By Justin Franz
Lance M. Fritz, president and chief executive officer of Union Pacific since 2015, will step down later this year amid pressure from investors tired of the Class I lagging behind its competitors.
On Sunday, Soroban Capital went public with its criticisms of Fritz, specifically noting that UP was in last place against its competitors. Soroban Capital owns a $1.6 billion stake in the railroad and apparently had been pushing privately for a new CEO for months. After getting nowhere in private with board members, the investor went public.
“Union Pacific has repeatedly and significantly failed to reach its potential under Mr. Fritz’s leadership,” Eric Mandelblatt wrote. “UP has ranked the worst in safety, volume growth, revenue growth, cost management, EBIT growth, and total shareholder return. These are highly underwhelming results despite UP having the premier railroad franchise in North America.”
Mandelblatt wrote that the investment firm also had an idea of who they wanted to replace Fritz: former Chief Operating Officer Jim Vena, who overhauled UP a few years ago.
The railroad was quick to respond on Sunday, issuing a press release stating that Fritz would be stepping down this year and that it had been searching for a new CEO since last year.
“The Board is seeking a CEO with a strong track record of success and expertise across safety, operational excellence, enhancing and driving customer service, innovation, employee culture and sustainability,” the railroad wrote. “The Board is focusing the process on highly-qualified candidates both within the industry and adjacent industries to identify a CEO capable of leading the Company for a long-term tenure. The Board expects to name a successor who will assume the position in 2023.”
The last year has been a tough one for Class I railroads, but especially UP. Earlier in the year, all of the Class Is were ordered to go before the U.S. Surface Transportation Board and explain their ongoing service issues. Months later, only Union Pacific was ordered to come back and defend its lack of progress.
Although UP officials were quick to announce that they were planning on replacing Fritz, they did not do so without praising him a little.
“The Board is grateful to Lance for his unwavering leadership, dedication and oversight in driving our Company forward over the last eight years as CEO. Lance created an environment that has allowed Union Pacific to make a measurable impact with our customers, communities and employees alike,” said Michael McCarthy, Lead Independent Director of the Board. “He has capably led our company during a time of significant challenge and change, positioning Union Pacific to deliver long-term sustainable value for shareholders and customers. We are immensely grateful to have Lance’s continuing leadership and support and know he will ensure a smooth transition.”
