USA: Activist hedge fund investor Ancora Holdings has won three seats on the board at Norfolk Southern in a vote at the annual shareholder meeting on May 9, ousting the railroad’s Board Chair, Governance Committee Chair and Compensation Committee Chair.
Ancora holds a $1bn stake in the Class I railroad, and had been campaigning to replace seven of the 13 board members, including President & CEO Alan Shaw, as part of a battle to focus the management on improving profitability.
In recent years, NS has sought to balance safety and performance improvements with achieving a lower operating ratio. It had earlier committed to not furloughing traincrew during a traffic downturn, in order to retain its skilled workforce and facilitate a faster recovery. However, Ancora argued for a change of focus, noting that its operating ratio was worse than the other major railroads.
On May 1, the railroad wrote to shareholders ahead of the meeting, emphasising that its ‘balanced strategy is delivering superior long-term upside for shareholders’. NS said it had improved train speeds by 22%, terminal dwell by 11% and merchandise velocity by 24% since Shaw became CEO in 2022. It also insisted it was an industry leader in safety, having achieved a 38% reduction in its main line accident rate during 2023.
NS added that it was ‘on a clear and achievable path’ to achieving ‘a sub-60% operating ratio in three to four years, while remaining well-positioned to deliver top-tier earnings and EPS growth over the long-term’. By contrast, it believed that the ‘reckless plan’ favoured by Ancora ‘would unnecessarily put Norfolk Southern at risk and destroy long-term value’, with its COO candidate Jamie Boychuck having ‘a reputation for extreme cost cutting measures resulting in the deterioration of service quality, safety, and performance’.
Following the meeting, NS announced that a preliminary vote count indicated that its shareholders had elected 10 of its director nominees including Shaw, former CN President & CEO Claude Mongeau, former Amtrak CEO Richard Anderson and UBS Group Chairman Thomas Kelleher. However, NS Board Chair Amy Miles, Jennifer Scanlon, and John Thompson were not re-elected.
The three Ancora nominees who were elected are William Clyburn Jr, former vice-chairman of the Surface Transportation Board; Sameh Fahmy, former EVP of precision scheduled railroading at Kansas City Southern; and Gilbert Lamphere, chairman of MidRail Corp and co-founder of MidSouth Rail Corp.
‘Our shareholders recognise that positive change is underway at Norfolk Southern’, the railroad commented. ‘Moving forward, we will continue building on the significant progress Alan Shaw, John Orr, and the entire team have already achieved. Together, we are building a safer, more profitable railroad, closing the margin gap with our peers, and ultimately growing value for our shareholders.’
Welcoming the new board members, it looked forward to working ‘constructively and collaboratively on behalf of our shareholders, unlocking the full potential of our powerful franchise’.
