All Aboard Episode 027: Activist Investors are Nothing New

[AllThingsTrains]

Norfolk Southern is fighting an Ohio-based activist investor, Ancora Holdings, who is seeking to remove CEO Alan Shaw and implement a host of changes at the Atlanta-based carrier. NS isn't the first to face an activist investor group and won't be the last, so in today's episode of The All Aboard Podcast, Phil breaks down the NS-Ancora conflict, and talks about historical episodes, such as Robert R. Young's fight for NS predecessor New York Central. Watch, share, and subscribe!

https://www.allthingstrains.com/post/ba ... -the-rails

[Gilbert B Norman]

The Journal reports that "things not looking good" for "Shaw and Company" to hang on to the throttle at NS.

Fair Use:

..Norfolk Southern leaders were dealt a heavy blow in their proxy fight with activist investor Ancora Holdings on Monday after proxy advisory firm Glass Lewis endorsed six of Ancora’s seven proposed board nominees.

In a report, Glass Lewis said Ancora presented “a compelling case” for overhauling Norfolk Southern’s current leadership, including Board Chair Amy Miles and Chief Executive Alan Shaw.

“Based on our review, we believe the operating performance of the company has been consistently worse than its peers for an extended period,” the report said.

I was quite alive and in secondary school following proxy fights in the pages of The Times for RRY's control of the NYC and Pat's fight for the NY,NH,&H.

As the topic originator notes. Proxy fights are nothing new in the railroad industry.

[Gilbert B Norman]

Shaw's safe, however "raider" Ancora Holdings will seat three directors:

Wall Street Journal

Fair Use:

Norfolk Southern embattled chief can keep his job.

The freight railroad’s shareholders on Thursday voted against an activist investor’s proposal to unseat Alan Shaw as CEO. The investor, Ancora Holdings, scored a partial victory as shareholders voted to replace three members of the company’s 13-person board.

Ancora has criticized Norfolk’s operational and financial performance as well as its handling of the train derailment that resulted in the release of toxic chemicals in a small Ohio town. Ancora was pushing for seven seats on the board and demanding the replacement of both Shaw and Norfolk’s chief operating officer.

[Shortline614]

A win for Norfolk Southern, with some *'s attached. Certainly a loss for Ancora. My impression was that Ancora was expecting a repeat of the 2012 CP proxy "fight," IE: current management is utterly decimated by the raiders. This needless to say, did not happen.

Interestingly enough, the individual investors mostly voted for Ancora, while the institutional investors did not. (Ancora chastised those investors in their loosing statement, prematurely blaming them for any East Palestine repeat.) I guess the institutional investors looked at Ancora's plan and said, "this sounds great, but we have no confidence in your ability to pull this off." Between Ancora's lack of knowledge on railroad safety and operations, plus the fact they wanted to elevate a non-railroader to oversee major operational changes, I don't blame them.

*The fact that Shaw won by such a small margin, (just over 50%) means he will have far less breathing room to continue implementing his plan than many would have liked.
*Ancora got three of its board candidates elected, plus NS panic-hired John Orr. This means that elements of PSR will remain at NS.

Will be interesting to see how this plays out. Shaw is still on thin ice and if he doesn't deliver, I could see him out one way or another soon.

(Disclaimer: voted for current management.)

[QB 52.32]

*Ancora got three of its board candidates elected, plus NS panic-hired John Orr. This means that elements of PSR will remain at NS.

Whether Duncan or Orr, Shaw or no-Shaw, NS slate or activist slate of Directors, elements of PSR have and will continue to remain with no change at NS.

Unless coal's decline is reversible within the industry's revenue growth challenges and/or demands upon our capital markets change, or unless and until rail can significantly up its fuel/emissions competitive advantage in the race against truck technology and/or government changes course driving modal shift to rail, PSR elements will remain with the focus upon an improved merchandise carload business.

What has changed along PSR's ~30-year history comes from the impact of a 100-year pandemic within the wider history of labor relations and network disruptions over that timeframe with the need to calm and change relations with labor, in turn calming shipper and government relations as well.

With peer CSX also simultaneously responding but out in front after a very fast, disruptive transition to PSR, the crux of NS' activist battle was along those lines as well the focus, speed, and organizational capacity to fix their problematic merchandise network business visa vi their decision to first work on their intermodal network business with applied PSR principles.

As part of NS winning this particular race my take is that Gil Lamphere, whose financier role has been interwoven from PSR's start and recognizes the strategic railroad revenue growth challenges within rail's ecosystem, will be a good addition to the NS Board across the challenging issues NS faces between management and owner-investors in more quickly closing their widened margin gap against CSX but afforded an extra year over the activist plan.