U.S. railroad Union Pacific on Sunday said it expects to name a successor to assume the position of chief executive officer replacing Lance Fritz in 2023.
"Union Pacific has been my home for 22 years and I am confident that now is the right time for Union Pacific's next leader to take the helm. I look forward to working with the Board as we identify our next CEO to lead the Company into the future," Fritz said in a statement.
The announcement comes after U.S. hedge fund Soroban Capital Partners in a letter on Sunday called for Fritz to be replaced.
"Unlike typical shareholder engagements which come with numerous demands, Soroban has only one ask — install new leadership who can get the trains to operate safely and on time," the letter said.
Soroban urged Union Pacific to consider former Chief Operating Officer Jim Vena as a possible replacement for Fritz saying "no internal candidates are remotely as qualified as Vena, and he is the leading external candidate available."
The hedge fund, which said it owns about a $1.6 billion stake in the company, added it sees a change in leadership could generate about $18 of earnings per share in 2025.
Union Pacific in a statement said 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.
As part of the board's succession planning process, it has considered shareholder input and will continue to do so, adding it has been actively engaging with Soroban Capital since 2017.
Union Pacific reported lower-than-expected fourth-quarter profit, hurt by delayed shipments amid labor shortages and a winter storm that crippled freight operations across the United States.
The development comes after activist investor Nelson Peltz ended his quest for a board seat at Walt Disney this month, after Chief Executive Bob Iger laid out plans to fix the home of Mickey Mouse, cheering investors.
Salesforce and activist investor Elliott Management are also in discussions to reach an agreement that may end a possible board challenge.