If CN Rail names a new CEO this winter who lacks deep operating expertise, the company can expect to lose its proxy battle with TCI at the shareholder vote scheduled for March.Lars Hagberg/The Canadian Press
The political controversy over Air Canada chief executive Michael Rousseau’s inability to speak French is adding additional tension to an already fraught CEO search at Canadian National Railway Co.
Last month, Montreal-based CN Rail announced that CEO JJ Ruest – who happens to be a francophone – plans to retire by the end of January. The move was made as activist investor Christopher Hohn at Children’s Investment Fund Management Inc. (TCI) wages a campaign to improve performance at CN Rail by replacing the CEO and three board members at a shareholder meeting scheduled for March.
Until last week, no one likely cared if the new boss at one of North America’s largest railways spoke English, French or Finnish. For those paying attention, all that mattered was the new boss’s strategy for getting CN Rail’s operating metrics back in line with rivals, in keeping with revered former CEO Hunter Harrison’s legacy, and boosting the stock price.
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Then Mr. Rousseau touched the raw nerve that is language rights in Quebec. After giving a speech to the Montreal chamber of commerce almost entirely in English, he tried to frame the fact that he’s lived 14 years in la belle province and never learned its official language as a “testament to the city of Montreal.” The resulting media firestorm pulled in politicians of all stripes, with critics ranging right up to the fluently bilingual Prime Minister Justin Trudeau.
Suddenly, the ability to speak French became a potential issue for the four members of CN Rail’s board – none of whom are francophones – charged with finding a new CEO, and their advisers at executive search firm Korn Ferry.
Here’s where the situation gets tense. In CN Rail’s senior ranks, there are several internal candidates for the top job, including at least one francophone, chief financial officer Ghislain Houle. However, Mr. Houle’s background leans to tax and finance, not making freight trains run efficiently.
If CN Rail names a new CEO this winter who lacks deep operating expertise, the company can expect to lose its proxy battle with TCI at the shareholder vote scheduled for March.
TCI has already made it clear that the next CEO should be former CN Rail chief operating officer Jim Vena, who learned precision railroading from Mr. Harrison. Mr. Vena spent the past two years turbocharging performance at Union Pacific Railroad, then stepped down in June. He’s not a francophone; neither was the Memphis-born Mr. Harrison.
The CN Rail board is also looking at several other external candidates – this is one of the best jobs in the industry and Mr. Ruest’s compensation package totalled $10.8-million last year. The next CEO could be Mike Cory, who was also formerly chief operating officer at CN Rail and a protégé of Mr. Harrison’s, and is now running a consulting firm.
There will also be an experienced railway executive or two kicked loose as Canadian Pacific Railway takes over Kansas City Southern, where we know CP Rail CEO Keith Creel will be driving the train for the foreseeable future. Korn Ferry’s headhunters could likely persuade a proven performer at either railway to leave, but that executive is unlikely to speak French as their first language. And that shouldn’t matter.
Air Canada is a consumer-facing company with a mandate to serve passengers in both official languages, and the airline received significant government support during the pandemic. That makes the CEO’s views on French an issue for provincial and federal politicians, and explains why Mr. Rousseau is now spending his free time with a private tutor.
CN Rail, on the other hand, moves goods for businesses. The next CEO needs to be a great operator, in the tradition of Mr. Harrison. While the board will look at francophones to run one of Montreal’s leading companies, no one should fuss if the railway’s next leader doesn’t speak fluent French.
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