MW Norfolk Southern touts progress and slams activist Ancora's 'reckless' plan in board battle
By James Rogers
The board battle between Norfolk Southern and activist investor Ancora Holdings Group is intensifying ahead of the railroad company's annual meeting next week
Norfolk Southern Corp. touted its progress and took aim at activist investor Ancora Holdings Group in a letter sent to shareholders Wednesday.
Ancora is pushing for an overhaul of the 13-person board at Norfolk Southern's annual meeting on May 9 and is urging shareholders to vote for Ancora's seven board nominees. If elected, the new board members would seek to appoint Jim Barber, a former chief operating officer at United Parcel Service Inc. $(UPS)$, as CEO of Norfolk Southern $(NSC)$.
Norfolk Southern is urging shareholders to vote for the railroad company's 13 board nominees. "Under the board of directors' guidance and president and CEO Alan Shaw's leadership, Norfolk Southern is executing a balanced strategy that we are confident will deliver superior shareholder value," the company said in the letter. "A vote for Norfolk Southern's 13 nominees is a vote to protect the value of your investment."
Related: Proxy-advisory firm ISS steps into Norfolk Southern's board battle with activist Ancora
"Since Alan Shaw's appointment as CEO, and in the face of the impact of the East Palestine incident, we have dramatically improved network performance, safety, and service," the company said, referring to the February 2023 derailment of a Norfolk Southern freight train carrying hazardous waste in East Palestine, Ohio.
In the letter, the company said it improved train speed by 22% and terminal dwell, or the average amount of time a railcar spends in a terminal between destinations, by 11% through March 31, 2024. Norfolk Southern also said it had a 38% reduction in its mainline accident rate in 2023.
In the letter, Norfolk Southern described Ancora's strategy for the company as "reckless," and said it would have a negative impact. "Ancora's plan is laden with false assumptions, would require thousands of job cuts, and would put safety and service at risk," the company said.
Ancora addressed the issue of headcount during a town-hall meeting last month. "I think what's important to know is that the first 18 months of our plan, where we get these first significant increases here in profitability is not done through laying people off or furloughing employees," said Jim Chadwick, president of Ancora Alternatives. "In fact, we don't find any in that period of time."
Related: Activist investor Ancora ramps up pressure in Norfolk Southern board battle
Jamie Boychuk, Ancora's candidate for Norfolk Southern chief operating officer, also spoke during the town-hall meeting. "We've got a plan that works. We've got a plan that is solid," Boychuk said. "We've got a plan that's got a fantastic timeline that really allows us to communicate with all of our stakeholders and do it right and to bring an entire team along with us."
Shares of Norfolk Southern are up 0.5% Wednesday. The stock is down 2.1% in 2024, compared with the S&P 500's SPX gain of 5.5%.
Norfolk Southern and Ancora, which holds a large equity stake in the company, have been trading barbs ahead of the Class I railroad company's annual meeting. Ancora launched its bid to take control of the company's board earlier this year, and Norfolk Southern has urged its shareholders to reject it. Ancora has also called for the firing of Shaw.
Related: One year after Norfolk Southern's East Palestine derailment, rail safety is still in the spotlight
Ancora says that its shareholder slate and recommended management team will implement a PSR-powered scheduled network at Norfolk Southern. PSR, or precision scheduled railroading, focuses on the movement of individual train cars rather than whole trains. A key railroad-industry trend of recent years, PSR aims to boost efficiency by streamlining operations.
"What most people don't realize is that one of the great outcomes of precision scheduled railroading is a repeatable closed-loop network that you do the same thing every day," Barber said at last month's town-hall meeting. "It's just like a UPS driver. It's why you give the driver the same car every day."
He added: "You rinse and repeat every day so that you know what's coming at you, there's not surprises, you do it the most efficiently you can, and what the byproduct of that is, is safety."
Related: War of words over Norfolk Southern board battle intensifies as railroad slams activist Ancora's labor negotiation
On Tuesday. influential proxy-advisory firm Institutional Shareholder Services stepped into Norfolk Southern's board battle with Ancora, recommending that its shareholders vote for most of the company's 13 board nominees but that they support five of Ancora's seven nominees.
-James Rogers
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May 01, 2024 14:40 ET (18:40 GMT)
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