Alan Shaw, CEO, Norfolk Southern
Scott Mlyn | CNBC
Norfolk Southern shareholders on Thursday voted to elect three of dissident Ancora’s director nominees but fell short of ousting incumbent CEO Alan Shaw.
The three seats are short of the full seven that the activist had been seeking, but still a clear indication of shareholders’ desire for change at a railroad plagued by underperformance.
Norfolk Southern’s board had fought hard to stave off Ancora’s biggest demand: Firing current CEO Alan Shaw. Ancora had rebuffed past settlement offers that didn’t include Shaw’s ouster.
The boardroom victory is still a milestone for Ancora, a $10 billion Ohio investment firm that launched an activism practice just ten years ago and scored a series of smaller wins leading up to the election at NSC. It caps an impressive campaign that saw the activist win unexpected support from unions, customers and, perhaps most importantly, Glass Lewis and ISS, the influential proxy advisory firms.
While Shaw’s ouster was Ancora’s most pressing demand, the activist firm laid out broader accusations of failed governance and asserted that the company’s proposed operating approach was unproductive. The activist had argued that Norfolk Southern should adopt a model known as precision-scheduled railroading, which has delivered impressive shareholder returns at other railroads but which its critics have said leaves railroads ill-equipped to handle surges in demand.
Norfolk Southern had first argued against PSR in favor of its proposed resiliency model, which would keep rail crews and cars on standby to handle those cyclical surges in demand. But the company abruptly changed tack in the midst of the fight, hiring a well-known PSR operator as COO and implementing some of those precision principles.
Government officials, which had previously voiced their support for Norfolk over Ancora, were momentarily silenced by the reversal. Labor groups accounting for some 40% of Norfolk’s union employees shifted their support to Ancora, and major customer Cleveland Cliffs endorsed Ancora’s proposed picks and plan.
The dissident also won support from proxy advisors Glass Lewis and ISS. ISS recommended that shareholders support five of Ancora’s seven picks but did not recommend electing Ancora CEO pick Jim Barber to the board. Glass Lewis endorsed six of Ancora’s nominees. Both said change was needed at the railroad.
This is breaking news. Please check back for updates.
