Alan Shaw, Chief Executive Officer of Norfolk Southern, testifies during a Senate Commerce, Science and Transportation Committee hearing titled “Improving Rail Safety in Response to the East Palestine Derailment” in Washington, USA , March 22, 2023.
Evelyn Hockstein | Reuters
Norfolk South– Unions and pension funds are expected to back activist Ancora’s full slate of seven directors at the railroad’s shareholder meeting later this month, two different ISS proxy advisory services said.
Taft-Hartley Advisory Services and ISS Social Advisory Services, which focus their recommendations on regulated unions and socially responsible investors respectively, said in their reports, both of which were viewed by CNBC, that a Ancora’s majority would help fight government “negligence.” current board of directors and address its “serious liability concerns.”
“The proxy contest centers on a debate over which management team is best suited to move the company forward, so it is important to give the dissident a strong enough voice to make their case for a change in direction be duly taken into account,” both parties said. reports report.
The recommendations also express support for Ancora CEO Jim Barber’s choice as a “credible” director and general manager, undermining criticism that his lack of rail experience was a liability. The former UPS executive “appeared to be a competent candidate with experience and skills that should be transferable to the rail industry,” according to reports.
The main advisory arm of ISS and Glass Lewis, the two proxy giants, had already said shareholders should support most of Ancora’s nominees at Norfolk Southern’s May 9 meeting. Glass Lewis approved six of Ancora’s directorial choices, including Barber.
ISS had previously endorsed five of Ancora’s nominees, declining to support the activist investors’ proposed CEO, Barber, but noting that he would likely also be a competent leader.
Thursday’s news “represents an important message to union pension plans and businesses that prioritize both socially responsible investments and value enhancement,” Ancora said in a statement to CNBC, adding that Ancora’s precisely planned three-year rail strategy “differs greatly from Norfolk Sothern’s rail resilience”. model” and did well at the four other publicly traded Class I railroads.
The proxy advisors’ endorsements so far have underpinned a clear mandate for change at the troubled railroad, which has underperformed its stock market peers and is still grappling with the fallout from a derailment in East Palestine, Ohio.
The ISS’s two more targeted recommendations carry particular weight in light of the derailment, which caused the release of more than 100,000 gallons of toxic chemicals into the environment, and because of the outsized influence of unions in the railway industry.
Union support was split between management and the activist investor. Two different Teamsters unions support the activist, making up about 42 percent of the NSC’s unionized workforce. Another coalition of unions supports management.
The union support is unusual for railroad activist campaigns, which typically focus on cutting costs and staffing levels to improve the operating ratio, a key financial metric for railroads.
But Ancora managed to obtain the support of unions and several shareholders. Neuberger Berman said earlier he would support Ancora’s arguments for change at Norfolk Southern, while Canadian asset manager EdgePoint also reiterated Thursday it would vote on its actions with the activist. (EdgePoint initially partnered with Ancora’s campaign at Norfolk Southern, but dissolved that deal months earlier)
Major institutional shareholders include Vanguard, BlackRock, State Street and Dodge & Cox, as well as the California pension funds, CalPERS and CalSTRS, and the Colorado Public Pension Fund.
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