Activist investment firm Ancora has seen three of its nominees elected to the board of railroad Norfolk Southern (NS) after a months long proxy battle, but failed to oust CEO Alan Shaw or COO John Orr, with both sides claiming victory as a result.
Results announced during the company’s Annual Meeting saw shareholders elect the three Ancora picks and ten NS nominees, including Shaw, to the 13 person board of directors.
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NS said the result showed shareholders recognised the “positive change” underway at the company, despite accusations from Ancora of failing to improve efficiencies and a poor safety record following the derailment incident in East Palestine, Ohio.
A statement from NS said: “Moving forward, we will continue building on the significant progress Alan Shaw, John Orr, and the entire team have already achieved.
“Together, we are building a safer, more profitable railroad, closing the margin gap with our peers, and ultimately growing value for our shareholders.”
However, despite Shaw’s reelection to the board, Ancora said that its success in getting three members appointed, one in place of the previous board chair, represented “a loud and clear message to replace the company’s unqualified CEO and reconsider its ineffective strategy.”
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By GlobalDataOne of the Ancora nominees elected to the board was Sameh Fahmy who, as a former EVP of Precision Scheduled Railroading (PSR) at Kansas City Southern, could indicate shareholders’ priorities and support for its message.
The issue of NS’s use of PSR became a focal point during the proxy battle with Ancora proposing to double down on the controversial operations system which focuses on increasing efficiency, often with longer trains and fewer staff, after the Class I railroad began moving away from it following the East Palestine incident.
However, NS appeared to move more towards the investment firm’s position part way through voting with the hiring of Orr, a PSR proponent, as COO and a commitment by Shaw to committing to “some components of PSR” as part of his hybrid strategy.
The issue had also become a key point for supporters of both NS and Ancora in the fight, with two union groups, BLET and BMWED, representing 40% of NS workers backing Ancora after the railroad’s change in strategy, leading another union group SMART-TD to label them as “judas”.
In response to the election results, SMART-TD President Jeremy Ferguson said the vote showed that a balanced approach with “emphasis on rail safety” would continue at the company.
He said: “This morning, a rare thing happened with the NS vote. Corporate raiders failed to take the reins of an essential player in the rail industry and veer this nation’s economy back into the bad old days of Precision Scheduled Railroading. Ancora’s attempt to railroad the railroad and ‘tear Norfolk Southern down to the studs’ has officially failed.”
However, despite not achieving their key aims, Ancora, which owns a $1bn stake in NS, said that the election of three of its nominees marked the “first step” towards turning the company around and meant its campaign for change at the railroad would continue.
