CN stops pension payments to ex-CEO

Canadian National Railwaysannounced Monday that it is suspending pension payments to retired president and CEO Hunter Harrison.

CN said it was taking the action to protect its shareholders, accusing Harrison of having breached his obligations to the company.

Harrison, who retired as CN president and CEO on Dec. 31, 2009, has been at the centre of moves by a New York-based activist investor who wants him to replace Fred Green as president and CEO of rival Canadian Pacific Railways.

Harrison has indicated in interviews that he would be interested in the job under the right circumstances.

"By reason of his recent statements and actions, CN has reasonable grounds to believe that E. Hunter Harrison . . . has breached and intends to breach his contractual undertakings to the company," CN said in a statement.

"Consequently, the board of directors of CNwhich has a duty to protect the legitimate interests of the railway and its shareholderstoday suspended pension and restricted share unit payments to Mr. Harrison.

CN also filed proceedings in the U.S. District Court for the Northern District of Illinois seeking a declaration that its suspension of the deferred compensation payments is "reasonable and lawful."

It is also asking the court for discovery to determine whether any such breach by Harrison is supported by the facts and, if so, a declaration that CN is entitled to cancel all of Harrison's pension, restricted stock units and other benefits.

Montreal-based Canadian National says Harrison, as part of his employment contract with CN, agreed upon retirement to be bound by a broad range of confidentiality and multi-year non-competition and non-solicitation provisions.