s special to me — an edition from my memories about a working life spent in the railroad industry. The story ahead of you is pretty much about one person.
A glowing testimonial, a sumptuous tribute, an effusive expression of devotion; it is not. Rather, it’s an indictment of sorts. Truth is, I despised the man and everything he stood for. I refer to the late Ewing Hunter Harrison, born in Memphis, Tennessee, in 1944. He died in December, 2017, age 73 years. He had humble beginnings and rose steadily through the ranks landing eventually in the rarified air of executive suite. Folks simply called him “Hunter”.
From 1993 until 1998, he was the CEO of that fabled “magic carpet made of steel”, the Illinois Central Railroad (IC), ancestral home to the The Ballad of Casey Jones and The City of New Orleans, the wonderful song made famous by Arlo Guthrie in 1972.
In 1998, Canadian National Railway Co.(CN), bought the financially troubled IC for $2.4 billion US. Harrison and his cadre of managers, whom I referred to as the “Memphis Mafia”, came north to Canada in the package with Harrison assuming the mantle of Vice-President and Chief Operating Officer. He would become the CEO of CN on January 1, 2003, and then retire on December 31, 2009. From what I’ve read, he wasn’t too happy when CN would not renew his contract. He went away for a while and raised horses in Connecticut.
In June, 2012, Harrison became the CEO of Canadian Pacific Railway (CP). He was so installed in the aftermath of a hostile takeover of the company engineered by an American hedge fund group in 2011. He earned over $90 million in his last four years at CP. It’s a loud and booming understatement to say he was extremely well paid throughout the years he worked in Canada. Here are a few figures, all U.S. dollars:
In 2003, his first year as CN CEO, he earned but $2.88 million. His earnings jumped to $16 million in 2004. And on and on it went.
As a result of his appointment at CP in 2012, CN stopped $40 million in financial benefits to Harrison and brought a lawsuit claiming that Harrison had breached confidentiality agreements following his retirement in 2009. I have no doubt, whatsoever, that CP was required to make good, to make whole, this $40 million shortfall before he stepped through their door.
In January, 2017, he resigned suddenly as CEO at CP and in March, became the CEO of CSX Corporation. He negotiated a $300 million US package and refused to submit to an impartial medical assessment. He was not well when he joined CSX and had had significant medical issues in the years prior. He went on medical leave in December, 2017, and died days after.
He was, at one time, a heavy smoker and had emphysema and required medical oxygen for some time prior to his passing. I believe he had open heart surgery early in his tenure at CN and came back after only two weeks to show everyone that he had the right stuff.
When it was all said and done, I understand that CSX was on the hook for $151 million US. I ask, what on earth was the brain trust at CSX thinking when they elected to take on a messiah who was so ill?
You have to understand that Hunter was thought of by the upper echelons and elites of these companies as an inspired leader, a cult figure, a financial wizard and a bringer and purveyor of great change and wealth, if only for a select few, a commander of organizations paring dead weight and inexcusable waste, of asset optimization and clear and simple thinking, or just plain common sense, as he put it. He brought a whole new meaning to the term, “sweating the assets”, which, in my mind, included the employees.
It was “My way or the highway” stuff with a “Take no prisoners” mentality chucked in for added measure. As managers, we were forever reminded that we wouldn’t ever dream of lying to Hunter; that would be heresy and serious consequences would surely fly. He frightened people. His word and ideas were sacrosanct. He wrote books about it.
One of the things that cemented Harrison’s legacy was his ability to drastically reduce a railway company’s ‘Operating Ratio’ year on year. This was like honey to the bee for investors. The operating ratio is a representation of a company’s operating expenses as a percentage of revenue and is typically utilized for large industries such as railroads and airlines.
It can be seen as a reflection of the company’s efficiency in the marketplace by comparing expenses to sales. I have also seen it expressed as the amount of cents spent to earn a dollar. It is a measure of profitability. A ratio of 80 or lower is considered acceptable. Harrison pushed this a lot lower.
At CN, the operating ratio in 1995 was 88.9%, in 1998 — 75.1%, in 1999–72% and in 2002 it was 69.4%. For 2003, Harrison’s first year as CEO, it was 69.8%. And so it went, steadily decreasing, with only a few bumps, to 55.9% in 2016.
In 2012, the operating ratio at CP was posted as a pedestrian 83.3%, but by 2016, a scant 58.6%. This was fantastic stuff and was accomplished by creating reductions in resources and infrastructure like trackage, assets like rolling stock, locomotives and employees, corporate debt and so on. He eliminated a third of the workforce. But what about things like reduced diesel fuel prices, or lower freight rates not passed on to customers over whom the railways held a monopoly? As information, Gross Ton Miles (GTM), another critical railway metric, actually decreased by nearly 10,000,000; from 254,354 to 242,694, during this four year period.
