WASHINGTON — The Transportation Trades Division of the AFL-CIO today urged Norfolk Southern shareholders to reject an activist investor’s bid to gain control of the railroad.
Ancora Holdings, which has been critical of Norfolk Southern’s response to the Feb. 3, 2023, hazardous materials derailment in East Palestine, Ohio, as well as the railroad’s lagging financial and operational performance, is leading an investor group that has proposed a majority slate of eight directors. Ancora says it would replace NS CEO Alan Shaw and Chief Operating Officer Paul Duncan.
“We urge you not to replace Mr. Shaw with Ancora’s proposed candidate, as it will have lasting deleterious effects on the safety and service of NS, and the railroad industry as a whole,” TTD President Greg Regan wrote. “Replacing Mr. Shaw with Ancora’s proposed candidate would be a tremendous mistake and a detrimental step for Norfolk Southern, its shareholders, and the entire Class I freight rail industry.”
Regan noted that NS has made progress improving safety and collaborating with unions under Shaw’s leadership.
“We do not see eye to eye with Mr. Shaw on everything and believe that he needs to do more to regain the trust of the residents of East Palestine, Ohio, and Darlington, Pennsylvania, as well as Norfolk Southern’s workers. However, he has taken meaningful steps in recent months to make Norfolk Southern a better railroad,” Regan wrote.
The union chief also was critical of Ancora’s plan for the railroad, which it says would cut costs, slash employment, and hurt safety and service. “Ancora’s presentation to shareholders about Norfolk Southern’s current performance only underscores Ancora’s whole focus on implementing a more extreme version of so-called ‘Precision Scheduled Railroading’ and putting short-term profits above all else, including the long-term functional operation of Norfolk Southern,” Regan wrote.
“Let us be clear: implementing this failed strategy will destroy shareholder value and irrevocably damage the company. Once Ancora has extracted value from the company, it will move on and leave shareholders, employees, customers, and the government to pick up the pieces,” Regan wrote.
Ancora, Regan noted, was among the activist investors who waged a proxy battle against Bed Bath & Beyond in 2019. The retailer ultimately settled with the activists, who gained four seats on the company’s board.
“Ancora … made promises to shareholders that are eerily similar to what they are promising here: bring in a new management team and increase sales and net profits, all while cutting costs at the same time. Contrary to Ancora’s promises, Bed Bath & Beyond declared bankruptcy just four years later in 2023,” Regan wrote. “While one activist investor made almost $58 million in the process, the bankruptcy wiped out a large amount of shareholder value. It is notable that Ancora’s cost-cutting actions took away the things that customers loved about the company and turned them away from shopping there, leading to a precipitous drop in revenue.”
Ancora is touting former UPS executive Jim Barber for the NS chief executive job and Jamie Boychuk, CSX’s former executive vice president of operations, as its chief operating officer candidate.
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