Canadian National Railway Company (CNR) Earnings Call Transcript & Summary

Good morning. My name is Robert Pace, and I am the Chair of the Board of CN. From my office in Halifax, Nova Scotia, I welcome you to CN's Annual General Meeting. On behalf of the Board of Directors and all of us at CN, I would like to extend our best wishes to all of you as well as your families. Let us all remain safe and healthy during these difficult times. We must continue to observe safety protocols, which is why we are again holding our annual shareholders meeting remotely and virtually. It's a pleasure for my fellow Director nominees to see all of you participate from the safety of your homes and offices. At CN, we are determined to mitigate the spread of this virus. This webcast allows you to ask questions, hear them answered and if you've not already done so, to vote on the matters we intend to address. We are providing close captioning, and we will proceed in both of Canada's official languages. CN is also providing a toll-free conference call number for those of you who do not have Internet access or to prefer to use the phone. Technically, it is not possible to perfectly synchronize the phone and Internet access. So please don't try to watch on your computer and listen on your phone at the same time. The online format will also necessitate minor changes in voting procedure and how questions from participants are handled. Voting during this meeting can only be done through our online voting platform on the webcast. You will not be able to vote your shares on the phone. If you have voted in advance of the meeting, you do not need to do anything more, and we thank you for your participation. Shareholders participating in the online webcast can put their questions in writing. Shareholders attending by phone can ask questions orally. The line operator, Carmen, will queue up your questions and open your line when it's your turn to speak. We'll provide more details on how to vote and ask questions as the meeting unfolds. To put it mildly, 2020 tested all of us. I am proud and grateful to report that CN railroaders focused relentlessly on their mission to deliver essential goods crucial to our way of life. It has been 25 years since our CN privatization. I've long been inspired by our transformational journey into a lean, sustainable enabler of trade, and I'm thrilled by the potential our future holds. We are continuing to adapt and grow, which brings me to our April 20th superior proposal to join with Kansas City Southern. It is welcome news that the KCS Board of Directors has determined that CN's proposal to combine with KCS could reasonably be expected to be a superior proposal and to enter into discussions with us. We are pleased that KCS has acknowledged the value that a CN-KCS combination would bring as the premier railway for the 21st century. The combination of CN and KCS will create significant revenue opportunities by connecting North America's industrial corridor that will further accelerate CN's industry-leading growth profile. We believe the combined network and the deployment of CN's innovative advanced technologies will produce unparalleled stakeholder benefits. It will provide more competition in the industry and new options for customers to move goods more quickly and efficiently. In every sense, what we proposed is the perfect railroad marriage. CN and KCS are heritage companies. Both have operated for more than 100 years through economic booms, depressions, wars, floods, hurricanes and blizzards. But always, both have provided the essential services to their communities. Names like the Southern Belle and The Flying Crow and the Super Continental are engraved in railroading history. Both railways have helped build the economies of our respective nations. Few other companies have our historical bragging rights. CN, KCS share the same culture and values, which will make this marriage work and last. We believe a combination of CN and KCS will also drive growth opportunities for communities across Canada, Mexico and the United States, generating good jobs and greater economic stability for their communities. In summary, CN looks forward to now engaging with the KCS team in this process, completing our due diligence and moving towards finalizing a binding merger agreement with KCS in the coming weeks. Now let us turn to our views on ESG. We are deeply committed to powering sustainable growth to the benefit of all. That is why the Board of Directors moved decisively to further enhance and put in place important ESG measures. It was clear our stakeholders' expected action, and we are delivering. First, to deepen our relations with the 110 First Nations and 18 communities along our network, we have created the CN Indigenous Advisory Council. This is an independent body comprising indigenous leaders from across Canada. We are very honored that it will be co-chaired by the Honorable Murray Sinclair and Ms. Roberta Jamieson. The council has a mandate to advise CN's Board and our CEO on issues either CN or the council believe are crucial to the growth in the new century. With respect to diversity and inclusion, put simply, CN is committed to reflecting our population and customers we serve. We also intend to hold an advisory vote by shareholders each year at our AGM on the company's climate action plan. You will have the opportunity to participate in the very first one today. We believe giving shareholders an advisory vote on our climate action plan provides a strong measure of accountability and a mandate to continue making progress in this vital endeavor. And finally, CN's Board is also implementing important governance changes. These new measures were announced earlier this year. We are reducing the size of the Board. We are imposing a 14-year term limit and setting a retirement age of 72 for all directors. And following the vote at today's meeting, we will have achieved our goal of gender parity and diversity among our independent directors. To facilitate the change, 5 directors have advised that they will not stand for reelection today. These are Donald Carty, Ambassador Gordon Giffin, Edith Holiday, Maureen Kempston Darkes and the Honorable Denis Losier. On behalf of the entire CN family, I want to thank these distinguished directors for their wisdom, expertise and the careful oversight they have contributed to CN's success. We are deeply indebted to them and I, for one, will dearly miss their contributions. I would also like to welcome our new Board nominees. Denise Gray and Justin Howell as well as Margaret McKenzie, who joined the Board in late 2020. These new directors bring extensive business, innovation and strategic planning expertise. We will now have 10 independent directors plus the CEO. Our new directors' profiles are available in the management information circular for this meeting. Now on behalf of CN's Board of Directors, I am pleased to call this meeting to order. At CN, every work assignment begins with a safety briefing. Today is no different. The small team actually attending in the CN premises today received a safety briefing earlier and are respecting strict social distancing measures. Before we begin with the actual business of the meeting, I would ask Sean Finn, our Executive Vice President, Corporate Services, Chief Legal Officer and Corporate Secretary, to share a safety moment. Sean?

