Sean Finn: Executive VP Corporate Services and Chief Legal Officer, CN

November 26, 2020

The Empire Club of Canada Presents

Sean Finn: Executive VP Corporate Services and Chief Legal Officer, CN

Chairman: Antoinette Tummillo, President, Board of Directors, Empire Club of Canada

Distinguished Guest Speakers
Sean Finn, Executive Vice President & Chief Legal Officer, CN Rail
Izzie Abrams, Vice-President, Government & External Affairs, Waste Connections of Canada

Introduction
It is a great honour for me to be here at the Empire Club of Canada today, which is arguably the most famous and historically relevant speaker’s podium to have ever existed in Canada. It has offered its podium to such international luminaries as Winston Churchill, Ronald Reagan, Audrey Hepburn, the Dalai Lama, Indira Gandhi, and closer to home, from Pierre Trudeau to Justin Trudeau; literally generations of our great nation's leaders, alongside with those of the world's top international diplomats, heads of state, and business and thought leaders.

It is a real honour and distinct privilege to be invited to speak to the Empire Club of Canada, which has been welcoming international diplomats, leaders in business, and in science, and in politics. When they stand at that podium, they speak not only to the entire country, but they can speak to the entire world.

Welcome Address by Antoinette Tummillo, President, Board of Directors, Empire Club of Canada
Good afternoon, fellow directors, past presidents, members, and guests. Welcome to the 117th season of the Empire Club of Canada. My name is Antoinette Tummillo. I'm the President of the Empire Club of Canada, and your host for today's virtual event, featuring another very special guest that I've had the privilege of working with, Sean Finn, Executive Vice-President, Corporate Services, and Chief Legal Officer, working for a company that is still very dear and close to my heart after having spent 18 years working there, and that's CN. Sean, I'm going to get teary; I loved CN. I even have all of my CN paraphernalia. Look at this; they didn't make me hand in all my pins—look, look!

Sean Finn, Executive Vice President & Chief Legal Officer, CN Rail
Good!

Antoinette Tummillo
Sean will speak to how CN has faced many challenges—and those challenges were not just about the pandemic in 2020.

So, before we get started, I want to take a moment to recognize our sponsors, who generously support the Empire Club, and make these events possible. Our Lead Event Sponsor today is Waste Connections of Canada, who's also a Season Sponsor. Our Supporting Sponsor is Tories, and our other Season Sponsor is the Canadian Bankers Association. I also want to thank our Event Partner, VVC, and livemeeting.ca, for webcasting today's event.

Now, I've got a few logistical items to share. First, if you're finding your internet feed is slow, please see below and click the "Switch Streams" button, and don't hesitate to press the "Request for Help" button available to you if you're experiencing technical difficulties. Our team will be more than happy to assist you. It is now my pleasure to call this virtual meeting to order.

CN holds a unique place in Canadian history. The unforgettable people, iconic landscapes, and exciting innovations have all marked our great railroad through time. But since its creation a hundred years ago, CN has faced many challenging situations, especially this past year, with an unfortunate work disruption, illegal blockades on its railroad, and the COVID-19 pandemic. CN is essential to the economy, to its customers, and to the communities it serves, by safely transporting more than 300 million tons of natural resources, manufactured products, and finished goods throughout North America every year. CN had to react quickly to maintain its operations. Sean Finn will discuss how CN navigated through a succession of exceptional circumstances, including going from being a government-owned company to a public company 25 years ago—which, I shared that journey with Sean for a few years and was at CN until about '99. So that was a lot of fun. And that was just celebrated last week, I believe. He'll share what they learned from it, and how CN adapted the way it conducts business and plans on doing so for another 100 years.

So let me introduce Sean Finn. Sean was appointed Executive Vice-President, Corporate Services, and Chief Legal Officer in December 2008. He first joined CN in January '94, and led the company's corporate tax function, while being involved extensively in CN's privatization in November '95. He quickly rose through the ranks after that. He took over treasury and the tax group, then became Chief Legal Officer and Corporate Secretary, then he took over the public affairs team as well. Prior to joining CN, Sean was the Managing Tax Partner with the Montréal law firm Lavery de Billy. He graduated from the faculty of law of the universities—I should say, Université de Montréal, and completed a master's degree in tax law at the University of Toronto. He was admitted to the Québec Bar in 1983 and was named Tax Lawyer of the Year in 2000. I will have you all note that Sean Finn is perfectly bilingual—and I'm talking about his French—with a name like Sean Finn. Hopefully, he'll share some of that with us on this call today.

Sean is a former chairman of the Canadian and US Chambers of Commerce, and he's currently the only Canadian member of the US Chamber of Commerce. In 2018, Sean was the inaugural recipient of the Canadian Chamber of Commerce's Emeritus Leader Circle Award for his commitment to advancing the CCC's mission and vision. And in his spare time from 2005 to 2009, Sean was the mayor of the city of Saint Lambert, so quite a busy guy. And there's lots of stuff that I haven't shared with you that maybe Sean will about his background, too. Sean will be taking a few minutes to tell us about CN's journey over the last year. I will then have the opportunity of asking Sean a few questions—and if I know Sean, he may have a few of me. But Sean, note, you know, I'm the one asking the questions, not you. Okay?

So, I do want to remind everyone on this call that this is an interactive call, so take advantage of the question box to the right of your screen. Let us know what's on your mind, and if you have any questions for Sean, we've saved some time at the end to do that. So, Sean Finn, a very warm welcome to the Empire Club. The stage is now yours.

