OMAHA, Neb. — Union Pacific today named Jim Vena, its former chief operating officer, as the railroad’s next chief executive.
The announcement comes five months after one of UP’s largest investors publicly demanded that the board oust CEO Lance Fritz and hire Vena as his replacement [see “Union Pacific to seek new CEO …,” Trains News Wire, Feb. 26, 2023]. Soroban Capital was critical of UP’s performance under Fritz and noted that the railroad’s operations and service quickly improved during Vena’s two-year tenure as chief operating officer, only to falter after his departure.
Soroban declined to comment today, but investors cheered the news, sending UP shares up 10% when the market opened this morning.
“Jim brings a strong rail operations background to Union Pacific, with over 40 years of experience. This includes two successful years as our chief operating officer from 2019 to 2020. After a comprehensive search process, it was clear Jim’s track record of operating excellence was unparalleled and he was the right candidate for the job,” said UP board member Mike McCarthy, who was named chairman today.
Vena spent four decades at Canadian National, rising from a brakeman to chief operating officer. CN posted a record low operating ratio and its best safety performance while Vena was chief operating officer from 2013-2016.
Vena accelerated UP’s shift to Precision Scheduled Railroading when he joined the railroad in January 2019. UP credited Vena with leading an operations team that reaped more than $1 billion in efficiency savings and delivered the best service in the railroad’s history.
“I am excited about returning to Union Pacific and look forward to the journey to be the safest, most reliable and most efficient railroad in the industry,” Vena said in a statement. “Working closely with the entire team, my focus from day one will be to ensure the company delivers industry-leading customer and operating excellence, cultivates and empowers our employees, and cares for the communities in which we operate. These efforts will generate strong shareholder returns.”
Looking back, Fritz told investors and analysts on the railroad’s quarterly earnings call that he was proud of the management team the railroad has assembled, as well as the company’s efforts in sustainability and creating an inclusive workforce. The railroad made progress on safety and the transition to a PSR operating model created better service, he adds.
“In terms of what we needed to do better, we were not consistent and reliable through my 8½ years serving as chairman, president and CEO. That needs to be remedied,” Fritz says. “As we look into the future, that’s exactly what we need to continue to do. We’ve got a strategy – serve, grow, win, together – that’s built off a foundation of consistent and reliable service. I am confident we are oriented, organized, and capable of doing that. We’ve got to prove it to our customers, because … our customers tell us as we demonstrate reliability, there’s more of their order book available to us. Plus, there’s more market participants that’ll start doing business with us.”
Fritz praised the selection of Vena, who is 64.
“We’ve got a fabulous operating executive joining us as our CEO,” Fritz says. “He’s got a great track record and he’s going to be laser focused on making sure that we’re providing the best service product to our customers so that we can translate it into growth.”
Fritz held the title chairman, president, and CEO. UP today split those roles, with lead independent director McCarthy becoming chairman and longtime UP executive Beth Whited named president effective Aug. 14. As president, Whited, a 35-year UP veteran who was the railroad’s executive vice president of sustainability and strategy, will oversee strategy and sustainability, law, workforce matters, corporate relations, and government affairs.
“We are adopting a corporate governance best practice by splitting the role of company CEO and board chair,” McCarthy says.
The board also created a new safety and service quality committee that will review, monitor, and evaluate the railroad’s safety compliance program and as well as provide oversight of UP’s service performance.
McCarthy praised Fritz, whose “ leadership has set our company up for great success for the years to come.”
This is the second time an activist investor touted Vena as a CEO candidate. In 2021, TCI Fund Management sought to have Vena replace CN CEO JJ Ruest. Vena ultimately withdrew his name from consideration, a move that sent CN stock tumbling 6.5% on the news.
Independent analyst Anthony B. Hatch said he was surprised that UP selected Vena. “I must admit I didn’t see this coming,” he says.
The market liked the selection, Hatch notes, but it’s unclear how the railroad’s customers, employees, and regulators will react.
Hatch says UP’s selection of an operations boss to lead the railroad is out of step with the trend toward CEOs with sales and marketing backgrounds.
“It seems like a choice from the past — the title, not the person,” Hatch says. “This is an old-school railroader in a new era for railroads where the growth pivot has to move from talk to walk, and where regulatory interest in the railroads is at high tide.”
Vena joined CN in 1977 as a brakeman and worked in numerous operating jobs from yardmaster, conductor and locomotive engineer to trainmaster and superintendent, among other duties. He also served in marketing.
In early 2005, he was named vice president of CN’s Champlain district. He was appointed vice president, operations in CN’s Eastern Region in March 2006, and then senior vice president, Eastern Region before becoming senior vice president, Western Region in June 2007. Before being named CN’s chief operating officer, Vena had served as senior vice president, Southern Region since April 2009.
Vena is a graduate of the University of Alberta and Athabasca University.
In his Feb. 26 letter to UP’s board, Soroban Capital Managing Partner Eric Mandelblatt said Vena “very quickly established what was possible for the Company, rapidly transforming [UP] from an underperforming to a top performing railroad only to inexplicably be allowed to walk away after less than two years. Operations almost immediately reverted to worst-in-class levels without Mr. Vena.”
— Updated at 11:10 a.m. with revisions throughout, including comments from Union Pacific earnings call; updated at 11:35 a.m. with additional Hatch comment.