Mr. Chairman, thank you. Before every work assignment or meeting, it is our practice to have a safety briefing or safety moment. Today is no different. Safety is a core value at CN. [Foreign Language] This morning is no exception. Pandemic has forced a new reality upon us. For more than a year, many of us have been working remotely to slow the spread of the virus. But it's just as important to work safely at home as in the field or from the office. Here are 6 tips to keep us healthy and safe. Check your posture regularly and don't ignore discomfort. Address any possible causes as soon as possible. Take frequent minibreaks throughout the day to give your muscles and joints a chance to rest. Avoid distractions by working in a quiet room with the door closed. Obviously, today, easier -- obviously today, often easier said than done, as you all know. Avoid glare by using window shades, soft lighting and antiglare filters on computer screens. Continue to socialize. Don't forget, stress can have physical repercussions. Reaching out to family, friends and colleagues periodically, virtually, of course, for informal chats is uplifting. And we all know that exercise is essential to physical and mental health. Make sure to take the time to go for a walk, a bike ride or some other form of physical exercise everyday. With little planning, we can all return to normal work someday in good health and spirits. Chairman?

Thank you, Sean. Nothing is more important to us than creating a safe place to work. Safety is a core value at CN. We divide -- we devote significant effort and resources to ensuring a safe environment and culture in pursuit of our goal of being the safest railway in North America and of eliminating work-related accidents altogether. Nevertheless, it's my sad duty to report that 4 of our colleagues died in service since our last annual meeting. Ms. Valerie Ellis, Jackson, Mississippi; Mr. Yoan Morneau, Montreal, Québec; Mr. [ Daniel Toulouse ], Prince Rupert, BC; Mr. Jasvinder Riar, Vancouver, BC. Please join me in a moment of silence in their memories. These tragedies reminds us all that railroading can be unforgiving and vigilance is our best protection. The best way to honor the memories of our colleagues is to always keep safety top of mind. I would now like to introduce the senior officers of CN joining me on the webcast this morning from CN's headquarters in Montreal, Québec: Jean-Jacques Ruest, President and Chief Executive Officer; Ghislain Houle, Executive Vice President and Chief Financial Officer; Sean Finn, whom you heard from earlier. I will act as Chair of the meeting, and Sean will act as Secretary of the meeting. Before we continue, let me review in more detail the process for the vote on today's motions as well as the question-and-answer session that will follow our meeting. For the purpose of the meeting today, voting on all matters will be conducted by a single electronic voting period that will open after the last item of business. You will be asked to vote today on: one, the election of directors; two, the nominations of the auditors; three, the nonbinding advisory resolution on the company's approach to executive compensation; four, the nonbinding advisory resolution on the company's climate action plan; and five, 2 shareholder proposals described in Schedule D of the company's management information circular. During this meeting, all shareholders, whether registered or nonregistered will be able to vote online and online only. If you have not already submitted your proxy, please log into the webcast using the 16-digit control number included on the proxy form or voting instruction form you received and click the submit button at the bottom of your screen when prompted. The vote will open after all motions have been introduced. On behalf of the Board of Directors in the company, we'd like to thank the shareholders who submitted their proxies in advance of the meeting. During the meeting, I will entertain questions relating to a specific motion after that motion has been moved and seconded. All questions will be handled by Sean Finn, who will read out the questions as needed and invite someone to answer the question. If you are a shareholder or a duly appointed proxy holder, you may submit a question at any time during the meeting by typing it in the Ask A Question field at the bottom of the web screen and clicking submit. Alternatively, if you are a shareholder or duly appointed proxy holder and have your 16-digit control number in hand, you can also ask your question verbally by calling 1 (833) 722-0214 for calls from Canada and the United States. I repeat, the number is 1 (833) 722-0214. For international callers, please dial toll-free 1 (929) 517-0688. [Operator Instructions] Time permitting and subject to our rules of conduct, we will answer all written questions received as well as questions asked over the phone. Any questions relative to the meeting that cannot be answered during the meeting due to time constraints will be posted online and answered. The questions and answers will be available as soon as practical after the meeting and will remain available until 1 week after posting. Consistent with the procedures followed during our in-person annual meetings, all questions submitted in accordance with the rules of conduct will be addressed in the order they are received. When asking a question, whether written or over the phone, please state your full name, whether you're a shareholder or a duly appointed proxy holder, the name of the city and the province or state where you live. Any questions not related to a specific motion will be addressed during the question-and-answer session at the end of the meeting. To keep the meeting as efficient as possible, a number of shareholders have already agreed to move and second formal motions and I will call on them at the appropriate times. There will also be a presentation today by JJ Ruest, President and CEO. Next, I would like to remind you of certain procedural matters related to today's meeting. The business matters to be conducted at the meeting are set out in the management information circular of the company dated March 9, 2021. As permitted, under Canadian securities rules, the company has used the notice and access regime to make available its meeting materials and set a notice on March 23, 2021 with all relevant information in that regard to holders of common shares at the close of business on March 5, 2021, the record date. A copy of the confirmation of mailing of such documents has been filed with the corporate secretary for inclusion with the minutes of the meeting. I will appoint Jeri Trotter and [ Rita Fernandez ] of Broadridge to act as scrutineers at the meeting. I have been advised by the scrutineers that based on the proxies received prior to the meeting and the shareholders and proxy holders attending this meeting via live webcast and conference call, there is a quorum for the meeting. I, therefore, declare the meeting has been regularly called and properly constituted. Next item of business is the submission of the financial statements of the company. The annual report of the company, which contains the consolidated financial statements of the company and its subsidiaries as of December 31, 2020, together with the reports of the auditors and management's discussion and analysis is mailed to the shareholders of the company who have requested copies. The annual report is also available for download at the bottom of the webcast page on CN's website. There's no formal action or resolution required with regard to this item on the agenda. Sean, are there any questions from the phone or online relative to this item of business?

Mr. Chairman, there are no questions on the phone or online on this matter.

Thank you, Sean. We'll now proceed with the election of directors. According to the resolution of the Board in accordance with the Board's new governance policies, 11 directors are to be elected. Information regarding the nominees is set out in the management information circular. I will now turn it over to Sean, who will read the names of those nominated for election as directors.

