In a major boost to activist investor Ancora Holdings’ campaign to shake up Norfolk Southern Corp.’s leadership, influential proxy advisory firm Glass Lewis has recommended that shareholders vote for six of Ancora’s seven nominees to the railroad’s board of directors.
The endorsement, disclosed in a report obtained by CNBC, comes just days before Norfolk Southern’s May 9 annual meeting, where shareholders will decide the outcome of the contentious proxy fight. Glass Lewis said it believes “Ancora has presented a compelling case for supporting a substantial overhaul” of Norfolk Southern’s current board and management team.
Significantly, Glass Lewis is advising shareholders to support Ancora’s nominees Jim Barber and Betsy Akins, who have “compelling credentials and track records” in the transportation industry, while withholding votes from Norfolk Southern CEO Alan Shaw and board chair Amy Miles.
Ancora has proposed replacing Shaw with Barber, a former UPS executive.The proxy advisor’s backing marks a major victory for Ancora in its uphill battle against Norfolk Southern, a $54 billion company.
While it is unusual for an activist with such a small stake – Ancora owns just 0.15% of Norfolk Southern – to gain traction, Glass Lewis’ recommendation could sway large institutional investors.Ancora has argued that Norfolk Southern’s leadership has overseen persistent operational issues, inconsistent service, and low employee morale due to excessive cost-cutting.
The activist’s campaign gained momentum after the February 2023 derailment of a Norfolk Southern train carrying hazardous chemicals in East Palestine, Ohio, which sparked a national outcry over rail safety.
In recent weeks, Ancora has won the support of two key unions representing nearly half of Norfolk Southern’s unionized workforce – an unprecedented alliance between an activist investor and organized labor. The Teamsters’ BMWED division said it would back Ancora and its director nominees, citing “years of deteriorating safety conditions and service quality at Norfolk Southern.
“However, Norfolk Southern’s management has fought back, defending the company’s safety record and operational improvements under Shaw’s leadership. In an earnings call this week, Shaw touted recent progress on key metrics like car velocity and dwell times, and outlined a plan to reach a sub-60% operating ratio in the next 3-4 years.
The company has also attacked Ancora’s plans as reckless, warning that the activist’s proposed cost cuts would require slashing nearly 3,000 jobs. Norfolk Southern says it offered Ancora several board seats in an effort to reach a settlement, but was rebuffed. As the proxy battle has heated up, other stakeholders have taken sides. The Federal Railroad Administration and Surface Transportation Board have expressed concerns that Ancora’s push for aggressive cost-cutting could undermine safety.
However, Cleveland-Cliffs, a major Norfolk Southern customer, endorsed Ancora’s campaign in a letter this week. With Glass Lewis and the Teamsters now in its corner, Ancora has momentum heading into next month’s pivotal shareholder vote. However, it remains to be seen whether the firm’s slate of nominees will gain the backing of the other major proxy advisor, ISS, or sway the large asset managers who own most of Norfolk Southern’s stock.
If Ancora does prevail, it would mark a stunning victory for shareholder activism and a repudiation of the precision scheduled railroading (PSR) strategy that has dominated the industry in recent years. But even if it falls short, the proxy fight has put immense pressure on Norfolk Southern to address long-standing operational and safety issues as it works to regain the trust of regulators, employees, customers and communities.
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