Norfolk Southern management fends off board takeover by Ancora

Taking aim at what he called “passive investors,” Chadwick said any further safety issues at Norfolk Southern, like last year’s derailment in East Palestine, Ohio, should be blamed on them.

“If anything goes wrong here, and there’s another derailment and people die, this is on you,” Chadwick said. “You ignored the recommendation of the proxy advisers, the unions and the company’s largest customer. You gave us literally no support, and we still won three board seats without you. What happens at Norfolk Southern is now on your firm’s and your conscience.”

The reference to the “largest customer” refers to the fact that Cleveland-Cliffs (NYSE: CLF), the steelmaker and producer of iron ore, backed the Ancora slate. Two Norfolk Southern unions did as well.

A statement put out by Ancora was more upbeat.

“It’s an extremely positive development for shareholders that this campaign has driven significant changes at Norfolk Southern, including the ouster of the Board Chair, Governance Committee Chair and Compensation Committee Chair,” Ancora said in a joint quote from Chadwick and Frederick DiSanto, chairman and CEO of Ancora. “This represents a loud and clear message to replace the Company’s unqualified CEO and reconsider its ineffective strategy, which has driven industry-worst customer delivery times, severe derailments and persistent share price underperformance.”

Chadwick, in a recent appearance on CNBC, provided a definition of success that does not appear to have included winning just three seats. 

“Look, there’s a lot of versions of success, but I think the message around the vote for seven, ultimately, that’s how we control our own fate and we have a plan and we believe we’re going to execute it,” Chadwick said in the interview.

Ancora also said Shaw’s vote to return as director “barely” topped 50%.

The incumbent board members defeated besides Miles, and whose positions were cited by Chadwick and DiSanto, were Jennifer Scanlon and John Thompson. Scanlon was chair of the Governance and Nominating Committee, and Thompson was chair of the Human Capital Management and Compensation Committee.

Citing those defeats, the Ancora statement said the vote was “a referendum for change.”

“We aren’t here to fight with you,” Chadwick said at the annual meeting. “But your CEO missed earnings estimates for six quarters in a row. It has destroyed a town in our own state. [Ancora is Cleveland-based.] And if this underperformance continues, we will hold you accountable.”

Former UPS executive Jim Barber Jr. was Ancora’s pick to be CEO if it was able to oust Shaw.

Ancora nominees elected to the board were William Clyburn Jr., a former federal regulator and now an independent rail consultant, and Gilbert Lamphere, chairman of MidRail Corp. and co-founder of MidSouth Rail Corp. who has been on the boards of Canadian National (NYSE: CNI) and CSX (NASDAQ: CSX), and Sameh Fahmy, former EVP of precision scheduled railroading at Kansas City Southern, which is now part of Canadian Pacific Kansas City Ltd. (NYSE: CP).

With the three Ancora-backed members now on the board, the joint Chadwick/DiSanto statement said “the campaign for change at this great American railroad will continue.”   

It will be doing so on a board where more than half the members are new. Four existing Norfolk Southern board members did not stand for reelection to a one-year term, and their replacement will be joined by the three Ancora nominees. 

In his remarks on the call, Shaw gave an upbeat outlook for Norfolk Southern without attacking Ancora.

He cited recent contracts with labor unions, a reduction in the mainline accident rate of 38%, a reduction in terminal dwell time, an increase in train speed and numerous other positive indicators. 

“We are not done,” Shaw said. “We will deliver on the promise to remake ourselves in a more productive and efficient way.”

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