Mr. Chairman, thank you. The following individuals are nominated for election as directors of Canadian National Railway Company: Shauneen Bruder, Julie Godin, Denise Gray, Justin Howell the Honorable Kevin Lynch, Margaret McKenzie, James O'Connor, Robert Pace, Robert Phillips, Jean-Jacques Ruest and Laura Stein.

Thank you, Sean. I would ask Mr. Cristina Circelli to move the motions to nominate the directors.

Mr. Chairman, my name is Cristina Circelli. I am a shareholder of the company, and I am pleased to nominate each of the persons named by the Secretary to be elected as a director to hold office until the next annual meeting of shareholders or until his or her successor is duly elected or appointed.

Thank you, Cristina. Alain Dussault, will you second the nominations?

Mr. Chairman, my name is Alain Dussault. I'm a shareholder of the company, and I second the nominations.

Thank you, Alain. Sean, are there any questions from the phone or online relevant to the election of directors?

Mr. Chair, there are no questions with respect to this matter.

Thank you, Sean. As there are no such questions or further nominations, I declare the nominations closed. Pursuant to a resolution adopted by the Board of Directors, 11 directors are to be elected and 11 eligible candidates have been nominated. As explained at the beginning of this meeting, voting today will be conducted by a single electronic vote that will open after the last item of business. If you have not already voted, you will be prompted to click the For or Withhold button next to the motion with respect to the election of directors. The Board of Directors and management recommend voting for the election of each director nominee. We will now continue with the next item of business, which is the appointment of the company's auditors. I would now like to call upon Alain Dussault to present the motion to appoint KPMG LLP as auditors of the company.

Mr. Chairman, my name is Alain Dussault, and I am a shareholder of the company. I move that KPMG LLP be appointed auditors of the company to hold office for the fiscal year 2021 or until the close of the next annual meeting of shareholders.

Thank you, Alain. Cristina Circelli, would you please second the motion?

Mr. Chairman, my name is Cristina Circelli. I'm a shareholder of the company, and I second the motion.

Thank you, Cristina. Sean, are there any questions from the phone or online relevant to the appointment of auditors?

Mr. Chairman, there are no questions with respect to this matter.

Thank you, Sean. If you have not already voted, you will be prompted to click the For or Withhold buttons next to the motion with respect to the appointment of KPMG LLP as the company's auditors. The Board of Directors and the company's management recommend voting for the motion. As mentioned, voting today will be conducted by a single electronic vote that will open after the last item of business. Now we'll turn to the next item on the agenda, the consideration of the nonbinding advisory resolution on the company's approach to executive compensation. The statement of executive compensation contained in the company's management information circular discloses such approach in detail. The results of the vote will not be binding on the Board. However, the Board will take into account the results of the vote together with relevant information or comments from shareholders. I call upon Alain Dussault to move the motion.

Mr. Chairman, my name is Alain Dussault. I am a shareholder of the company. I move that the nonbinding advisory resolution on the company's approach to executive compensation, as set out in the management information circular, be approved.

Thank you, Alain. Cristina Circelli, will you second the motion?

Mr. Chairman, my name is Cristina Circelli. I'm a shareholder of the company, and I second the motion.

Thank you, Cristina. Sean, are there any questions from the phone or online relevant to the nonbinding advisory resolution on the company's approach to executive compensation?

Mr. Chairman, there are no questions on this matter.

Thank you, Sean. Again, if you've not already voted, you'll be prompted to vote for or against the motion. The Board of Directors and company's management recommend voting for the motion. As mentioned, voting today will be conducted by a single electronic vote that will open after the last item of business. The next item on the agenda is the consideration of the nonbinding advisory resolution on the company's climate action plan. The detailed plan is contained in the company's management information circular. Key element of our environment, social and governance commitment is this advisory vote on the company's climate action plan held for the first time today. It complements CN's long-standing and robust climate change disclosures, public reporting of our greenhouse gas emissions and our strategy to reduce greenhouse gas emissions. The results of the vote will not be binding on the Board. However, the Board will take into account the results of the vote together with other relevant information or comments by shareholders when considering the company's approach to its climate action plan. I will now ask our President and CEO, JJ Ruest, to present the company's climate action plan. JJ?

Well, thank you, Mr. Chairman. And if you could join me on Slide 1. CN has been making a positive contribution to the fight against climate change by offering carbon-efficient transportation solution to our customers. Since 1993, we have reduced our locomotive green gas -- greenhouse gas emission intensity by 40% avoiding 46 million tons of carbon dioxide equivalent, and we continue to lead the North American rail industry, consuming approximately 15% less locomotive fuel per gross ton-mile than the industry's average. The graph illustrate how CN has been able to decouple its growth from carbon emission since 1993. As we prepare for the future, on Slide 2, we are committed to reduce emission and improve our carbon intensity consistent with stabilizing global temperature. In 2017, we became the first railroad in North America to set an approved science-based target by committing to reduce our green gas emission intensity by 29% by 2030 based on 2015 level. In 2020, we achieved a reduction of 6.8% of CO2 emission in intensity term compared to our 2015 base year. To ensure consistency with the most recent climate science and best practice that apply to a well below 2-degree scenario and due to CN recent acquisition of TransX, we are currently working with a science-based target initiative to have resubmitted our target. We expect to issue our new level of ambition by Q2 of this year. On Slide 3, by approximately 85 -- with approximately 85% of our greenhouse gas emission generated by our rail operation, we believe the best way to reduce our carbon footprint is by continuously improving our rail efficiency. To achieve our science-based target to reduce our greenhouse gas emission intensity by 29% by 2030 based on 2015 level, we are focused on 5 key strategic areas. Number one, locomotive fleet renewal. We continue to purchase more fuel-efficient locomotive. And in 2020, we acquired 41 new high horsepower locomotive. Number two, innovative technology. We continue to explore and invest in innovative technology to improve our carbon efficiency in the years to come. Number three, big data. Through our locomotive telemetry system, we collect large amount of data to improve performance and fuel conservation. Through big data analytics, additional opportunities for fuel conservation will present opportunities for us to further reduce our emission in the years to come. Number four, operating practice. We have layered advanced technology and automation into every aspect of our operation. We are calling this next-generation operating model, Digital Scheduled Railroading, DSR. And finally, number five, cleaner fuel. The growth of our renewable fuel present an immediate opportunity to reduce further emission by using sustainable renewable fuel blend in our locomotive fleet. Furthermore, we are also actively working with our suppliers and are focusing on testing and exploring a greater use of sustainable, renewable, fuel blend above the regulatory amount required by the law. Closing on this topic on Slide 4. As we took -- as we look to 2030 and beyond, removing carbon from rail transportation will continue to require innovative fuel efficiency technology; the greater use of cleaner, sustainable fuel; and designing innovative low-emission supply chain solution through investment and collaboration. CN recognize the need for the new propulsion engine technology to meet the deep decarbonization required to achieve a net zero-emission by 2050. We also recognize the importance of collaboration with government, supply chain partners, fuel producers and locomotive manufacturers in achieving an effective transition to a low-carbon future. As part of our broader sustainable strategy, we will also pilot Lion Electric Company zero-emission electric truck in our intermodal road operation. CN plan to continue to lead the industry by piloting low and no carbon technologies, and we will collaborate to develop a battery electric yard locomotive and conducting trial later in a few coming years. As we -- as a mover of the economy, CN is committed to committing to play a key role in the transition to a low-carbon economy. Thank you.

