NORFOLK ACTIVIST WINS GLASS LEWIS SUPPORT FOR CEO OUSTER

(Bloomberg) -- The activist investor battling to replace Norfolk Southern Corp.’s leadership won the backing of Glass Lewis & Co., raising pressure on the railroad in the final days before a crucial shareholder vote.

Glass Lewis, an influential proxy adviser, recommended investors vote for six of the dissident nominees, including proposed Chief Executive Officer Jim Barber, according to a statement Monday from activist Ancora Holdings Group. The investor had aimed to install seven directors on Norfolk Southern’s board. Norfolk Southern pushed back against Glass Lewis’ report, calling it “flawed” and lacking “rigorous or thoughtful analysis.” 

The Glass Lewis recommendation “fails to recognize the deliberate and meaningful change we have set forth to build a safer, more profitable railroad,” Norfolk Southern said in a statement. Glass Lewis didn’t immediately respond to requests for comment.

Ancora is seeking to replace CEO Alan Shaw and also install a chief operating officer of its choosing, citing poor decision-making, weak operating results and an underperforming stock. The campaign comes in the wake of the costly derailment in East Palestine, Ohio, last year that drew national attention. The proxy vote is scheduled for May 9.

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Public support for Ancora’s slate has grown in recent days, with a pair of Teamsters divisions representing more than 40% of Norfolk’s unionized employees calling for leadership change. Both groups had previously been critical of Ancora and its proposals.

When Shaw became CEO in 2022, he advocated for a rethink of the precision scheduled railroading efficiency strategy that has dominated in the industry for more than a decade. Shaw argued that railroads had become so focused on costs they had forgotten how to grow. He pledged to keep workers on the payroll and continue investing in the business, even through downturns. 

But under pressure from Ancora, Shaw acquiesced to making profitability metrics a more explicit part of executives’ compensation math and hired John Orr, a PSR acolyte, as his chief operating officer. 

“We believe in loyalty, but not blind loyalty. The Norfolk Southern at the start of the proxy battle is not the same NS as today,” the general chairmen of the Brotherhood of Locomotive Engineers and Trainmen said in a statement. “Alan Shaw, who opposed PSR at the start of the battle, now appears to be a cheerleader for it.”

The BLET says it has entered into a memorandum of understanding with representatives for Ancora for commitments to certain safety and operational protocols that the union has sought, including a requirement for two-man crews, seniority protections and more say over training practices. 

Such an agreement would be in violation of the Railway Labor Act, which grants exclusive negotiating authority to company representatives, Norfolk Southern said in a separate statement Monday. “Ancora’s actions are a blatant attempt to buy votes through backdoor deals to take control of the company,” the railroad said.

In response, Ancora said the allegations are meritless and that its proposed management nominees aligned with the unions on “non-binding concepts and non-binding principles.”

The railroad’s other major unions have backed the existing management team and its strategy. 

Bloomberg reported Sunday that Cleveland-Cliffs Inc., a major customer of the railroad, has backed Ancora as well. 

(Updates with additional context on safety and union comment from the sixth paragraph.)

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2024-04-29T12:09:54Z dg43tfdfdgfd