Big upheaval: Antoinette Lloyd steps off a train during her conductor trainee programme at Norfolk Southern’s yard in Chicago. The company added two new board members last year and two others will step down this year at the annual shareholders’ meeting. — Reuters
NEW YORK: Activist investment firm Ancora Holdings Group has called for new management and an overhaul of the board at Norfolk Southern Corp, the railroad that’s still reeling from a costly derailment in Ohio last year.
Ancora will nominate eight directors, including former Ohio governor John Kasich and a former executive with railroad Kansas City Southern, as part of its proxy fight with Norfolk Southern, according to a statement on Tuesday.
The investor proposed Jim Barber, the ex-chief operating officer of United Parcel Service Inc, to replace Alan Shaw as Norfolk Southern’s chief executive officer (CEO).
Norfolk Southern “has suffered for years due to its board’s poor decisions,” Ancora, which recently took a stake in the company, said in the statement.
After Shaw was named CEO the railroad has had “industry-worst operating results, sustained share price underperformance and a tone-deaf response to the devastating East Palestine, Ohio, derailment.”
Shaw, who vowed to improve customer service by not furloughing workers so aggressively during drops in freight demand, had been on the job less than a year before the derailment in February 2023.
Norfolk Southern has paid out more than US$1bil for the accident, mostly for environmental remediation.
The CEO has been leading an effort among railroads to improve customer and union relationships after several years of heavy cost-cutting that increased profit margins but resulted in spotty service and disgruntled workers.
Those plans to keep a buffer of workers during a freight downturn with the goal of maintaining service when volume rebounded were derailed by the crash of a train carrying chemicals in East Palestine.
Norfolk Southern’s board members on the governance and nominating committee evaluated and interviewed all Ancora’s nominees as part of the negotiating process, the railroad said in a statement.
The company added two new board members last year and two others will step down this year at the annual shareholders’ meeting, which doesn’t have a date yet. The annual meeting is usually held in May.
The company defended its operating record and said it’s working to recover from short-term impacts to profit margins. It also said that it’s operating on principles that are based on scheduled railroading.
“Customers are seeing our progress,” the company said in the statement. “They recognise our commitment to delivering consistent, reliable service and are awarding us new business.”
Norfolk Southern also defended its safety record and reaction to the East Palestine derailment, and said it logged a 42% reduction in 2023 from the previous year for the accident rate on mainline tracks, such as the route through East Palestine.
“We are proud of our response in East Palestine and the relationships we’ve built throughout the community,” the company said.
Ancora’s board slate includes Sameh Fahmy, who is credited with implementing at Kansas City Southern a strategy of cost cuts and operational improvements known as Precision Scheduled Railroading.
William Clyburn, another board candidate, has extensive rail experience, including with the Surface Transportation Board that regulates railroads.
Ancora also recruited Jamie Boychuk, an experienced railroader who just left Norfolk Southern’s main rival CSX Corp, to be chief operating officer.
Norfolk Southern and the activist firm had been in talks, but hit an impasse over keeping Shaw as CEO, according to Jim Chadwick, an executive with Ancora.
“The company has been, what I would describe as, blindly loyal to him,” Chadwick said in an interview with CNBC. — Bloomberg