Thank you, JJ. I'll now call on Catherine Frémont to move the motion.

Mr. Chairman, my name is Catherine Frémont, and I'm a shareholder of the company. I move that the nonbinding advisory resolution on the company's climate action plan as set out in the management information circular be approved.

Thank you, Catherine. Cristina Circelli will second the motion.

Mr. Chairman, my name is Cristina Circelli. I'm a shareholder of the company, and I second the motion.

Thank you, Cristina. Sean, are there any questions from the phone or online relevant to the nonbinding advisory resolution on the company's climate action plan?

Mr. Chairman, there are no questions on this matter on the phone or online.

Thank you, Sean. If you've not already voted, you will be prompted to vote for or against the motion. The Board of Directors and management recommend voting for the motion. As mentioned, voting today will be conducted by a single electronic vote which will open after the last item of business. Now I will turn to the shareholder proposals. We have 2, and we are going to consider them separately. They were submitted by Ms. Pamela Fraser, an individual investor. We'll proceed as follows. First I'll ask Ms. Fraser to introduce the motion on both her shareholder proposals and to make a brief statement to state her position for each proposal in turn. The company will then state its position on each of the 2 shareholder proposals. I would now like to ask Ms. Pamela Fraser to present and move her shareholder proposal. As indicated to Ms. Fraser, to keep the meeting efficient, we have allocated 3 minutes per proposal for a total of 6 minutes to present both proposals. Ms. Fraser, please present your proposals.

Thank you, Mr. Chairman. Good morning to my fellow shareholders. I'd like to congratulate our incoming board members, all of whom have distinguished backgrounds. Their leadership will guarantee that the CN Railway meets the high aspirations of corporate governance, as stated on the CN website. I'll use my 6 minutes to cover the overlapping governance issues reflected in my 2 proposals. My presentation is divided into 2 sections. First, I will discuss the context of my proposals on the CN Police and workplace safety. Second, I'll discuss the implications of that context to show why CN shareholders should vote for both proposals. We elaborate on these points on our website, cnrailshareholders2021.com. Starting with the background context on CN Police, my fellow shareholders should be aware of important developments that happened after I submitted my proposals to the company on December 3, 2020. In summary, through their words and material admissions, the Board's recommendation that you vote against my CN Police proposal is misleading. The first development relates to a phone call that my lawyer and I had with the Board's representatives on January 13, 2021. During our phone call, Mr. Sean Finn and Ms. Cristina Circelli assured us that CN Railway had a written policy to guarantee the independence of CN Police. The Board relied on this policy to recommend voting against my proposal. On that call and 5 times after that, we asked the company for a copy of that policy. They failed to disclose it and further failed to explain why. So how can CN shareholders properly vote on my proposal without any verification that this policy exists and has been consistently applied? After our phone call, through my lawyer, I sent the Board official documents. These documents show that CN Police had, in fact, taken over an exclusive jurisdiction of the investigation of Kevin Timmerman's death from the RCMP and Saskatoon Police. For my fellow shareholders' information, Mr. Timmerman was a CN worker who died in our Saskatoon rail yard in 2015. Despite reviewing his relevant records from the Saskatoon Police, the CN Board still fails to reconcile that case with its assertion that CN Police has always deferred to public police forces. We are working to confirm whether the company's handling of Kevin Timmerman's death reflects the norm rather than the exception at CN. For now, it's critical that CN Railway separate itself entirely from the perception that through its police force, the company may be interfering with the integrity of criminal investigations. The second development that happened after I submitted my proposal is the RCMP's December 2020 decision to criminally investigate our competitor, CP Rail, for the derailment of train 301 in 2019. This is relevant to CN because that railway police's role in the initial investigation appears to be a focus of the ongoing RCMP investigation. We shouldn't wait for the outcome of that case to address the risk of our police officers, playing any role in investigating CN. The third development should motivate shareholders to vote for my policing proposal as its implications on the company's recent bid for Kansas City Southern, any merger would likely combine the CN Police and KSU police into a super police force operating from Canada to Mexico. My proposal insulates CN from the business, political and reputational risks enforcing criminal law across the whole of North America. The current heated discussions around policing powers in the United States, especially, should discourage shareholders from expanding these risks. We provide better alternatives to the current system at cnrailshareholders2021.com. For now, the developments I discussed show why it is urgent for CN to clearly and proactively separate its comments from policing functions. If CN Police has always been independent, has never investigated the company and has never been abused, why would the Board oppose a proposal that reaffirms these positions? Does management and the Board still stand by these positions? My comments about my second proposal will be brief. My proposed method for at-risk compensation automates accountability and transparency. It does so by focusing on deaths and serious injuries that are the worst possible safety outcomes for any company. Further, by placing the responsibility for any safety incident on all levels of management, this will better align management's interest with the workers' welfare. If the Board and management agree that every workplace death or serious injury is preventable, then they have nothing to fear. Through their diligence, these events will rarely, if ever, occur, and management will not lose any part of their bonuses. Mr. Chairman, I move that the 2 shareholder proposals as set out in Schedule D of the management information circular be submitted to a vote. Thank you.

