Norfolk Southern shareholders will decide Thursday whether they support investors seeking to fire CEO

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.

Ancora Holdings received significant support during the campaign from major investors like EdgePoint Investment Group, two major rail unions and some customers. But the rest of the rail staff, several key regulators and a number of other customers supported the management.

If Ancora’s seven candidates are elected, it would give them the votes they need to advance their plan to fire the CEO and restructure operations at the railroad, which has been in the spotlight since its disastrous derailment in February 2023 in Eastern Palestine. , Ohio.

If shareholders only support some of their board nominees, Ancora will not be able to make radical changes immediately.

The railroad and Ancora disagree on whether CEO Alan Shaw’s strategy of keeping more workers available during a recession to be prepared to handle the eventual rebound is the best way to run Norfolk Southern and whether he is the best man to run the railroad.

Ancora CEO candidate Jim Barber, who previously served as UPS’s chief operating officer, said keeping more workers available during downturns was wasteful. That’s why Ancora wants to implement the industry standard Precision Scheduled Railroading, designed to minimize the number of workers, locomotives and railcars a railroad needs.

Ancora’s plan would rely on running fewer, longer trains on a tighter schedule and switching cars between trains less frequently to streamline operations. Shaw argued that running the railroad too thin would jeopardize the safety and service improvements Norfolk Southern has seen since the derailment.

Rail unions have said they believe precisely scheduled rail has made the industry more dangerous and derailments more likely because inspections are very rushed and preventive maintenance can be neglected.

If Ancora succeeds in electing its seven candidates, it will have the power to fire Shaw and its new chief operating officer, John Orr, whom it just hired in March after paying $25 million to another path of iron for permission. Ancora wants to appoint Barber as CEO and hire former CSX rail operations chief Jaimie Boychuk as Norfolk Southern’s chief operating officer.

Ancora expects to be able to reduce expenses by more than $800 million in the first year and an additional $275 million after three years. Investors say they don’t plan layoffs, but want to use attrition to eliminate about 1,500 jobs over time.

Norfolk Southern said its own plan to make the railroad more efficient would generate about $400 million in savings over two years and improve its profit margin. Analysts question whether Norfolk Southern will be able to catch up with other major freight railroads, all of which are also working to become more efficient.

If Ancora doesn’t get all of its directors elected, investors will likely be able to put more pressure on Shaw to deliver.

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