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CSX Corp.’s new leader must undergo an annual physical under a measure proposed in the wake of railroad legend Hunter Harrison’s death in December.
The railroad’s board plans to adopt the proposal at a meeting Feb. 7, according to a letter recently made public by the Securities and Exchange Commission.
The letter, from a lawyer for the company, was written in response to an investor who submitted a proposal to require a regular checkup for the CEO, with the results sent to the board. That shareholder proposal doesn’t need to go to a vote because the board is implementing it, the letter said.
Harrison, 73, who had acknowledged health issues when he was hired in March to serve as CEO, died nine months into an overhaul of the company. Before CSX hired him, he declined the company’s request for an independent doctor to review his medical records.
CSX spokesman Bryan Tucker declined to comment further. Steven Haas, the Hunton & Williams LLP partner who wrote the letter, also declined to comment.
Some companies for years have required a CEO physical, but it’s usually done for insurance purposes, not in anticipation of a change in leadership, according to Constantine Alexandrakis, who leads executive search firm Russell Reynolds Associates’ U.S. business.
“Is health top of mind for boards as they think of CEO succession planning? No, I think it’s assumed,” he told Bloomberg Law. “What’s more important is what the CEO is contributing to the company’s success and strategy, and whether he or she is the right person for the job at any given time.”
Alexandrakis said more companies may make physicals mandatory as succession planning goes from “a nice-to-have” to “a clear requirement” for directors and institutional investors. More directors are prioritizing such planning in 2018 after several high-profile CEO departures over the past year at companies like Uber Technologies Inc. and Equifax Inc., a survey by the National Association of Corporate Directors showed. The NACD said its focus on succession is also driven by increased investor scrutiny of executive performance.
With a CEO physical, the question is whether the results are revealed to anyone besides the board, according to Allan Horwich, a partner at Schiff Hardin LLP and a Northwestern University law professor.
A handful of companies have publicly disclosed executive health problems or leaves of absence, Horwich found in a new paper. “But that doesn’t tell you whether it was done every time a company knew there was a problem,” he told Bloomberg Law.
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