Sean Finn
Antoinette. Thank you very much, merci beaucoup. It's a pleasure to be here. It's an honour to, to spend some time not on the podium, but at least in front of a screen on the Empire Club with your board members on your and people attending today, including Gord McIvor, who's a special adviser to the board and past president of the Empire Club, and of course, Antoinette, great to see you again, spend some time with you. I appreciate it very much. And, and, you know, as, as—like at the Canadian Chamber, you know, the Empire Club could put on these events because they have outstanding sponsors. I want to recognize that the Lead Event Sponsor today is Waste Connections of Canada. Izzie Abrams, who I know well, is he great, great [indiscernible], but also, thank you very much for your sponsorship, and also the other sponsors who accepted to support today's event, but also, the Empire Club. If it can do what it does for over 117 years, it's because people are sponsored in the past. So, it's important that we, we support these institutions. They play a key role in us allowing to network each other, especially today, virtually. But also, in creating public policy, and allowing the private sector, governments, and academics come together at these events, and exchange ideas, which makes, I think, Canada stronger.

You know, obviously, Antoinette was very gracious. She didn't spend many, many years at CN. She was at CN from 1981 until 1999. So that's 18 years, of which—and this is surprising, when you think about it, because when I joined in '94, that is a year-and-a-half or almost two years before our privatization, which was on November 17th, 1998. And Antoinette spent, you know, 17 years in a federal, you know, 14 years in the Federal Crown Corporation from '81 to '95, and then she spent four years in the private sector at a private company, then being CN. And, you know, we all think about people who work in Crown Corporation. Sometimes we think that, you know, they can be bureaucratic, and, you know, a bit old school. But Antoinette joined CN right, right out of high school, I think. But more importantly, Antoinette was one of the people at CN who was a real internal entrepreneur, was not a standard Crown Corporation executive.

You know, many of my colleagues—and in those days, our CEO, Paul Tellier, you know. Antoinette was a very strong executive in a very male-dominated industry, back in 1995. And we were sorry to see her leave in '99, but she did leave her mark. You know, we left the Crown Corporation with a big portfolio of real estate that Antoinette had put together. And she was also key, and as we, were prioritized, we had to hand over almost 325,000 acres of real estate to the government of Canada. We kept some back to create some cash flow in the years that followed the IPO. But Antoinette was the person with, with the team that created Canada Lands Corporation that inherited the CN Tower, as you do well in Toronto, as well as a lot of the real estate. And that real estate, you know, has been in the federal government's portfolio, has been used to reinvest in other, other endeavours or create the parks or, or very special places. And that was put together by Antoinette and her team of people. So, it does exist. You know, we must realize that both in the federal bureaucracy or federal government, but also in Crown Corporation, there are some very strong executives that can play a key role in making those companies stronger, but also can transition very, very easily—and Antoinette is one of them—from the government-owned Crown Corporation to the private sector. So, I want to recognize Antoinette's contribution to CN's success.

And I say so jokingly—we held back some real estate. Because, you know, right after the IPO, we had not had positive cash flow at CN for 75 years, you know. We were all pretty proud of the IPO. It was the biggest IPO in Canadian history at the time, of 2.25 billion Canadian. But we forget sometimes that there were, you know, there was 75 years of a Federal Crown Corporation, in which all of us taxpayers in Canada had invested 90 billion—nine-zero billion—so it's pretty easy to take an asset of that quality, do an IPO, and be successful. The challenge was to create free cash flow out of operating a railway. So, just to make sure we had some free cash flow—people won't acknowledge this—we kept back some real estate. And we, were able to sell some, you know, towards the end of the year, to make sure — I remember at the first year of the IPO, in 1996, Michael Sabia said, "We'll have at least a hundred dollars of free cash flow." Got a bit more than that. But, but it was a challenge to do so.

To give you an idea, today, you know, we generate on a quarterly basis substantial amounts of free cash flow, and it's what makes us a strong company, able to reinvest. So, we have been free cash flow positive since 1996. And that was probably the, the hallmark of our of our privatization, was making sure that we could operate a railway—which is highly capital-intensive—but still generate enough revenue and enough free cash flow to make sure every year we can reinvest the capex required to keep the railway safe.

So, I think, you know, Antoinette, you mentioned the, the fact that it was 25 years ago last week. It's been 100 years, the company celebrated, on June 19th, 1999, our 100th anniversary of coming together of 12 bankrupt railways. You probably remember this, but in 1919, the federal government essentially nationalized 12 bankrupt railways—we're not celebrating 100 years of bankruptcy; we're celebrating 100 years of success—but it was our anniversary and allowed us at that moment in time to put together a container village right across Canada. We went from, essentially, Winnipeg to Vancouver on a multi-city stop. We were planning on coming east in the spring of 2020. We'd have done Ottawa, Toronto, Moncton, and Montréal. But because of COVID, we couldn't do it. But we will come back; we've determined that we will be back, hopefully in 2021, with that container village; calling it A Moving Celebration, talking about 100 years of history. And we have a chance; those of you we published a book for that anniversary of CN, which is a tablecloth—a tabletop copy, coffee table book, excuse me—that talks about building 100 years of legacy that's worthwhile to get a hand on, look at, because it gives you a good idea of where we came from.

