Norfolk Southern Defeats Activist Attempt to Sack Rail CEO
(Bloomberg) -- Norfolk Southern Corp. investors backed a majority of its board nominees, a win for Chief Executive Officer Alan Shaw in a bitter fight with an activist intent on throwing out the railroad’s leaders.
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Shaw was among the 10 company-backed director candidates appointed Thursday in a closely watched shareholder vote. Activist investor Ancora Holdings Group came away with a partial victory as it placed three of its nominees on the board.
The results, which still must be certified, mark the culmination of a campaign that had become increasingly acrimonious in recent months, with Ancora accusing Shaw of poor decision-making that led to weak operating results and an underperforming stock. The activist was also critical of the rail giant’s handling of the fallout from a derailment last year in Ohio that spilled toxic chemicals and caused a national uproar.
Read More: Activist Wants to Fire Railroad CEO for His Lack of Ruthlessness
While the vote likely means that Shaw will remain in place, he’ll need to find common ground with a firm that now has several board seats. Norfolk said in a statement that it “will work constructively and collaboratively” on behalf of shareholders with the new-look board.
The company’s shares fell 2.5% in New York.
Ancora’s aim was to win majority board representation in order to force out Shaw and the chief operating officer, arguing that the executives weren’t focused enough on profitability and shareholder returns. The firm had intended to install Jim Barber, a former executive at United Parcel Service Inc., as Norfolk’s CEO and hire railroad executive Jamie Boychuk as COO.
The campaign led to the ouster of Chair Amy Miles, who was voted out Thursday. Norfolk said it would elect a new chair at its next meeting, to be scheduled in the coming weeks.
Among Ancora’s seven-person slate, it won support for three: William Clyburn Jr., Sameh Fahmy and Gilbert Lamphere. The investment firm said in a statement after the vote that it would “continue to hold Mr. Shaw to account and push for the appointment of a qualified operator who can actually drive shareholder value.”
The outcome was “disappointing” for Ancora, TD Cowen analyst Jason Seidl said in a note.
“With just three directors, Ancora only has a minority representation on the board and will likely find it difficult to steer change in their desired direction,” he said. “We believe the activist will continue to advocate for its CEO and COO candidates, but to little avail.”
‘Overwhelming Support’
Speaking at Thursday’s meeting, Ancora said it received “overwhelming support” from active shareholders but failed to get necessary backing from passive investors.
“For passive shareholders, if anything goes wrong here or if there is another derailment, it’s on you,” said Jim Chadwick, president of alternatives at Ancora. He added that his firm would still work with those investors.
The campaign generated heated rhetoric and split opinion among various stakeholders. A pair of Teamsters union divisions, proxy adviser Glass Lewis & Co. and customer Cleveland-Cliffs Inc. backed Ancora. In Norfolk’s corner were Lincoln Energy Solutions and Centennial Energy, as well as departing Surface Transportation Board Chair Martin Oberman. Adviser Institutional Shareholder Services also supported Shaw and several Norfolk board candidates.
Shaw took the helm in 2022, calling for a rethink of the precision scheduled railroading efficiency strategy that has dominated in the industry for more than a decade. His plans for change were upended by the derailment in East Palestine, Ohio, which damaged the company’s reputation and performance.
Under pressure from Ancora, Shaw acquiesced to making profitability metrics a more explicit part of executives’ compensation. He also hired John Orr, a PSR acolyte, as chief operating officer.
--With assistance from Brooke Sutherland.
(Updates with analyst comment, additional detail throughout)
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