Thank you. Ms. Fraser. You have the motion on the floor. To facilitate the flow of this meeting, we have arranged for someone to second your motion. Catherine Frémont, can you second the motion?

Mr. Chairman, my name is Catherine Frémont. I'm a shareholder of the company, and I second the motions.

Thank you, Catherine. I would now call upon Sean Finn, CN's Chief Legal Officer, to present the company's position with regard to each of the proposals in turn. Sean, the floor is yours.

Thank you, Mr. Chairman, and thank you, Madam Fraser. Please accept CN's sincere condolences on the loss of your son, Dylan, in 2019. We cannot imagine your pain. And while Dylan was not onboard a CN train, we respect your efforts to make railroads safer in his memory. At CN, on your first shareholder proposal -- at CN, we're profoundly committed to the safety of our workforce and members of the public. Safety is a core value at CN. Our goal is to become the safest railroad in North America. And we know that means a relentless safety culture at all levels of the company. The key to accomplishing that is leadership, training and leadership, coupled with safety technologies and capital investments. CN's program, Looking Out For Each Other, teaches employees about risks and mitigating those risks before injuries and accidents occur. We train our employees to talk about safety because talking about safety keeps it top of mind. CN is also implementing a new safety technology to reduce risk and human error to the maximum extent possible. Examples include our automated track inspection cars and automated inspection portals, which continually inspect tracks and rolling stock. CN's compensation structure is another important component of safety, leadership. It contains strong financial incentives for leaders. 10% of their annual bonuses is based on attainment of company safety targets. This bonus target is based on safety performance applies to all senior leaders, employees in 2019 and to all CN's 4,850 managers in 2021. The shareholder proposal suggests replacing our system of incentives with more punitive approach. Not only is that approach not consistent with best practices, it is considered ineffective to deter unsafe behaviors. Be assured, the Board and the company make no compromises in its focus on employee safety and elimination of preventable accidents. Our view is that our current strategy of intensive training, strong leadership focus, technology investments and bonus incentives is the appropriate route to accomplish that objective. For these reasons, Mr. Chairman, we recommend that shareholders vote against the proposal. With respect to the second proposal by Ms. Fraser, the mission of the CN Police is to protect and engage with communities. Their role is to assure the safety of CN employees, assets and operations and to protect the general public against inevitable risks associated with railway operations. The CN Police, its jurisdiction and its relationship with CN are established by law. Its officers, led by a great CN leader, our Chief Security Officer, Steve Covey, someone who embodies safety at CN, are employees of CN but are, first and foremost, police officers. As such, they are recognized as public servants who answer primarily to the law and only through that lens to the company. Their independence is safeguarded by rigorous protocols and policies. If we were to combine with KCS, the CN Police would not be combined with special officers with KCS. They are 2 separate jurisdictions under 2 separate laws in 2 separate countries. The shareholder proposal would not improve the safety of our employees or the communities in which we operate. As a matter of policy, notwithstanding its authority and expertise, CN Police defers investigations of workplace accidents resulting in fatalities or serious injuries to the local police agency, the RCMP or our regulators. Because of their proximity to our network, CN Police are often first at the scene. They follow established procedures to secure the scene and preserve evidence. When investigative authorities arrive, CN Police offers its full cooperation and hands over investigation to local law enforcement or to regulators such as Transport Canada or the Transport Safety Board. For these reasons, Mr. Chairman, we recommend that shareholders vote against this proposal.

Thank you, Sean. Sean, are there any questions from the phone or online relevant to any of the shareholder proposals?

Mr. Chairman, there are no questions with respect to the shareholder proposals.

Thank you, Sean. If you have not already voted, you'll be prompted to vote for or against the shareholder proposals. The Board of Directors and management recommend voting against each of the 2 proposals. This concludes the items of business to be considered at today's meeting. We'll now proceed with voting on today's business items as follows: one, the election of 11 directors to sit on the Board of Directors of the company; two, the appointment of the auditors of the company; three, the nonbinding advisory resolution on the company's approach to executive compensation; four, the nonbinding advisory resolution on the company's climate action plan; number five, so the shareholders' proposal #1; and number six, the shareholder proposal #2. I now direct the vote to be opened. If you have not already voted, please click on the red Vote Here button and the 6 resolutions will appear on your screening. Register your votes and you must click on the Submit button at the bottom of your screen in order for your vote to be counted. We'll wait a few moments for the electronic voting to be completed. We'll provide shareholders approximately 1 minute to complete the electronic voting. Once voting is completed, I would ask that the scrutineers compile the report regarding the results of voting on all business matters. [Voting]

