Calgary Alberta - The chairman and another board member at Canadian Pacific Railway Ltd. have quit as directors after a dispute over corporate governance.
 
CP president Keith Creel revealed the board spat during a conference call with analysts Tuesday where the company outlined a weaker outlook, but he would not go into details.
 
He said the two directors tendered their resignations "over disagreements related to corporate governance matters".
 
The remaining board members are "united," he added.
 
Earlier in the day, the company had announced that board chair Gary Colter and director Krystyna Hoeg had resigned, and another board member, Andrew Reardon, was named as the new chairman.
 
On the conference call, Mr. Reardon said the company has a "very engaged and a very passionate kind of a board. I cannot speak to the details of the issue, but I can assure you that our board remains united and committed to serving in the best interests of our shareholders."
 
The issue "which was purely a matter of board governance" is "definitely behind us," he said.
 
No further board changes are expected, he added.
 
Mr. Reardon was the chairman of the board finance committee before moving into the board chairmanship.
 
CP spokesman Martin Cej would not provide any more details, saying only that, "It was an internal disagreement and will remain internal."
 
CP's chief executive officer Hunter Harrison did not participate in the second quarter conference call, as he usually does, because he is recovering from "minor maintenance procedures to his lower extremities," Mr. Creel said.
 
The recovery has been slower than hoped, Mr. Creel said, and Mr. Harrison "didn't exactly follow the doctor's orders," which impeded his recovery.
 
Now the doctors have insisted on no work or travel.
 
Mr. Creel said he wants Mr. Harrison to "be gone as long as he needs to be".
 
He said that last week he was on the phone with Mr. Harrison for six hours and "he was roaring like a lion. His will and his drive and his tenacity has not been tempered a bit, but his body obviously has got to heal from the procedure that he went through. Contrary to his belief he is not Superman."
 
Mr. Harrison will have "new and improved bionic legs" when he returns, Mr. Creel said.
 
As for the length of time he will be off, "My call is that it is short term, it is not long term."
 
CP's second quarter profit rose compared to the year-earlier period, although revenue declined slightly and the company cut its growth outlook.
 
Profit was $390-million, up 5 percent from $371-million in last year's second quarter.
 
Revenue was $1.65-billion compared with $1.68-billion last year.
 
The revenue drop was mainly caused by sharply lower shipments of crude oil and U.S. grain.
 
The company's much-watched operating ratio, which measures expenses as a proportion of revenue, improved to 60.9 percent from 65.1 percent.
 
In updated projections for all of 2015, Canadian Pacific said it now expects revenue growth of two to three percent, a considerable reduction from its April projection of seven to eight percent growth.
 
Adjusted diluted earnings per share is expected to total $10 to $10.40, a year-over-year increase of roughly 20 percent.
 
Earlier profit projections were of 25 percent growth or more.
 
CP maintained its expectation that its operating ratio would be below 62 percent.
 
Mr. Creel said CP may make deeper job cuts as a result of the weaker outlook.
 
The company's headcount is down about 700 people from the same period last year, and there could be additional reductions of 200-300 people.
 
"If business goes down, and demand reduces, then obviously headcount is going to go down in lockstep with it," Mr. Creel said.
 
Canadian Pacific shares fell sharply Tuesday, ending the day down 5.51 percent to $194.97 on the TSX.
 
Analyst Cameron Doerksen of National Bank Financial said that while the outlook downgrade might be disappointing for some, "a 20 percent earnings growth rate this year would still be a very solid achievement in the context of a challenging volume environment."
 
In a note, Mr. Doerksen said he was not "overly concerned" with the resignations from the board of directors, "but the lack of disclosure on the issue does create uncertainty for investors."

Richard Blackwell.

       

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