So, long story short, it's been a hundred years of success. The last 25 have been very challenging. But, you know, if there's one takeaway I would say to you that, you know—and a lot of people didn't believe in CN's privatization in, in November of 1995. We had been successful because we inherited a very good asset. A lot of people who are on the call today were there before us, that left us behind a legacy of a railway that was customer-focused, willing to understand that nobody had [indiscernible] stock, nobody had to ship goods on CN; there's the odd shipper that has fewer choices, but most shippers have choices. And part of our DNA—you'll appreciate this, Antoinette—is that, you know, we take nothing for granted. Even today, 25 years after, 26,000 railroaders come to work every day. And he or she do so because he realized that our service is essential to our customers. It's essential to communities where we operate. But also, we have to earn our right to serve our customers every day. There is strong competition, both from the trucking industry but also from other railways both in Canada and the US.

So, you know, one thing we don't do at CN: we take nothing for granted. And everything is done thinking about how can we get better at it. But more importantly, how do we recognize, you know, it's great to say you're essential, it's great to realize that the last year have proven that between the strike, the blockades, and now the pandemic. But you can't take it for granted. And secondly, it comes with a responsibility to make sure that you're there to serve the essential services are required by our customers and communities. So, that's essentially it, Antoinette, those are opening remarks. I'm looking forward to our back-and-forth discussion, and be more than happy to take any questions as we go along, also.

Antoinette Tummillo
Thank you, Sean. And I'm glad I was one of those executives that had a lot of confidence at the IPO time. I've got to tell you, we didn't have a lot of money, my husband and I, and we decided we're going to do it. And I'm very happy today with all the shares that I hold, and I'm proud to say I haven't sold one share. I think I shared that with you. And I'm glad to see that Bill Gates is a big, big investor. So, if Bill Gates invests in you guys, you know, the promise is still there to keep doing great things. So, I have a lot of confidence in you guys.

But, you know, you talked about your history, a hundred years. And, and I know when I was there, there were a lot of people that were at the railway that were very entrepreneurial. I mean, I, you know, we did some amazing things in the years that I was there. And the company really did like to go outside the box. And some did it better than others, you know—and there are always some people who are the laggards—but I'm just curious, you know, 100 years, lots of challenges that you had to face. You look at the IPO, lots of challenges going from a, you know, Crown Corporation to a commercial entity. And that transition, and that learning, just curious, what are the key qualities that help CN keep going? You know, like you had these three situations to deal with. Like, what are the key qualities that the company has learned, and gained and, you know, keeps forging ahead?

Sean Finn
Yeah, I think, Antoinette, I think, you know, from Paul Tellier to today, [indiscernible], they would all tell you, and all of us who've worked with them, this is not a one-man show, but you need strong leadership at the top, and you need a vision. And I think that that's how we were very fortunate with Paul Tellier when he took over the Crown Corporation in 1993 and got it ready for the IPO, privatized it, and stayed until 2002. But during that 10-year period, you know, Paul got the company ready with Michael and Claude Mongeau, and a lot of people worked on it; Jack McBain and people like that who were railroaders. But it brought together a melting pot of, you know, external people coming in, like myself, people like you, Antoinette, who spent years here—but who realized that it was not a sustainable model. You know, one way you measure a railway's success is how many cents must it spend to earn a dollar of revenue? When we're prioritized, we have to spend a dollar-and-one to earn a dollar revenue; back then, we spent 59 cents to earn a dollar of revenue.

So, getting the costs under control is one thing. But also, you know, Paul was a change agent, but he was able to bring together very strong railroading ethic and discipline, with an entrepreneurial spirit of, you know, going public, you know—the, having quarterly meetings does focus the mind. But it wasn't just saying it. He made us realize that that we had to perform if we wanted to keep us people investing, and to attract someone like Bill Gates' Foundation, you know, we had to make sure that they realized that we knew what we were doing, but more importantly, we had a long-term vision. And so. To answer your question, I think Paul's leadership. But also, capable of identifying and setting out a vision for the company from, you know, the IPO '95 to when he retired in 2002 to go work for Bombardier, Paul, you know, was, was systematically telling us the story, why are we doing this, what must we achieve?

And during that period, you know, we purchased Illinois Central Railway, which goes from—in those days, went from Chicago to New Orleans. And all of a sudden, you know, because of NAFTA, and Paul's understanding of the North American economy and network, we bought this railway in Chicago and became, truly, no longer just an east-west railway, but also a north-south railway. And all of a sudden, we were leveraging the trade flows into the US. But what came with Illinois Central was Hunter Harrison, one of the better railroaders I think in the industry at the time—and even today, God rest his soul—but he took us on a new journey. He took us from, you know, a, now an investor-driven company, into making sure that we were the best we could be from an operating perspective. Because ultimately, it was a time when some would say that, you know, Paul Tellier, you know, ran the company, and Hunter Harrison operated the railway; it was the same thing. They did so together.

But Hunter brought a discipline of how you operate the railway. There are good things and, you know, we had our challenges when it comes to some areas of serving customers. But you know, the second CEO brought a new vision, a more disciplined approach in how we operate the railway, controlling our costs, but also growing the top lines. A lot of people just think that Hunter's, you know, recipe was cutting costs. Hunter was very conscious that the best way to improve your operating ratio is to increase your revenue. So, my second comment is Hunter's leadership. And then Claude, you know, strategic mind. He had been with the company since the IPO; you know, he took over from Hunter in 2010, and for seven years, you know, kept the journey going with a new innovative approach, and probably a bit more focused on making sure we were a bit more customer-centric.

