Activist investor group falls short of Norfolk Southern takeover

Ancora Holdings Group got three new board members elected but failed to get majority control
A Norfolk Southern logo is seen at the Norfolk Southern headquarters building from W. Peachtree Street NE in Atlanta on Tuesday, April 4, 2023. 
 Miguel Martinez /

Credit: Miguel Martinez

Credit: Miguel Martinez

A Norfolk Southern logo is seen at the Norfolk Southern headquarters building from W. Peachtree Street NE in Atlanta on Tuesday, April 4, 2023. Miguel Martinez /

An activist investor group that seeks to reform Atlanta-based Norfolk Southern got three new board members elected to the railroad’s board — but failed to gain majority control of the board and effect a plan to replace the company’s CEO Alan Shaw, according to preliminary results of a shareholder vote Thursday.

Norfolk Southern, beleaguered by criticism for more than a year, has incurred more than $1.6 billion of charges since its February 2023 derailment of a train carrying hazardous materials in East Palestine, Ohio. Its financial performance has suffered from the additional expense as the company has spent much attention on responding to the disaster and its aftermath.

On Thursday, the company’s shareholders voted in 10 of Norfolk Southern’s 13 proposed board members, and voted out three of the company’s nominees, including its board chair Amy Miles.

Instead, shareholders voted in three of activist investor firm Ancora Holdings Group’s seven proposed board nominees, placing on the board William Clyburn Jr., a Democrat and former vice-chair of the U.S. Surface Transportation Board; Sameh Fahmy, a former Kansas City Southern railroad executive; and Gilbert Lamphere, chairman of MidRail Corp.

The results signal shareholders are showing some dissatisfaction with the company’s current management by voting in some of Ancora’s proposed board members.

But management also said the vote — for most of the company’s proposed board slate — means “shareholders recognize that positive change is underway at Norfolk Southern.”

“Together, we are building a safer, more profitable railroad, closing the margin gap with our peers, and ultimately growing value for our shareholders,” Norfolk Southern said in a statement after the vote. The company announced results of a preliminary vote count at the meeting, with final results to be tabulated and certified in coming days.

Since East Palestine, Mr. Shaw has been willing to come to the table on safety and improve the railroad. He's been listening to his employees – and that's been evident in the progress made on multiple fronts.

- Transportation Communications Union/International Association of Machinists President Artie Maratea

Ohio-based Ancora is an investment firm that owns an equity stake in Norfolk Southern, and offers investment advisory, wealth management, retirement plan and insurance services to clients.

Ancora wanted to replace seven people on the 13-member board to gain majority control and replace Shaw with former UPS executive Jim Barber as CEO. Ancora also wanted to install former CSX executive Jamie Boychuk as chief operating officer.

Ancora had argued that its plans to revamp the railroad would improve its service, safety and long-term value.

Shaw said during the meeting that he was ”grateful to our shareholders for their continued valuable feedback. We want you to know that we are listening.”

Ancora’s president of its alternatives group, Jim Chadwick, gave a fiery statement during the shareholders meeting, saying: “This was a referendum for change.”

“We intend to keep on fighting,” he said. “Our newly elected board candidates will work to repair the strained relationships at Norfolk Southern.”

Chadwick said Shaw “has missed earnings estimates for six quarters in a row” and said the railroad has “destroyed a town in our own state.”

He also said he had a message for shareholders who did not support Ancora’s proposals.

“For the passive investors, if anything should go wrong here, and there’s another derailment and people die, this is on you. ... What happens at Norfolk Southern now is on your firms and your conscience.”

Shaw took a more conciliatory approach during the meeting, saying: “We are confident that Norfolk Southern will build a strong and constructive relationship with our new directors.”

The new board members nominated by Ancora will be joined by two new members nominated by Norfolk Southern and elected to the board: former Delta Air Lines CEO Richard Anderson and Mary Kathryn “Heidi” Heitkamp, a former U.S. senator from North Dakota.

It’s yet to be seen how the shift in the makeup of the board could affect the company’s direction in the future.

The first step toward turning around Norfolk Southern has been taken by electing Messrs. Clyburn, Fahmy and Lamphere. Given that we have no standstill agreement and a clear mandate from a critical mass of shareholders, we will continue to hold Mr. Shaw to account and push for the appointment of a qualified operator who can actually drive shareholder value.

- Ancora Holdings Group CEO Fred DiSanto

Norfolk Southern had defended its strategy by saying under Shaw’s leadership and its board, it was “building a more resilient, productive railroad to deliver long-term shareholder value.”

During the meeting, Norfolk Southern fielded questions from shareholders, including one who asked why the company this year hired as its chief operating officer John Orr, who was chief transformation officer at Canadian Pacific Kansas City (CPKC).

The appointment of Orr as COO as the railroad faced pressure from Ancora’s bid for control cost Norfolk Southern $35 million, a recent filing said. That includes $25 million Norfolk Southern previously said it had agreed to pay CPKC for a waiver of Orr’s noncompete provisions and other “financial and commercial considerations.”

Shaw said Orr’s “performance history as a disciplined and thoughtful operator makes him an ideal fit as we look to execute our balanced strategic plan that will deliver top-tier earnings and revenue growth and industry competitive margins.”

The Brotherhood of Locomotive Engineers and Trainmen union, which represents workers at Norfolk Southern and switched allegiance from management to Ancora before the vote, on Thursday issued a statement from its general chairmen saying: “It’s understandable why shareholders made a split decision.”

“Alan Shaw and his team showed real leadership after the East Palestine disaster and made major moves to make the railroad safer and more competitive,” the union said. “However, changes in his team and strategy in recent weeks left many stakeholders and shareholders feeling uncertain about the railroad’s future direction.”

While we certainly do not agree with Mr. Shaw on everything, we asked for him to remain because we believe he has made meaningful safety improvements since the train derailment in East Palestine, Ohio last year. We also believe his leadership would better serve rail customers, workers, and shareholders in the long run.

- Greg Regan, president of the Transportation Trades Department of the AFL-CIO

Institutional Shareholder Services (ISS), a shareholder advisory firm, recommended before the vote that shareholders support five of Ancora’s seven nominees and voting out Miles as board chair, but did not support the replacement of the company’s leaders.

ISS in a report cited an “ongoing failure by the board to prioritize the best interest of shareholders” and said Miles’ leadership of the board “coincided with many of the concerning developments” underpinning Ancora’s case for change.

“Although there is a clear case for change, (Norfolk Southern) is not a broken company, and operational performance does not reflect a situation so dire as to suggest that a change in board control and an accompanying overhaul of strategy and leadership is immediately required,” ISS wrote in its report.