(Reuters) – Lance Fritz, chief executive officer of US railroad Union Pacific, said on Sunday he would step down this year to make way for a new leadership after hedge fund Soroban Capital Partners called for his replacement.
Union Pacific said it expects to name a successor this year, and Fritz said he looks forward to working with the board to find a new CEO.
“Union Pacific has been my home for 22 years and I am confident that now is the right time for the next Union Pacific leader to take the helm,” Fritz said in a statement, without further explaining the reasons for his decision.
Soroban Capital issued a letter on Sunday calling for Fritz to be replaced, saying he has lost the trust of shareholders, employees, customers and regulators.
Soroban founder Eric Mandelblatt said in the letter that new leadership could create significant shareholder value.
The hedge fund said it “has long held the view that current management is unable to deliver strong operational performance” and sees “an increased risk of lasting damage to the franchise if not addressed.”
“Unlike typical shareholder engagements that come with numerous demands, Soroban has only one question – installing new guidance that can keep trains running safely and on time,” the letter added.
Soroban urged Union Pacific to consider former Chief Operating Officer Jim Vena as a possible replacement for Fritz, saying “no internal candidate comes anywhere near as qualified.”
Vena retired from running to lead Canadian National in December 2021.
The hedge fund, which says it owns about $1.6 billion in Union Pacific, said a leadership change in 2025 could generate about $18 in earnings per share.
Union Pacific reported lower-than-expected profit for the fourth quarter, impacted by delayed shipments due to labor shortages and a winter storm that crippled cargo operations in the United States.
Union Pacific said in a statement it was looking for a new CEO capable of leading the company for a long-term tenure.
As part of the Board’s succession planning process, he had and would continue to consider shareholder input and has worked with Soroban Capital since 2017.
The development comes after activist investor Nelson Peltz ended his search for a board seat at Walt Disney Co this month after Chief Executive Bob Iger unveiled plans to repair Mickey Mouse’s home and hailed investors.
Salesforce and activist investor Elliott Management Corp are also in talks to reach an agreement that could end a possible board challenge.
(Reporting by Rhea Binoy and Kanjyik Ghosh in Bengaluru; Editing by Chris Reese and Stephen Coates)