Thank you. Voting is now closed. We now have received the report of the scrutineers. According to the proxies received and the results of electronic voting, each director nominee received more than the majority of the shares voted at this meeting in favor of his or her election or, on average, in excess of 98% of such shares voted. I, therefore, declare that the 11 nominees have been duly elected as directors of the company to hold office until the next annual meeting of shareholders or until their successors are duly elected or appointed. I declare that the appointment of KPMG LLP as auditors of the company has been approved by 94.7% of the holders of common shares represented at this meeting. I declare the nonbinding advisory say-on-pay resolution on the company's approach to executive compensation has been approved by 97.7% of the holders of common shares represented at this meeting. I declare that the nonbinding advisory resolution on the company's climate action plan has been approved by 92% of the holders of common shares represented at this meeting. Finally, I declare that each of the 2 shareholders proposals were defeated by at least 98% of the holders of common shares represented at the meeting. I wish though to thank Ms. Pamela Fraser for having presented her proposals and again, our most sincere condolences on the passing of your son, Dylan. I would now like to present the members of your Board of Directors and congratulate them on their election to the Board. They are a talented group from all over North America who make every effort to bring value to CN shareholders. They are all present today at this meeting safely from their homes or offices: Shauneen Bruder, Julie Godin, Denise Gray Justin Howell, the Honorable Kevin Lynch, Margaret McKenzie, James O'Connor, Robert Phillips, Jean-Jacques Ruest, Laura Stein and I am Robert Pace, and I'm Chairman of the CN Board of Directors. Thank you to our shareholders for your continued confidence. As we've now completed all the business before this meeting, I'll entertain a motion to conclude the formal part of the meeting. Cristina, would you kindly introduce a motion to that effect?

Mr. Chairman, my name is Cristina Circelli, and I am a shareholder of the company, and I move that the formal part of this meeting be concluded.

Thank you, Cristina. Alain Dussault, will you second the motion?

Mr. Chairman, my name is Alain Dussault, and I'm a shareholder of the company, and I second the motion.

Thank you, Alain. I hereby declare the formal portion of the meeting closed. We'll now move into the next agenda item, our President and CEO's presentation. JJ will now address the meeting.

Thank you, Robert, and good morning to all of you. It's a pleasure to have this opportunity to speak to all of you today. Let me start by thanking all of the essential workers, the courageous people who are working tirelessly on the front line, providing medical care, educating our children and ensuring essential goods are available on the store shelf. I also express my deep respect to our essential CN railroaders we have continued to move the economy to make sure goods are delivered to those who need them for their everyday life. I am incredibly proud of the performance and dedication of our people who pulled this through, all of this, as one team. At last year's Annual General -- AGM, you may recall that we said that the exceptional teamwork and dedication of our CN railroaders will help us stay the course and fulfill the needs of the North American economy during the pandemic and during the demand recovery. In fact, we said that CN would be a catalyst to the recovery. Before I review the CN 2020 performance in detail, let's all watch a short video highlighting our accomplishment last year. [Presentation]

Very good. Thank you. At the outbreak of the pandemic, demand for CN services dropped sharply, with the second quarter registering the most pronounced decline. Most commodity groups were negatively impacted to varying degree, except for grain and grocery products. Overall, year-over-year revenue were down 7% to $13.8 billion. But the CN railroaders adapted quickly to keep our customers' stock and with the needed goods they needed for their critical supplies. We triggered our pandemic response early, putting in place a dedicated COVID-19 team, deploying our operational health department and providing employees with health and wellness resource like telemedicine. CN fully aligned its operation with guidance from the WHO, the CDC, Health Canada, as well as provincial and state authorities. With the extraordinary effort of our dedicated team of essential railroaders as well as from our supply chain partners and customers, CN tackled the challenge of the global pandemic head on. 2020 was a landmark year for delivering Canadian grain to market. CN set records for Canadian grain movement for 10 consecutive months beginning in March. In October, CN set an all-time record for Canadian grain moving to the coast of 3.25 million ton of grain. Overall, CN closed 2020 with over 33 million metric ton of Canadian grain shipped in hoppers and containers, which is 15% more than the previous company record. CN also set a record in December 2020 of 53,000 barrels of export propane at the AltaGas Ridley Island Terminal in Prince Rupert, BC. Over the 25 years since our privatization, CN vision has been to be the safest, most carbon-efficient, operationally effective and customer-centric railroad of North America. CN is building a sustainable future. At CN, we are governed by a sample maxim, how we deliver is just as important as to what we deliver. We call this delivering responsibly. Let's start our discussion on sustainability where every CN workday starts, with safety. This is an area where we can and must do better. Our Chair reminded us today of the deep loss of our passing 4 colleagues last year in the last 12 months. Through this tragic accident, we are reminded how unforgiving the movement of heavy equipment can be. This is why we make safety a core value of our corporate culture. We are committed to reduce exposure to risk by training and coaching our people in life-critical rule, which identify the day-to-day activities for each job function that must be followed to avoid serious harm or loss of life and fostering an environment that encourage employees to speak up and look out for one another. CN'S FRA personal injuries and train accident ratios improved by 15% and 18%, respectively, compared to 2019. We are fully committed to further improvement and most importantly, we are focused on bringing serious injuries and fatalities to 0. Regarding environment, CN recognize that our climate is changing and that business must be part of the solution. Our goal is to conduct our operation with minimal environmental impact and play an active role in the transition to a low-carbon economy for ourselves as well as for our customers and our supply chain partners. In 2020, CN became an official supporter of the Task Force On Climate-related Financial Disclosures. And CN was the first North American railroad to release a standalone TCFD report. Also, CN was again listed in the Dow Jones Sustainable World Index for the ninth year in a row. We were 1 of the only 3 Canadian companies listed on the CDP Climate A List. And in January 2021, we ranked #10 on the Corporate Knights Global 100 Index of the world's most sustainable companies. Today, you voted to approve CN climate action plan. This initiative complements CN long-standing and robust climate change disclosure and our progress toward a science-based target to reduce our greenhouse gas emission intensity. Regarding people, a diverse and inclusive workforce and culture enable us to better respond to the need of our customers and the stakeholders we serve. Diversity and inclusion gives us access to a large talent pool and prove the effectiveness of our decision-making through a wider range of perspective and innovation. We are focused on attracting the best diverse talent, developing their skill, providing the sort of inclusive workplace that will ensure they fully integrate and can be their full authentic self. We are committed to a culture where our employee diverse -- where employee difference are valued, and we're taking concrete action to support that commitment, including facilitating employee resource group where employee with similar background and/or interest can gather and share idea and experience. In 2020, we also appointed a Director of Diversity, Equality and Inclusion. And in 2021, as mentioned by our Chair, we announced the creation of an Indigenous Advisory Council to provide CN with advice on any issue they deem relevant to CN, including reinforcement of diversity and inclusion in our workplace. Now let's look toward the future. We are raising the Precision Scheduled Railroading that CN pioneered 20 years ago to the next level, which we're now calling Digital Scheduled Railroading or DSR by adding advanced technology and automation into every aspect of our operation. The deployment of pioneering technologies is transforming our railroad and bringing significant benefit that will shape the future and make CN the premier railway for the 21st century. DSR is paying dividend for safety, allowing us to now inspect up to 20x more track than ever before and detect railcar defect not visible to the human eye. The result, resulting reportable rail accident for the first quarter of this year came down by 1/3. DSR is also allowing customers to connect seamlessly with CN or track and trace shipment information, including ETA and GPS location, a rail industry first. On April 20, CN's superior proposal for Kansas City Southern is entirely aligned with our strategy and with the strength of CN. We are confident that together, CN and KCS will create the premier railway of the 21st centuries. The result of the CN-KCS combination will be a safer, faster, cleaner and stronger railway that will offer greater connectivities, greater choice and efficiencies for customers in a more sustainable environment with more opportunities for employee and more robust investment in local community and significant safety improvement. It's pro-competitive, it's growth oriented, it's a solid combination. We expect the combination to expand the total addressable market by up to $8 billion across the Canadian transborder, the U.S. domestic and the rapidly growing Mexico-U.S. market. Driven by extensive experience in successfully integrating acquisition and our strong track record of realizing synergies, we are confident that the combination of CN and KCS will deliver significant value to all CN and KCS stakeholders. Our proposal offer a clear path to completion and is structured in a way that gives KCS shareholders both greater immediate value and the opportunity to participate in the future upside of the combined company. This combination is in the best interest of KCS shareholders and of the public. It is the right combination to bring the renewed USMCA to its full potential. In conclusion, I am -- we are very optimistic about CN future, about our ability to embrace change, to come out stronger, our network reach, our customer centricity, our focus on sustainability, the exciting growth opportunity that we have ahead of us and the superior proposal to acquire KCS. Our entire CN One Team is determined not only to succeed, to innovate, to connect, but also to lead the company to success for many more years to come. Thank you.

