(Adds details on recommendation, background)
By Michael Flaherty
NEW YORK, May 22 (Reuters) - Proxy adviser Institutional Shareholder Services (ISS) has recommended that owners of CSX Corp CSX.O stock vote in favor of an $84 million payment related to the appointment of new Chief Executive Officer Hunter Harrison.
The recommendation is a boon for activist hedge fund Mantle Ridge, which is trying to convince shareholders to agree to the payment.
Mantle Ridge fronted the $84 million payment to extract Harrison early from his previous employer, fellow rail company Canadian Pacific Railway CP.TO , where as CEO he led a turnaround. Harrison has said he will resign from CSX if shareholders fail to approve the reimbursement. His total pay package, including the reimbursement, is estimated by the company to be around $300 million if he hits all of his targets.
"The company's failure to make the reimbursement will likely lead to Harrison's exit and the loss of the market value that accompanied his arrival," ISS said in its recommendation.
Harrison is a respected rail operator known for engineering the turnarounds of several struggling rail companies. News in January of Harrison's plans to leave Canadian Pacific early for CSX sent the company's stock soaring.
Shares of the Jacksonville, Florida-based company have held up ever since, closing at $51.46 on Monday, up 35 percent since January.
ISS offered plenty of caution with its recommendation, however, saying the decision on whether to reimburse Mantle Ridge ultimately rested with the board.
Harrison, 72, took a medical leave in 2015 to recover from a surgery after a bout with pneumonia. Concerns of how strong he will remain throughout his four-year contract with CSX have remained at the forefront, however.
"Shareholders should also consider the risks, including lingering questions about Harrison's health, and the lack of recoupment provisions in the event of his unexpected departure from service," ISS said.
ISS also recommended that shareholders vote against the election of Mantle Ridge's founder, Paul Hilal, to the company's board.