There is an aspect of subjectivity applied in arriving at these metrics, something critical to keep in mind. I am no economist, but when we are not careful, black art and other creative and sometimes sinister elements can creep into the soup pot. He ran monster long trains, for instance — so what.
His labour relations history is simply awful. Thousands of grievances and a litany of industrial complaints were a legacy from his time at CP, more so than his time at CN. He was not happy with the Canadian Railway Office of Arbitration (CROA). This office is paid for by the railway companies in Canada and provides a judicial mechanism by which employees/union and management can resolve workplace disputes. Rulings generally go the way of management.
Not long after arriving to my new posting as trainmaster at MacMillan Yard, located north of Toronto, early in the summer of 1999, I got a phone call telling me to attend a mandatory, ‘you cannot for a single moment consider missing it’, ‘fail to appear at your peril’, meeting with Hunter. The entire operations group of managers were there. Just prior to the meeting he had removed the newly appointed superintendent to the terminal, the guy who had asked me to come to T-O in the first place; for reason(s) not announced but what I suspected was a failure to deliver performance metrics, that is — the numbers.
He went on at great length outlining his expectations then threw it open for questions and comments. Anyone who knows me knows that I like to ask questions at these meetings. And, of course, I did. A few of them, some with a punch of their own. To his credit, he answered them earnestly. Later, I was called in for a private meeting with the relatively new general manager (who was also forced out soon thereafter and left the company), who asked me if I had a problem. No, I said, I just didn’t like the view of the path we were heading down.
There was a day, no longer am I certain if it was early in 2001 or 2002, when a critical incident occurred that has had a deep and sometimes dark effect on me. It took place at MacMillan Yard. One morning, Harrison, and three associates, namely; the Senior Vice-President — Eastern Canada, the General Manager, Greater Toronto Area (the replacement from Alabama who also replaced the Supt. in ‘99) and the Terminal Superintendent MacMillan Yard, were gathered in the West Tower, ordinarily manned by a yardmaster. It is that portion of the rail yard that gathers and classifies traffic for U.S. destinations.
It so happened that a yard engine and crew pulled up at ‘West Tower’ where they would take their dinner break. A crew member detrained from the locomotive in an unsafe and prohibited fashion by stepping down facing outwards with his back to the stairwell. Simultaneously, the on-duty trainmaster arrived in the company vehicle. Evidently, it appeared that he did not either confront or remonstrate with the employee for this safety practice transgression.
I understand that the trainmaster was then contacted on his cell phone by someone who, along with Harrison and the others, witnessed the apparent non-response by the supervisor and was directed to attend the top floor of the nearby tower whereupon he was descended upon by a most verbose and bellicose Harrison in front of the aforementioned associates.
In that time, there were three supervisory teams at Mac Yard consisting of a senior and two trainmasters who monitored activities on the ground in the yard, a massive and sprawling place.
These management crews manned shifts around the clock seven days a week. I was a member of one of these teams. I was off duty on this day but when I learned what had transpired with the supervisor in question I called his senior who told me what had occurred. The supervisor in question went off duty greatly stressed and upset, inconsolable and uncontactable. I think he was either transferred or relieved entirely of his position. I never actually found out and never saw him or spoke to him again. No one would talk about it.
The team senior brought the offending yard crew employee in for a formal investigation and this was the correct thing to do under the circumstances. Ordinarily, a verbal warning for the employee would be appropriate for such an infringement with subsequent failures warranting a more formalized approach. Such is the role of supervisor.
I, too, was greatly upset by this event which transpired. It has occurred to me many times that if I had been on duty that particular day, and if I had had possession of a baseball bat in the trunk of my car (à la “Ray Donovan”, the fixer from the TV series by the same name), I would have appeared at the West Tower and would have immediately administered a most severe bashing upon the four individuals in question. For Harrison; to both impart and impress upon him that he was the face of most everything that had gone sour and ugly on the railway and that he was a persona non grata in the most extreme. This act would have been undertaken with significant prejudice.
For the others, an emphatic and resounding reminder that their enabling and perpetuation of Harrison’s autocratic and mean-spirited demands and wishes, for the substantive intimidation, for their promotion and promulgation of the Hunter myth, for pushing his behests and decrees which wrought continued fear and loathing and a constant source of anxiety throughout the entire employee population. You could taste it. You could feel it. And, in addition and for added measure, for their feckless leadership style and for being lousy managers of people. Dispatch to a hospital nearby for urgent medical treatment would be required for all four.
