CSX, one of the largest US railroad operators, spent $84 million to hire Hunter Harrison away from his old job and install him as CEO in March.
CSX’s board members knew he was in poor health—while his illness was undisclosed, he used an oxygen machine and mostly worked from home—but they entrusted him to lead a major shakeup of the company that alienated customers and led other executives to leave, according to the Wall Street Journal.
Shareholders loved the hire—CSX shares rose 60%—and it seemed worth the risk, until the worst fears were realized and he died Dec. 16 at age 73. CSX’s board is now being questioned about how much it knew about Harrison’s illness, and whether it was wise to place the company’s future in the hands of a man with serious health problems.
The physical condition of a CEO, and what investors are entitled to know, is a ticklish problem. Companies aren’t required to disclose health issues, and yet the well-being of CEOs and their ability to perform their jobs is a material issue for investors.
Similar questions were raised when Apple CEO Steve Jobs appeared to lose weight and began missing company events in 2008. He tried to reassure investors that he suffered from an easily cured “hormone imbalance” before admitting it was more serious and going on a six-month leave to treat a recurrence of pancreatic cancer. He eventually had liver transplant surgery in 2009 before his death in 2011. Apple came under fire for not revealing the seriousness of Jobs’ illness to investors, and Bloomberg reported the Securities & Exchange Commission began a probe, although nothing came of it
It’s not all clear how much the CSX board knew about Harrison’s health. Harrison refused to submit to an examination by an independent physician, and instead produced a letter from a doctor testifying to his fitness to serve. That probably should have been a red flag, but Harrison was a legend in the railroad industry, and CSX—and particularly Mantle Ridge, the activist investing firm pushing the company to cuts costs—was eager to have him.
When the Wall Street Journal asked Harrison about his health in May, he said “don’t judge me by my medical record, judge me by my performance.” In the end, sadly, they were the same thing.