The activist investors trying to take control of Norfolk Southern's board are picking up key support, but the railroad's CEO promised Monday to fight the takeover attempt until a May 9 shareholder vote because he believes his strategy is the best in the long run for investors, customers and workers.
Ancora Holdings' bid to elect seven new directors and replace management at the Atlanta-based railroad has gained the backing of one of the major proxy advisory firms, one of the railroad's biggest customers and two of its largest labor unions in recent days.
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But CEO Alan Shaw said he believes he still has the support of most of the railroad's workers, investors and customers.
“The choice really couldn’t be any more clear for our shareholders,” Shaw said an interview with The Associated Press. “We make promises and we’ve continued to keep our promises, and we will continue to deliver. And we’ve got a long-term vision for Norfolk Southern where shareholders win, as opposed to the activists who’ve got a short-term and erratic approach where shareholders lose.”
The main issue is whether Shaw's strategy of keeping additional resources on hand during a downturn and his investments in safety are the best course for the railroad that has been in the spotlight ever since a fiery derailment in eastern Ohio in February 2023. Ancora — and the former UPS and CSX railroad executives the investors nominated to lead Norfolk Southern — argue that a dramatic overhaul of the railroad's operations is needed to streamline the way its trains move and bring Norfolk Southern's profits in line with its peers.
Proxy advisory firm Glass Lewis said in a report Monday that shareholders should vote for six of Ancora's seven nominees, including proposed CEO Jim Barber, the former chief operating officer at UPS, because “Ancora has presented a compelling case for supporting a substantial overhaul of the company's current leadership" after the railroad delivered results that have been “consistently worse than its peers for an extended period.”
Norfolk Southern's profits in the first three months of the year fell short of Wall Street expectations again, even excluding the $600 million settlement it recently announced for people who live near the East Palestine, Ohio, derailment. Shaw said he believes the railroad is on track to improve its bottom line over the next couple years, particularly after last month's hiring of new Chief Operating Officer John Orr.
Barber has said he doesn't think the changes Orr is making to streamline Norfolk Southern's railyards will be enough, and he questions the $25 million Shaw agreed to pay a competing railroad to get the right to hire Orr.
Steel producer Cleveland-Cliffs, which is one of the railroad's biggest customers, also endorsed Ancora's plan in a letter CEO Lourenco Goncalves wrote to the investors.
“We believe in shareholder activism when the activist has a plan and knows how to execute the plan. That seems to be the case of your current effort, and therefore you have my support,” Goncalves wrote.
Both the Brotherhood of Locomotive Engineers and Trainmen and the Brotherhood of Maintenance of Way Employes Division unions broke with the rest of rail labor last week to endorse Ancora after meeting with Barber and his proposed operations chief Jamie Boychuk. The 11 other rail unions reiterated their support for Shaw in a statement Friday, saying they believe Ancora's cost-cutting plan will “jeopardize the safety and service improvements Norfolk Southern has made since the 2023 derailment in East Palestine, Ohio.”
Those union endorsements became controversial over the weekend after documents surfaced online detailing an agreement the BLET made with Ancora where the investors promised to make a number of changes in work rules that would benefit the engineers if they prevail in the vote.
“This is a backroom deal where Ancora signed an agreement illegally binding Norfolk Southern to an agreement with BMWED and with BLET, and they’re just giving away shareholder value to win votes. And that’s not the right thing for our shareholders,” Shaw said.
Both sides accuse each other of getting desperate in the final stages of this campaign. Shaw said Norfolk Southern remains open to a possible settlement with Ancora, but not on the terms the investors are demanding to replace management and overhaul the railroad's strategy.
Ancora said in a statement that “it's disingenuous for Mr. Shaw and his board to chastise us for not having stakeholder support on one hand — and then lash out at us for appropriately obtaining support on the other hand.”