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Set to move overnight ahead of Norfolk Southern’s annual meeting Thursday morning, scheduled to begin at 8:30 a.m. EASTERN THURSDAY
Norfolk Southern shareholders will decide Thursday morning whether to support an activist investor’s bid to take over the railroad’s board and replace management.
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Ancora Holdings received significant support during the campaign from major investors such as EdgePoint Investment Group, two major railroad unions and some customers. But the rest of the railway workers, several key regulators and a number of other customers supported the management.
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If all seven of Ancora’s candidates are elected, they will get the votes they need to move forward with their plan to fire the CEO and overhaul the railroad’s operations. If shareholders support only some of its board nominees, Ancora will not be able to make sweeping changes immediately.
The railroad and Ancora disagree about whether CEO Alan Shaw’s strategy of keeping more workers on hand during a downturn to prepare for the eventual recovery is the best way to run Norfolk Southern, and whether he is the best man to run the railway.
Ancora CEO candidate Jim Barber, who was previously chief operating officer of UPS, said it would be wasteful to have more workers on hand during slower times. That’s why Ancora wants to introduce the industry standard Precision Scheduled Railroading, designed to minimize the number of workers, locomotives and railcars a railroad needs.
Ancora’s plan would be based on running fewer and longer trains on a tighter schedule and changing cars less frequently between trains to streamline operations. Shaw argued that running the railroad too leanly would jeopardize the improvements in safety and service that Norfolk Southern has seen since its catastrophic derailment in February 2023 in East Palestine, Ohio.
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Railroad unions have said they believe precision scheduled railroading has made the industry more dangerous and derailments more likely because inspections are so rushed and preventative maintenance may be neglected.
If Ancora manages to elect all seven candidates, the company will have the power to fire Shaw and its new chief operating officer, John Orr, whom he hired in March after paying another railroad $25 million, to obtain permission to hire it. Ancora wants to install Barber as CEO and hire former CSX railroad operations manager Jaimie Boychuk as Norfolk Southern’s chief operating officer to overhaul the way the railroad plans and operates its trains.
Ancora has forecast it can save more than $800 million in expenses in the first year and another $275 million by the end of three years. Investors say they don’t plan layoffs but want to cut about 1,500 jobs through attrition over time.
Norfolk Southern said its own plan to make the railroad more efficient would result in about $400 million in cost savings and improve profit margins within two years. Although analysts have questioned whether Norfolk Southern will be able to catch up with the other major freight railroads, all of which are also working to become more efficient.
If Ancora doesn’t elect all of its directors, investors won’t be able to make sweeping changes immediately, but they will likely be able to put more pressure on Shaw to deliver results.
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