A CEO Working on the Railroad

By Jacqueline Doherty 

Three years ago, Jack Koraleski's retirement plans were firmly in place. After 40 years at the Union Pacific railroad, where he had risen to executive vice president of marketing and sales, his September 2012 retirement date was set. The Omaha Country Club was reserved for the party, and a vacation to Maui was on the calendar.

But in March 2012 his colleague and friend of more than 30 years, then-CEO James Young, told Mr. Koraleski he had pancreatic cancer. He asked Mr. Koraleski to delay his retirement and become the next CEO.

Mr. Koraleski joined the board of directors that summer and was named chairman of Union Pacific last year, after Mr. Young died. "But the thing that was important to him was making sure the company didn't miss a beat, and that was something that I knew I could do," says Mr. Koraleski.

Indeed, he has. In his three years at the helm, revenue at the country's largest railroad has grown 22% to $24 billion, driven by strong demand. Due to increasingly efficient operations, earnings have risen nearly 60%, to $5.2 billion, or $5.75 a share. This year earnings per share are expected to grow 13%, to $6.51.

Union Pacific shares (UNP) are up 117% since Mr. Koraleski became CEO, to under $120, beating an index of railroad stocks by 32 percentage points. The S&P 500 index is up 50% in that period.

Mr. Koraleski is quick to credit his success to Mr. Young's inclusive management style. As CEO, Mr. Young had led an operating committee of senior executives to discuss and debate the company's goals and come to agreement on its direction.

"We were going to continue to do what we all knew how to do, which is to keep the momentum and the trajectory going for our shareholders, for our customers, and for our employees," Mr. Koraleski says. "There was no dramatic need for change."

A decade ago, poor conditions on 2,000 miles of track had slowed Union Pacific trains. The slower a railroad system runs, the more engines and trains are needed to meet delivery schedules. By last year, after continual maintenance, only 400 miles of track were in poor condition.

"Customers want great transportation that gives them an advantage in their marketplace," says Mr. Koraleski. Union Pacific's capital expenditures, including money for track repair, totaled $4.1 billion last year.

Now approaching 65, Mr. Koraleski doesn't look ready to retire anytime soon. "I'll wait and see," he says with a chuckle. "This is a lot more fun than I thought it would be."

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