Thank you, JJ. We'll now proceed with the question-and-answer session. During today session, we will answer written questions received online as well as live questions over the phone. [Operator Instructions] The line operator, Carmen, will open the line. Time permitting and subject to our rules of conduct, we will answer all written questions received online as well as questions received over the phone. For each written question we answer, the Corporate Secretary, Sean Finn, will summarize the question, read the name of the person who asked the question and invite someone from CN to answer. We begin by answering questions submitted in writing from the webcast. Sean, would you please read the first question from our shareholders on the webcast?

[Interpreted] Thank you, Mr. Chairman. Before going further, I just remind you that it is possible to ask a question in writing by clicking on the question-and-answer icon or by dialing the appropriate number in the phone line. The question is for JJ, Jean-Jacques Ruest. Why is your combination with KCS more pro-competitive than CP?

Well, thank you for the question. It's a very timely question. Our proposal will definitely enhance competition, which is a very key aspect. It's a growth story. Many customers actually are looking for better choice in transportation, and no customers will lose any transportation choices. There's nothing new in the CP-KCS single-point connection at Kansas City. CP growth will rely on diversion from other existing route, not creating new route. At CN, we're focused on putting together a better bid, a better railroad that gives customer more choice and be a better partner to the North American economy.

Mr. Chairman, the next question is for Jean-Jacques Ruest. How is COVID-19 affecting your business?

Well, thank you for the question. The impact is really significant on 2 fronts. One is, first and foremost, our people. The 19,000 to 24,000 people who come to -- physically come to work every day. And we had to put in place very significant measures so that we can protect their health and safety. I'll give you some example. Since March of last year, our employees have to practice physical distancing. We have to restrict travel. We had to provide screening of temperature and symptom at a number of place locations. We have to provide PPE, mask equipment and other things to make sure that they're not exposed to COVID. We had to, in many cases, also provide some much significant cleaning requirement in locomotive cab, in pickup truck, in the bunk house where employees stay overnight, waiting for the next train. And in some cases, if we have areas which were contaminated, we had to evacuate, disinfect and make sure that every employee who might have come in contact was then contacted and if infected, was asked to self-isolate. So job one in the case of COVID was to really make sure the well-being and safety of our own employee. On the business side, I think the impact was really obvious based on my comment earlier, where during the second quarter of last year, there was business that dropped really quickly. But then it came back. And as an employee came back to work, we really have been very busy since late summer of last year to do -- to really move what people need. And the impact on the business is that we're not moving as much as energy product as we did in the past, like, for example, crude and frac sand, but we're moving a whole lot more of consumable product, mostly product that moves in container. So people side, we had to make sure that people could work safely and we're not exposed to COVID-19. And on the business side, a sharp drop in volume, solid recovery but a recovery with a different book of business, which is more focused to consumables and the consumer economy.

Thank you, JJ. The next question is for JJ. We all know the importance of an efficient supply chain for our partners in the grain industry. Could you tell me how is the movement of grain going at CN?

Thanks for the question. And as I mentioned in my earlier comment, grain has been a very solid business in the last year. We have set records at 10 months in a row, and we're looking forward to the next crop. Agriculture science is getting just better and better. And the amount of grain and the yield in the Canadian prairies and the U.S. Midwest is just growing every year. So with that in mind, the Board has also allowed us to make some future other capital investment to support the grain farmers and the export of grain. This year, the Board just approved again the capital program to add 3,500 new rail hopper cars that will be deployed over the next 2 years. This year also, the Board has allowed us to buy more locomotive that will come in service later this year or beginning of next year to really participate in all aspects of the economic recovery but including grain. So as we are focused on the combination with KCS and really looking forward to create new volume, new opportunity, new option for the North-South corridor with USMCA, we remain very focused on the Canadian grain industry and equally investing in our Western corridor, buying locomotive, buying railcars so that we can participate with the grain farmers and the great future of agriculture in Canada as well as the U.S. Midwest.

