Norfolk Southern urges shareholders to reject activist investor's takeover plan at the railroad

OMAHA, Neb. — Norfolk Southern wants its shareholders to back its current management team and strategy and reject a bid from a group of investors seeking to take over the railroad.

The Atlanta-based railroad urged shareholders to reject Ancora Holdings’ eight board nominees when it filed its proxy Monday morning with the Securities and Exchange Commission. Norfolk Southern also nominated two new board members of its own — a former Amtrak CEO and a former U.S. Senator — that the railroad argues will provide valuable fresh perspective without derailing its current plan.

“We are confident that the continued execution of our balanced strategy – under the vision and leadership of Alan Shaw – is critical as we prioritize operational rigor, safety, and service,” said board chair Amy Miles.

Since 2019, Norfolk Southern has run a version of what has become the industry’s standard operating model that relies on running fewer, longer trains on a tighter schedule, so the railroad won’t need as many crews, locomotives or maintenance workers.

But under Shaw, the railroad backed away from that model’s short-term cost cutting to keep additional staff on hand during downturns to respond better when the economy rebounds. Norfolk Southern has also invested in improving safety over the past year since its fiery derailment in East Palestine, Ohio.

Ancora argues that Norfolk Southern hasn’t done nearly enough to improve its efficiency because its profits continue to disappoint, and its operating ratio — a key measure of profitability that rail investors track — lags behind the other major freight railroads. So Ancora wants to hire former UPS executive Jim Barber and former CSX chief operating officer Jamie Boychuk to run the the railroad.

“Our slate and proposed management team have publicly committed to pursuing ‘stronger growth’ and implementing a ‘reliable network strategy that will leverage Norfolk Southern’s existing assets and people to get the organization to the right destination,’” Ancora said in a statement.

The Ohio-based investment firm also argues that Shaw and Norfolk Southern mishandled their response to the East Palestine derailment. The railroad has said the derailment will cost it at least $1.1 billion and that total will continue to grow as the cleanup continues and lawsuits and fines pile up. The town is eager to recover, but many residents worry about the potential long-term health consequences of the derailment.

Two rail unions — the massive SMART-TD union that represents conductors and the Brotherhood of Railroad Signalmen — have issued statements supporting the current management team at Norfolk Southern. And the head of the Federal Railroad Administration cautioned that the railroad would face additional scrutiny if it abandoned any of its efforts to improve safety after a management change.

The chairman of the Surface Transportation Board, Martin Oberman, told the Progressive Railroading trade magazine that Norfolk Southern had been one of the industry leaders in rebuilding its workforce and improving service after the deep cuts of the last six years.

“If the activist investor succeeds at Norfolk Southern, it will be a huge detriment to the industry. It will have other CEOs looking over their shoulders. And it’s just a very bad trend,” Oberman said to the magazine.

But Ancora said the fears of regulators and labor groups are misplaced.

“Policymakers and labor leaders should be able to take comfort in our slate’s commitments to honoring union agreements, leveraging the company’s existing workforce and investing in a network strategy that drives growth,” the investment group said.

The date of the railroad’s annual meeting hasn’t been set yet.

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