So, to answer your question, you know, those three CEOs brought a lot to the table. They had a very strong vision, a strong leadership. But they had a group of people who were willing to follow. And that's something about railroaders, you know. Give them a goal, give them a direction, and sort of get out of their way, because they're going to deliver. And, you know, that has its strengths when it comes to doing things, sometimes as weaknesses; we don't necessarily apply as much as we should. I mean, it might be a knee-jerk reaction, but that's your question: getting us out of the federal government's constraints, probably, with three strong leaders that could transform the organization as people were coming in, and some people were retiring after long years. But never forgetting that we got here because of the long tradition of, you know, being a very strong railway—even when we were a Crown Corporation—with strong work ethics. But also, I come back to my comment, you know, you need strong leaders, but you need people also who are humble enough to realize that we can't take this for granted. It's not because we have a great logo that people buy our services; it's because we provide good service. And you can never lose that.

One last thing I think we've gotten a lot better when it comes also to, you know, how we engage with communities. We had years where we were not as friendly. But I think following the Lac-Mégantic accident in Québec, you know, where 47 Canadians lost their lives on July 6th, 2013, I think that upped our game. Where we became, all of a sudden, a lot more conscious of the importance of us to engage locally with communities, with farming, farmer associations in AG. So, I think today, even though we're publicly-traded, you know, we're a railway, the technology hasn't evolved. I think the people at CN have evolved, and think we realize that, you know, to be successful in the railway industry, you must be safe, you must serve your customers, you must have employees who are engaged. And you mustn't forget that our railway goes through 1400 communities, and, you know, you have to be a good neighbour. If not, you have no success.

Antoinette Tummillo
I think you've got a good map to share with us on your, on the network?

Sean Finn
Yeah, maybe that'd be a good time. Yeah, it's hard to give it to talk about the railroad without a map. So, maybe you can put up the map for a second.

Antoinette Tummillo
Yeah, I think that would be great, you know, as you were talking—while they're putting that up—as you were talking, you know, I could still hear Mr. Teller's speeches that we would have in the town halls. We'd always go in there, we'd be super pumped, because we were getting great results, the operating ratio was going down, and we were proud. But he'd always end his speech with, "but it's not enough, we got to do more, and here's why, and here's what we got to do." And we'd go out there and come out and say, okay, was he complimenting us, or is he telling us we're not doing enough? Do you remember those meetings?

Antoinette Tummillo
Yeah, I worked for Paul from, directly for Paul from 2000 to 2002, but with him when he arrived in the company. And obviously, Paul was a great leader, had a great vision. But you know, he made us—you know, that's what leaders often do, Antoinette, is they make people achieve things they thought they couldn't achieve.

Antoinette Tummillo
Yep.

Sean Finn
And Paul was a master at that. He still is today. And I think that if CN is successful, it's the journey that Paul set us on—but also that Hunter, and Claude, and then today JJ, are making sure that we continue down the road. But you know, the, our competition's got wise to us. They're as good as railroads as we are now. So, our game now will be to how do you raise your game to the next level? How will technology improve? Where we're going? So, I guess we have, the people can see the map?

Antoinette Tummillo
Yeah, so, as you address that map, you know, maybe you can share with us, you know, how you managed through those three crises? You know, it's demanding of any company. And you had, like—even just running a railway is difficult. Now, you had these three crises, boom, boom, boom, one after another. What motivated CN to persevere and find solutions and, you know, here's the map showing this broad area you're covering. So, over to you.

Sean Finn
Yeah, I think the map sort of tells the story, you know, the journey after the IPO. You can see, probably, they'll show you this map in 1995, you would, you would go to Chicago and nothing south. But you look at the map today and, you know, you take a step back, and it's always, you know, this is our footprint, this is what, this is our franchise, this is what our value is really driven by. And if you look at it for a second, you look at the fact that we serve Prince Rupert, Vancouver on the West Coast, Halifax on the East Coast, down the Mississippi to New Orleans. So, we're the only railway in North America that serves the three coasts. Obviously, as we're growing the business, the future growth of our railway is very much intermodal containers, as, you know. They come in through Halifax, and Rupert, and Prince George—or sorry, and Vancouver, they want to come either east or west into Toronto, into our Brampton remodel yard which we, which is very much at capacity.

And those of you who follow the media closely in Ontario, we're working very hard to build a, a logistics park to be an overflow yard to serve our customers in the GTHA in Milton. We've been working on it for seven years, we've done a full environmental assessment with a panel, and we're looking forward to get a decision, hopefully in the coming weeks, for the federal government allowing us to build the intermodal terminal, which will allow us to serve our customers. Because this traffic is coming in through these ports and must come inland to terminals, you know, you can't drop off the box from a plane. If you don't have the railway coming into Milton or into Brampton, the trains will stop in Chicago, Winnipeg, Cornwall, Montréal to get trucked in—and I think last time I checked, the 401's got enough trucks. So, we're pushing very hard.

But give you the example of, you know, that's an innovative way of us of doing things, making sure that we have the capacity, and we're looking forward to the approval on Milton. When it comes to the map itself, why I raise the map is you can look at, for us Canadians, the message is very simple: use Canada as the gateway to North America. So, you know, have your containers, your goods come in through Rupert, Vancouver, get on the railway in the case of Rupert, on CN, the case of Vancouver CN, or CP into Halifax, or Saint John on CN or CP, and then get on to a Canadian network, get through the border—which must remain fluid—and all of a sudden, you can get a box off a ship in Rupert onto a train and in Chicago faster than you can get the blocks off a ship in Long Beach, California, because of the congestion and the time constraints.

So, obviously, that is a competitive advantage for Canada, for the railways in Canada. And it relies on one thing: that that border remains very fluid. But we're also very, very pleased that, you know, every single container that goes through the Canada-US border goes through a [indiscernible] machine, or x-ray machine, which is not the case for trucks. So, the network is what is important to us. But this footprint, I often try and explain to people: you look at this map and don't take your box from, you know, City of Montréal; you want to get goods going from Québec City, to Montréal, to Memphis, to Jackson, and elsewhere in the Deep South US, but also get access to the Northeast markets. So, CN is well-positioned for that.