I must say that the notion of resorting to such force and violence is somewhat troubling to me but such was my complete and total anger and disgust with these individuals. I guess I could call this a ‘significant emotional event’ and I hope this story finds its way to them.
This act, of course, would have proven to be seriously problematic for me and would have ruined my life in a number of respects, to be sure. I would likely have been incarcerated and charged with felony assault and battery. I would have been fired and lost a significant portion of my pension. I would probably have lost my house and become unemployable, at least in the type of position and remuneration to which I was accustomed. I was in my late 40’s at the time.
What would this have done to my marriage to my beloved Donata, who had stood by me every step of the way in the over 25 years we had been wedded at that point? This action would have certainly disqualified our move to Australia in 2005, where we spent 13 fine years until our return to Canada in late 2018. What reply could I have provided to my two daughters when they asked, “Dad, what on earth were you thinking?”
I brooded over the plight of this trainmaster colleague of mine for a long time and the awful treatment he received. I don’t know if this ordeal broke him or if simply decided to go underground. I remember him as a good natured and friendly fellow who was popular with the work force. We shared much good banter and I never heard him speak ill of anyone.
I first moved to Toronto in June, 1999, and moved back to Edmonton in April, 2002. I was happy to get away and back West. I left CN for good in May, 2005.
Frankly, I don’t give a damn that he was twice selected as “Railroader of the Year” in 2002 and 2015, by the industry trade magazine Railway Age or “CEO of the Year” for 2007, by the Globe and Mail. These things have no currency whatsoever with the typical railroad employee - in fact, they are meaningless. He was a mean and ruthless s.o.b., and he hurt people.
Industry observers and commentators hail him as legend, saviour and savant. So did Wall Street and other impatient and greedy investors. I saw him as bully, pariah and predator. He was an empire builder for hire — to the highest bidder, of course. I saw him also as carpetbagger, hired gun and robber baron, exploiting many for his own incredible financial gain and as the proverbial greedy bastard. He had no hesitation in saying that his chief aim was to build share value. By 2019, Bill Gates owned nearly 14% of CN. The law of the land states simply that no individual can own more than a 15% stake.
What was his net worth at the time of his death? $100 million US? $200 million US? More? Who knows, it’s a bit difficult to find on the Internet but the extent of this avarice and gluttony is breathtaking. He loaded up the saddle bags with the “mean green” before heading home to the U.S., was hardly physically fit to ride back there himself and then went looking for more.
Consider that railway employees would go on strike, but grudgingly, for minimal gains. I often wondered if loyalty can be bought and sold as a commodity. I wonder also if someone has to pay a great price to accumulate such astounding wealth. Really, how much money does a railroader need to make in their lifetime?
From Don Henley’s great album, End Of Innocence (1989); here’s a passage from the song, “Gimme What You Got”:
You spend your whole life
Just pilin’ it up there
You got stacks and stacks and stacks
Then, Gabriel comes and taps you on the shoulder
But you don’t see no hearses with luggage racks
Call me nostalgic, call me sentimental. I remember a time when the CNR, so called in earlier days, was “The People’s Railway”, when it provided a working life and a constant and a continuation for generations of railroaders like myself, folks who had an abiding emotional stake for an organization that served the country and the community. Railways were nation builders. We were a part of something bigger than ourselves and proud of it. We were the sons and daughters of railway families. That certainly ended with Harrison’s arrival on the scene. I am certain that many of my railroad colleagues at the CPR feel the same way. It came to feel like a desecration.
I get that things change and evolve, it’s inevitable, like the inexorable movement of the seasons. I know it’s important for organizations to strive for improvement and to keep pushing to do things better. This can be done by both encouraging and inviting your employees to participate, not by running over them. An employee treated well can achieve great things for a company.
I might feel less enmity toward him if he had acted to improve the company and processes and procedures and efficiencies and the lot for all employees instead of cutting deeply and making the place shine for himself, his associates and investors only.
Ordinarily, about 40 million Americans and over 3 million Canadians live in poverty. Of course, this number will expand as a result of the pandemic. A simple and humanitarian living wage is unattainable for so many. How can this astronomical gap in properity, as wide as an ocean, be allowed to continue? I ask, in what direction does our moral and social compass point?
I have no doubt that wide reaching and tremendous social change will occur in the aftermath of the pandemic. So it should be in the workplace and it is my fervent hope that amongst these changes we will see renewed moral and guiding principles exercised by corporations and their boards and a repudiation of the villanous largesse bestowed on corporate executives.