Thank you, JJ. The next question is for Jean-Jacques. Again, with respect to your deal with KCS, what are the next steps? And will CN shareholders be called upon to vote?

The CN shareholders will not be called upon to vote, but the shareholders of KCS and the shareholders of CP will be called upon to vote. So where we're at right now is we've started -- we will be starting to do diligence with KCS following their decision to allow CN to go down to that step and -- which they may lead to a point where the KCS Board will decide which of the 2 offer in the end it wants to follow through. We also are in the process of engaging with the STB to secure a voting trust, so if we're successful with KCS, then we can actually buy the company and put in a voting trust. These are quite technical in nature. So maybe I would ask Sean to maybe add some color here.

Thank you, JJ. As JJ said, we don't require a shareholder vote, but we are engaging very actively with our shareholder base, as you can imagine, and have their support when we proceed in this transaction. So we're not having a vote per se, but we're engaged very actively with them. And on the next steps, as JJ said, we have started due diligence, the review of the KCS information available in a data room. We will then settle a merger agreement in the coming weeks. So within the next couple of weeks, we'll have finished the due diligence and settle the merger agreement. We have already delivered a merger agreement to the KCS management team to review, and we're optimistic that we get to be in a position to sign that in the coming weeks. We'll then proceed with a shareholder vote, the KCS shareholder vote in June, and then close the voting trust late in the fall of 2021 and have an approval by the STB on the control application or the control of KCS by the second half of 2022. The next question, JJ, is when will the STB approve your voting trust.

This is a process that has different time line. I think this is one that Sean, you might be best to work through the different option but...

Sure, JJ. We filed yesterday an application to approve the voting trust. We actually have asked the STB to approve it on the same basis as the CP voting trust, applying the same substantive standards, the same time lines and have a decision issued at the same time as the CP voting trust. We've asked the STB to do so on the same process, which should be fair, transparent and even handed. And we've asked the STB to do so no later than May 31 to allow both the voting trust to be approved by the STB prior to a vote by the KCS shareholders. And all we're really asking is the STB apply the same level playing field to both applications. So we would expect to have a decision by the STB and the voting trust by the end of May of this year. The next question, JJ -- or would be for Ghislain, excuse me, is CP -- regarding prospective KCS merger said, the reality is that it only matters if it's attainable. Unrealized value is still equal to 0. If you can't do the deal, if it is not doable, you never get there. You also said CP is not increasing its bid because it doesn't want to put its balance sheet at risk. [ Shi-An Shingle ] would like to know, is the deal doable? Is the balance sheet placed at risk with our substantial larger bid of $33 billion versus $25 billion? Ghislain?

Yes, thank you for the question. The transaction is definitely doable. And at CN, we have a very solid balance sheet and the best investment-grade credit rating of the rail industry. Our balance sheet is not at risk with our superior offer for KCS. And we have ongoing discussions with rating agencies and expect to remain investment-grade through this process. Thanks for the question.

Thank you. Mr. Chairman, that is all the questions on the online application. I will now turn to the phone lines. [Interpreted] So first, in French, I would ask shareholders to limit themselves to one question, and I would now ask [ Pak Kang ] to provide the first question in French.

[Foreign Language]

[Interpreted] Thank you for your question. No, that is not the case. We have transported all the grain that was available. We have also transported all the containers that were available. Last year, CN did an excellent job meeting all requests from all segments. We had only a few weeks during February when, as you remember, it was extremely cold. The polar -- the so-called polar vortex, where for 2 weeks, we had operational challenges, like all the other transportation companies. But our success last year in transporting grain is the result of the fact that we've focused on it. We invested time, money, we have the staff, we have the capacity, and we'll continue to offer this in 2021, 2022. As I said earlier, by reminding to people the investments that we make to support Canadian farmers. Thank you for your question. So there are no other questions in French. Carmen, would you please open maybe those phone lines, introduce the first shareholder or proxy holder to ask a question?

Marcella Pietrantonio.

Good morning. Mr. Chairman, my name is Marcella Pietrantonio. I am a shareholder of the company. I have a question for management. What actions does CN take in order to reduce greenhouse gas emissions? Thank you.

Very good question. We actually have a long list of action that is -- that to really reduce emission, you have to apply many, many lever. So as we mentioned earlier, of course, we're buying new equipment. The more modern locomotive are more fuel efficient. But we're also applying operating practice just like an automobile, when you -- the way you break does matter, the way you accelerate does matter, the way you handle your train as you go up and down a curve or up and down a hill does matter. We also use software, which helps the engineers and conductor to apply the -- what we call the throttle to manage basically the speed that they're at, as another example. We are now testing and using to some cases some new fuel biodiesel, and we would like to use more of them as they become more available. We also have a vision over a long time to look at propulsion engine, which instead of being diesel-driven could becoming electric, from a battery and/or hydrogen. We are working with people who make locomotive, Wabtec and Progress Rail, to start to do some tests as soon as we can get some manufactured and tested, tested either in U.S. cities or Canadian cities. So it's a long series of different things that add up to a big thing. And we are confident that we will commit, we will deliver against our commitment for 2030. And we are fairly secure that the objective of 0 carbon emission by 2050 is doable, especially if we get the help of government, if we get the help of people who are making equipment and if we get the help of people who are being innovative. And just think what's possible in the world of automotive, where electric cars are on their way. You could see them on the horizon over the next decade. Eventually, similar technologies will be available also in the rail sector.

There are no further questions on the phone lines, as mentioned, any relevant questions that could not be answered during the Q&A session will be posted online. Mr. Chair, that is the end of the question period.

Thank you, Sean. In closing, I want to thank everyone who made this day possible. And everybody that participated on the call, remain safe. Enjoy good health. Thanks all. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]