Now, it comes with this large footprint, you know, of 19,000 miles. We're an outside sport, you know, you need all 26 employees, 20 employees to do their job every day. There's probably one industry where I often tell my colleagues, you know, a CN employee, he or she who do their job very well, make a difference every day. Because if a local carman inspecting a train coming up a yard does his job well, and or her job well, picks up a defect on a train, avoids a derailment, that's a major contribution to our success for that given day. The same way, if that same employee does not do his job well, it can have a major impact on our success. So, our employees every day come to work. Safety is a core value, but also, they realize that we have a very important responsibility to move these goods safely. And there, every person who comes to work makes a difference at CN, and that's important, also. Which means when you have a strike, and you lose, you know, 3,000 people, [indiscernible] a locomotive for nine days, it impacts the railway.

And so, to answer your question about the last year, we had a strike that lasted nine days in the fall of 2019—ended a year ago today, after nine days of outage—you know, the railway came to, essentially, a halt. We were able to run about ten percent of our traffic. And, you know, luckily, when you have a strike—and I'll compare it to a, to a blockade—you can plan the shutdown a little bit in advance. So, you can park the trains in a way that the, the network can regain its fluidity after the strike. So, in the case of the strike, nine days of very little service; but we were able to stage our equipment, our trains, and our train crews, to recover relatively quickly.

So, the strike was nine days. But I tell you, by the middle of December, we were back at our normal run rate when it came to trains operating on our network and serving our customers. So, we caught up relatively quickly. And that's one thing about this network, Antoinette, and also us, the resilience of the railway. If you, you know, if you have a shutdown—or God forbid, an incident—that shuts down the railway for one or two days, the railroaders will focus on getting the railway reopened as quickly as possible. But also, getting back to a normal fluid service to our customers. So, that's part of our DNA. And, you know, I don't like to say this, but because we have incidents on the railway, we have an expertise on how to deal with them. Which means, when the railway gets shut down, we have our expertise on how to restart it, which we did last fall. So, that was one issue.

Now, a blockade is very different, because we had a 21-day blockade in Belleville, Ontario in February—so, in the middle of the winter. That you can't plan for. That you have trains backed up all the way to Halifax on one side, all the way to Winnipeg on the other. But we didn't just have one blockade; we had 19 blockades for the network. And it really impacted our service for those 19 days. Obviously, you could appreciate, very frustrating for our operating colleagues. But also, you know, we realized that that that the governments, and the, and the, the OPP had to do its job, do so safely, make sure that these blockades come to an end in a peaceful fashion. So, we were patient, our customers were very patient, obviously. But, you know, you have a 21-day blockade and you cut off the traffic from east to west, out of Eastern Canada right to Toronto—we could serve the West, we could serve the US. But, you know, the amount of products that come from the east is somewhat surprising—lumber, for example, aluminum comes from the east. And the other way around—coming, propane coming from Sarnia to, you know, to the people in Québec was cut off.

So, but again, you know, people are resilient. I can tell you, it's 21 days of coming in the office, painfully trying to find a solution to a problem that was not caused by us. But, you know, we realized the importance of it, we doubled down. And I think we all realize that we have to be a lot more proactive dealing with, you know, with some of the issues that were raised during that blockade. But also, you know, blockading the track is not a safe way to protest. We have been very adamant about the fact that, you know, the railway is not a playground, it's not safe to block track. And you can imagine, you know, there could be a victim on the ground. But we have, you know, two employees in a capital locomotive, they're running a 12,000-foot train at, you know, 40 miles-an-hour, it's gonna take you two miles to stop the train. So, if a blockade pops up in front of a train, those two people in the cab know they can't stop—and God forbid, we had no accidents, no fatalities. But, you know, my message to all Canadians was—last year and again this year is—you know, there are other ways to protest peacefully, I'm sure. But occupying a railway track unannounced is not a safe, a safe behaviour. Secondly, we can under no circumstances condone it in any way. And more importantly, it's up to us to make sure that Canadians realize that, you know, this network is essential to our customers and to the service.

Finally, we got the blockade lifted, I think, was on February 21st; two weeks after, the pandemic hits us. And, you know, the railway never stopped operating, you know, our 26,000 employees came to work every day. Some got to work from home, but the majority of our employees, you know, were in a cab of a locomotive, were maintaining track, and, you know, they came to work. And, you know, we thanked them enormously, because they had family at home, they had kids not in school, and they didn't miss a beat. We moved record amounts of grain, for example, from January all the way to October. So, I must say that we had a bit of a slowdown in carloads during the months of May, April and May; it's come back relatively strong. But, you know, we never took our eye off the ball.

And that is also part—to answer your question, I think it's the resilience of our railroaders, and also the quality our network allows us to recover from these incidents. But I must say, Antoinette, like, three in a year, it's a bit much. And a lot of our employees have worked very hard, they're looking forward to getting some downtime over Christmas. But, you know, these are committed employees and, and very proud employees. And if we're successful today, it's because all 26,000 employees come to work every day and do their jobs. And they're not the type of people looking to get credit. They appreciate being thanked, obviously. But they're very proud of their work. And that's something I think that we as a company, and we as executives, have to recognize, that that is a very valuable and precious asset, of having employees that have a very, very high level of being proud, but also of engagement. And it's something you can't take for granted. And therefore, you know, I thank them all for their hard work in the last 12 months. And we're looking forward to a 2021 which we hope will be a bit more run-of-the-mill, just run the railway, and hopefully have less, less crisis, and less distance to deal with on a daily basis.

