US railroad Union Pacific on Sunday said it would replace its chief executive this year, hours after an investor publicly called for his ousting.
The company said it had hired a consultancy to help aid its efforts to replace Lance Fritz, who has led the railroad for the past eight years. Union Pacific added its board had formed a task force focused on succession last November.
“Union Pacific has been my home for 22 years and I am confident that now is the right time for Union Pacific’s next leader to take the helm,” Fritz said. “I look forward to working with the board as we identify our next CEO to lead the company into the future.”
The announcement came shortly after Soroban Capital Partners published a letter it had sent to the board, warning that the freight rail operator — one of the largest in the US — was lagging behind rivals and needed new management to urgently fix problems at the company.
“Acute operating issues at [Union Pacific] have continued, and we see a heightened risk of permanent damage to the franchise if left unaddressed,” Eric Mandelblatt, the chief investment officer of Soroban, wrote in the letter.
Soroban said it was pushing for the company to hire Jim Vena for the role, saying it believed the company’s stock could potentially double under his leadership. Vena was previously chief operating officer of Union Pacific.
Union Pacific “has repeatedly and significantly failed to reach its potential under Fritz’s leadership,” Mandelblatt wrote. In the presentation to the board, he noted the company “ranked the worst in safety, volume growth, revenue growth, cost management, [earnings before interest and taxes] growth, and total shareholder return”.
He added: “Unlike typical shareholder engagements which come with numerous demands, Soroban has only one ask: install new leadership who can get the trains to operate safely and on time.”
Union Pacific said it was evaluating candidates both in the rail and “adjacent” industries, hoping to find a leader with a “strong track record of success and expertise across safety, operational excellence, enhancing and driving customer service”.
The company, with a market capitalisation of almost $120bn, has been in talks with Soroban since 2017. The hedge fund holds a $1.6bn stake in Union Pacific, making it one of the railroad’s largest shareholders.