A Norfolk Southern train travels in East Palestine, Ohio, on February 14, 2023. A derailment earlier this month released millions of pounds of toxic chemicals into the environment and forced the evacuation of thousands of people.
Angelo Merendino | Getty Images News | Getty Images
Activist investor Ancora gets strong endorsement in efforts to secure board changes and remove board norfolk southern airways On Monday, Glass Lewis, a proxy adviser to Chief Executive Alan Shaw, recommended that railroad shareholders vote in favor of Ancora’s six board nominees.
“We believe Ancora has made a compelling case to support a significant overhaul of the company’s current leadership,” Glass Lewis said in the report.
The recommendation for an activist nominee, rare among companies the size of NSC and its industry, could sway thousands of investors holding millions of shares ahead of Norfolk Southern’s May 9 shareholder meeting. How to vote.
Proxy advisor recommends shareholders vote in favor of Ancora nominees Betsy Akins, Jim Barber, William Clyburn, Sameh Fahmy, Gilbert Lamphere and Allison Landry.
Notably, proxy advisors also advised shareholders not to support current CEO Shaw and board chair Amy Myers.
In addition, Glass-Lewis said Ancora’s pick for CEO, Barber, and activist-picked chief operating officer, Jamie Boychuk, “have compelling credentials and track records.”
Ancora is seeking to oust Shaw in favor of his predecessor ups Barber began his 35-year career as a delivery driver for Teamsters in the 1980s and ended as chief operating officer of one of the world’s largest logistics companies. He lacks direct experience as a top railroad executive, but told CNBC earlier this month that UPS is one of the world’s largest railroad customers.
Ancora also seeks pre-installation CSX CEO Boychuk serves as Barber’s chief operating officer. Boychuk spent 20 years with the Canadian Nationals before joining CSX. Like Barber, Boychuk began his career as a conductor representing a union and rose through the ranks of the orchestra. China He serves as executive vice president of operations at CSX until 2023.
Earlier this week, two Teamsters unions representing about half of Norfolk Southern’s unionized workforce said they would support Ancora’s plan for change. Their support, coupled with Glass Lewis’s endorsement, provides the activist with powerful ammunition to convince shareholders.
“We also tend to agree with Ancora’s criticism of the company’s current operating strategy, which relies on inherently incompatible rail concepts,” the agency adviser said in the report.
The National Safety Council initially eschewed an approach based on Precision Scheduled Railways (PSR) in favor of a so-called “resilience” model. Ancora, on the other hand, believed almost from the outset that an operating plan based on PSR would best serve Norfolk Southern’s customers, employees and investors.
The focus of PSR is to ensure trains and crews keep moving, minimizing waste of time and equipment, by running on a fixed schedule like a passenger train, rather than just rolling the train when it’s full of cargo. Investors tend to reward companies that adopt PSR, and their implementation can be easily tracked through a railroad’s operating ratio (operating expenses as a percentage of revenue).
In contrast, the elastic model maintains a strategic reserve of trains and cars during periods of low demand, which often occurs in the rail industry.
The company has since reversed course, appointing veteran rail executive John Orr to implement an operational plan that combines PSR and a resilience approach. The activist and some analysts have criticized the plan.
Support from agency advisors has historically been crucial to activists
A panoramic view of the exterior of the Norfolk Southern Airlines headquarters in Atlanta, Georgia, on April 1, 2023.
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Winning the support of agency advisers is a top priority for activists and management. The level of support Ancora has among such a large company is unusual for activists, but not unprecedented.
ISS backs seven of Pershing Square’s Bill Ackman director nominees Canadian Pacific Airlines 2017.
But support from an agency advisor is no guarantee that everything will go smoothly.Nelson Peltz 2017 campaign Procter It won the approval of ISS and another influential proxy adviser, Glass Lewis, but ultimately fell short.
Reconciliation seems unlikely, but not impossible. NSC CEO Xiao previously told CNBC that the company offered the activist “several” board seats but was turned down. Ancora has repeatedly made clear that it holds Shaw accountable for Norfolk Southern’s poor performance and what it says was mismanagement of the East Palestine derailment in Ohio.
The activist has previously said any deal would require Shaw to step down as chief executive.
With just over a week left until the May 9 shareholder meeting, NSC and Ancora will continue to make their case to investors large and small. ISS, another influential agency advisory firm, is expected to issue recommendations this week.
watch: Activist Ankola makes case for new Norfolk Southern CEO and management
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