Antoinette Tummillo
Wow, what a year. So overall how, how did all these challenges affect CN from a business standpoint? Did you experience a loss or gain in business? Are people feeling like, okay, the railway is the way to go? Or a lot of people shutting down, not operating? Like, how has it affected you?

Sean Finn
Yeah, I think the pandemic, because everybody was in this, I think, you know, our customers had a tough time. And, and, you know, we were there to serve them, so obviously, very engaged with them. I think it raised our awareness of how essential our services are; not just internally, but I must say, across Canada, and in, you know, in provincial capitals, but also in Ottawa, where I think that more and more Canadians now realize that this railway is essential to our customers and the communities where they operate in, one.

Secondly, I think that that, you know—we always say it's a sort of lip service—but communicating with our customers is often a challenge, and something we don't do as well as we could. But I think the last year has really raised our game, because we find that the more we talk to our customers, and even including communities where we operate on, you know, we kept them informed of the strike, because they count on us. But I think that that my takeaway—and I think a lot of my colleagues would say, you know, we're not perfect, we have good days and bad days at CN. But if we are in a position to communicate to our customers, to stakeholders, to our partners, you know, that, you know, what is going on—because you know, we're a big railway, and people don't see the whole network—and tell them how what we're going to do or not do will impact them, they become very, very supportive.

And I think that, you know, I must say, too, the level of recognition by the Canadian grain industry, the farmers in Western Canada—the blockade, the strike, and the pandemic, has just raised, like I said to you before, the awareness of how important the railways are to our economy in Canada and North America. But—and it's a big but—I tell my colleagues, what comes with that, you know, that recognition, a responsibility. That when our customers need us, when the grain industry needs us in Western Canada, we must be there. Which means, we must invest the capital, we must buy the cars, we must make sure we have enough locomotives, we must make sure we have the employees to serve the business. Otherwise, you know, you end up saying we're essential, but only when we want to be. Well, that doesn't work.

So, I think, I think to answer your question, Antoinette, what's driven us through this? Resilience. The fact that we have invested a lot, we've invested 10 billion dollars of capital in our railway in the last three years. That means that, to give you have an idea, every dollar of revenue we earn, between 20 to 25 cents, depending on the year, go back into the network, you know, to maintain it, to keep it safe, but also for expansion. So, that's a very high level. And, you know, our revenue is about 20, which is even higher than our US colleagues. But that's because, you know, this is an outdoor sport, the railway must be safe to be successful. But also, we must invest to make sure that we're resilient, not for strikes, blockades, and pandemics, but for winter, for unforeseen events, but also, for our customers' expansion. We're seeing, you know, our, our customers growing in Canada—mostly in Western Canada, but also in the east—the ports are getting more and more traffic. And they're counting on us, CN, the railway, to be there to serve them.

So, you know, this, this pandemic, or this last year is, yeah, we're essential. But I'm very much of the school that comes with that responsibility to make sure that we plan our affairs, and we maintain our railway, and we invest in a way that we'll be there for our customers for many, many more years to come—and not just eight months of the year when it's nice outside; 12 months of the year, when it's minus 40 in Saskatoon and you have to switch grain cars, you can't say, well, the technology, you know, doesn't work well at -40. Well, in the meantime, that grain's got to move to port because the grain farmers have customers in Asia, they're expected to get the grain delivered, and they don't know what -40 feels like. So, that's our problem not theirs.

Antoinette Tummillo
So, how has the pandemic changed the way you do business, or has it changed the way you do business and the way you run the railway?

Sean Finn
Yeah, I think, you know, I'll give you one little example, and it's really accelerated our recognition that technology is gonna be the next transformation that's CN. So, you know, we've come from Crown Corporation to private corporation. We've come from, you know, a great, you know, good operators to great operators because of Hunter. You know, we've come from, you know, not good, not great with customers, a bit more customer-centric—a lot of work to do, still, there, but not very much so, under Claude—and now, technology.

And I think that's going to be our next thing. You saw this. You know, we could no longer have our train crews, right? So, the train crew has a conductor, an engineer in every cab. When they report to work, they go into a check-in bungalow or check-in office, where they download their operating instructions, you know, talk about, do a safety briefing, and then get to their train, and leave. Well, with the pandemic, we couldn't have our crews go and meet in a check-in room, running the risk that they would, you know, get infected by COVID-19. So, they're all now equipped with an iPad—which, you know, most people have, but we didn't have them—and now, they take their, you know, their, their operating instructions on the iPad in the cab of a locomotive, they can check in by the iPad, they get their, their switching assignments on the iPad. So, the pandemic has forced us to change how we work as railroaders on a daily basis, recognizing we need self-isolation, but it's accelerated the use of technology. So, to answer your question, I think it's only reinforced all of us—our board, but also, I think, our investors—recognizing that if CN wants to remain the leader as the most effective and highest-performing railway in North America, we have to make sure that technology is our next, is our next transformation. So, going from, you know, IT to operating technology, and using that to accelerate our service. But also, you know, the railways are renowned. We're very good moving our trains from yard to yard not; so good from loading dock to loading dock—what we call often the first mile and last mile. Well, technology has to help us and our customers better understand, you know, how CN's going to perform on that famous first mile and last mile.

So, the pandemic has raised awareness on how we had to change how we have to change how we work, and secondly, really points the direction that, you know, that the solution for that is technology. Now, there's two people in a cab of a locomotive, they are exactly six feet apart. So, things like wearing masks were mandatory as of, as of May. And our employees have been very, you know, very cooperative—we've had very few cases of COVID-19 for the size of our company. And it just goes to the fact that our employees realize that, you know, this this was important. Because, you know, if we lose too many train crews in a place like Melbourne, Saskatchewan, you know, you might have locomotives, and track, and cars, but you need crews to move those trains. So, I want to thank our employees again for their, their, their disciplined approach, and also their understanding, but also, their commitment to make sure that we stay safe. Because safety is not just about, you know, on the railway; it's about safety coming to work in a safe environment and healthy environment. And safety is a core value. So, I think, Antoinette, to answer your question, the walk away from the pandemic is how important technology will be to transform CN to its next, it's next, this next vision, this next journey

QUESTION & ANSWER

Antoinette Tummillo
Great. I have more questions, but I think I'm going to shift to the audience questions, because quite a few coming in. We've got one from Peter, and he says: in their annual reports, VIA talks a lot about their challenges in dealing with host railways, and the need for the government to address the inherent imbalance in bargaining power. What is CN's perspective on this problem?

Sean Finn
Well, I think it's important that VIA has always been an important customer of ours, it circulates on our network. As you know, we run the trains from Montréal to Toronto, from the Québec City to Windsor corridor, we've run Metro; we run GO trains in Toronto for many, many years. So, I want to debunk this perception that the freight railways—as host railways, we own the track—but as host railways, you know, don't work well with passengers; we work very well with passenger service. Our train crews and our rail traffic controllers understand that a commuter train can't be late—because you can't show up at Union Station an hour late then go to work. But, you know, these are, you know, the issue often comes down to capital investment. And we've been very successful. You know, we run the Metro in Chicago, but on the South Shore Montréal, in Montréal, we ran the [indiscernible], the commuter trains run on us. And. you know, we work with them well because they allow us to invest more capital, because they need reliability and just-in-time service, obviously. But, you know, they don't use the track in the middle of the night. So, it allows us to get capital investments to upgrade our track to give better service to the commuters, in exchange for which we get to use the capacity overnight.

Now, the Montréal-Toronto corridor, VIA is our most busiest corridor. And, you know, every time you want to add another train, you know, you define rail capacity by using what you have as the asset. When you want to grow it, you know, you need either more track, or you need some way to get more trains in the same capacity. So, you know, I think that our busiest corridors are our challenges. And that's why some people think that, you know, we don't work well with VIA; I think we work very well with VIA. We have to, obviously, work on making sure we remain reliable. But, you know, VIA wants to expand, it wants to have more capacity and more frequencies. And, you know, we have customers, also. And, you know, if we start them, you know, VIA has its windows, and we make sure we serve them as much as we can, respecting their schedules. But the capacity that's there, our customers use it also. So, you know, freight railways and passenger railways who have high frequency and high speed probably don't share the same track well together. So, I'd submit to you, we and VIA work well together. I think we've done a good job over the years.

I think VIA's come to a point now where it wants to increase its frequency, and it's, it's, it wants to grow its business on the Québec City to Windsor corridor, and there's only so much capacity. So, I think that's where we're seeing them, you know, looking to invest on the North Shore of the St. Lawrence River to have a dedicated track if they could. You know, GO Transit is a good example. They bought most of our network in, in Toronto, and they run dedicated trains, obviously, on their track. We have the odd switcher that gets in the way in Oshawa—and my good friend Phil Vister calls me regularly about that, but I tell Phil we'll get the train out of the way, because the commuters in Oshawa don't want to be waiting, you know, in the yard in Oshawa going to work in downtown Toronto because a slow switcher at five miles-an-hour is serving one customer. So, we're aware of that. And that's important, too. I think it's important that people realize our friends at VIA, you know, they do great work. They need more dedicated track. But nobody at CN sits in a rail traffic control center and purposely puts a passenger train in a siding to let by a freight train. They all know, you know, CN likes moving freight; it doesn't talk back to us. But our rail traffic controllers know there are real people, and often their families, on those trains. So, we don't do it, you know, in a way that's in any way purposeful. But, you know, we have to work together. But when you get to a point that the capacity is required, and we only have so much of it, and unless there's lots of money invested, I think time will come where VIA will be looking to have its own dedicated track to grow its business.

Antoinette Tummillo
And that conversation has been going on for a long time. Because I remember those discussions with VIA and how generous CN was giving them all the railway stations for a buck, and was involved in all those discussions. I have another question here from Jack: how does CN approach Indigenous relations, given there have been times marked by protest blockades along your lines? How does CN build constructive relations with Indigenous people?

Sean Finn
Yeah, so we, you know, I'm very conscious of that. And it's my responsibility at CN, that relationship. You know, we have lots of work to do. We have been neighbours with these communities across Canada for over 100 years. You know, we have good days and bad days. I wouldn't attribute the blockades to that relationship; I think the blockades are often caused by an external force. But we have to do better. And we've done a lot of work since 2002. We've developed an Indigenous Strategy for us. We've done a lot of training with our first line of supervisors and engineering people. We go through almost 300 First Nation communities across Canada. So, they are our neighbours in a lot of places in Canada. We have mentorship programs and internship programs, where we have young Indigenous people come work for us in our offices in Montréal, for example, and elsewhere on the network. But we have more work to do. We're about four percent Indigenous population in the overall employee base at CN. We have to do more; we have to get better at diversity and inclusion. And that community is very important to us.

We are presently working on creating an Aboriginal Council, which will be an advisor to our board and to our CEO, with the help of [indiscernible] from the [indiscernible] and David Johnston, the former Governor General, is helping us. But also, we already have a pretty good relationship with Indigenous people across Canada. And that's going to raise our game even more. I think we have to raise our awareness. But, you know, it comes down to something very, very basic, and it applies to Indigenous to any community in Canada. You know, I'm of the view the railway cannot take its neighbours for granted. Antoinette, you'll remember this, when I joined 25 years ago; you spoke to an operating person; you said, "Listen, you know, you're parking the locomotive next to this new development, you know, can we move it somewhere else?" And the operating person would say to me, "No. No Sean, don't understand, you know, they're not our neighbours, we're their neighbours, but we were there first." That's changed today, happily.

I think we all recognize that we have neighbours across Canada. We can't pick up our track and move; we're there for another 100 years; what we do today. So, we put our full-court press in developing strong relationships with those communities, we put a full-court press in developing strong relations with the AG industry. We have to do more in the Indigenous area. You know, we have good relationships. But we have to be a lot more innovative, but also, think about the future and develop, together, employment, obviously economic development, and help these communities grow. But also, you know, these are good jobs at CN, but we have to adapt to the reality that you can't take a First Nation young lady from her community and move her six times in ten years because of the railway. It's not going to happen that way. So, we have more work to do. But, you know, we're really focusing on—as we all should—on diversity and inclusion, and, you know, for us in Canada, this is job number one, when it comes to the Indigenous communities that we operate in.

Antoinette Tummillo
Great, I'm going to squeeze in one question, but you've got to promise to be quick...

Sean Finn
I will.

Antoinette Tummillo
...on the answer on this one, although it's not an easy one. This one's from Brian: what steps will CN take to reduce GHG emissions? More biodiesel electric trains?

Sean Finn
So, two comments. One, we are a very environmentally-friendly technology to move a ton of freight versus other technologies; but we still consume a lot of diesels. We have done some testing with mixing diesel with natural gas, an issue of how the technology is there, but obviously, we're very focused on it. And I must say, a lot of our colleagues on the sustainability side are really focused. So, you know, we're looking at, you know, net-zero by 2050. We have a role to play in that. So, we are currently looking at how, you know, we can better operate locomotives, better control the consumption of fuel. But we recognize, you know, we have a role to play. You can't sit back and say we can move freight, you know, long distances more environmentally; we still consume a lot of diesel fuel. So, I think we're going to see technology evolve.

One issue we have, the locomotive technology is North American; you know, these locomotives are built in the US or in Canada, but they're used across the network. So, we have to make sure the technology is adopted by all the railways. If not, we'll be stuck at the border taking off our locomotives and then putting on somebody else's, which would not be good for customer service. But I can just tell you that, you know, the environmental portfolio is at the top of our agenda at CN. And we're, we're determined to, to play a key role. It's not sufficient to be on the Dow Jones Environmental List; we have to make sure that every day we do our job, and we are, our employees expect that from us today. And that's going to be a driving force going forward.

Antoinette Tummillo
Great, well, thank you, Sean. I would like to now introduce Izzie Abrams, Vice-President of Government and External Affairs at Waste Connections of Canada, to provide the appreciation remarks. But I do want to just make one little note: it was Izzie's idea to invite you, Sean. Like, we were having a conversation of who should we get to the table, and he said, "How about Sean Finn?" So, over to you, Izzie.

Note of Appreciation by Izzie Abrams, Vice-President, Government & External Affairs, Waste Connections of Canada
Thank you, Antoinette, and Sean, it's good to see you again; it's been a while—far too long. But I do want to thank you for taking the time, and adding to the public discourse, and sharing your insights with us. But more importantly, I want to thank you for moving goods and resources that are so vital to the Canadian economy. And congratulations on your 100 years—and here's to a good outcome on the Milton Intermodal Yard; I've been watching that closely. So, lots of good success on that and continued good success with CN. So, thank you again.

Sean Finn
Izzie, thank you very much, really appreciate the invitation. And all the best to the Empire Club for many more years to come.

Concluding Remarks by Antoinette Tummillo
Great. Well, this was a very interesting discussion. I could go on another hour with questions, Sean, but unfortunately, we don't have that. I would like to just take a moment to share with everybody our upcoming events, and we've got quite a few over the next several weeks. We've got the Honourable Doug Downey, Attorney General of Ontario, coming to speak with us on December 3rd. On the 4th, we've got a Roadmap for Canadian Black Youth, Defining Recognition and Development Under the UN Decade for People of African Descent, and UN-75. On December 7th, we've got Rahul Bharwadj from the Institute of Corporate Directors coming to speak to us. And December 8th, we've got a panel talking about Small Business Success Post-COVID.

And I have to talk about our December 10th event, which is our Nation Builder of the Year Event. It's our signature event, and this year's award is going to go to the frontline workers. Who else are deserving but the frontline workers? So, do plan on joining us. We've got a great event planned, with a lineup of VIPs and celebrities to celebrate our heroes. And I encourage you all to submit a testimonial for a frontline worker at #NationalBuildingHero of your choice. This can be someone you know, or even yourself, if you're a frontline worker, and you've got a chance of winning $5,000. We're going to have a draw for that. So, registration for all these events is free. I want to thank everybody for taking the time to join us today. Thank you again, Sean. Keep doing what you're doing at CN. I don't want to sell one share. Okay? I'm going to hold on to them. I'm going to hold on to them—notwithstanding what my financial advisor says. Anyways, thanks again. This meeting is now adjourned.