The control of Norfolk Southern, one of America’s major freight railroads, is up for grabs at its annual meeting, following a massive derailment in February 2023 that led to the release of toxic chemicals. The fight for control could impact the future of the railroad, including the use of longer trains, which has been criticized by rail safety advocates. Current management, credited with improving safety practices since the derailment, is being challenged by activist investor Ancora Holdings, who wants to implement changes to make the railroad more profitable.
Ancora is seeking to elect its own slate of directors and implement a new operating philosophy known as Precision Scheduled Railroading (PSR). While PSR has been met with opposition from rail unions and customers, Norfolk management appeared to be moving away from it following the derailment. Norfolk Southern CEO Alan Shaw and his team have received praise for their efforts to improve safety since the incident, drawing support from some who previously criticized the railroad’s performance.
The fight for control has split the railroad’s unions, with some supporting current management, while others endorse Ancora. Norfolk’s recent efforts to counter Ancora’s takeover plans have caused concern among some unions, who believe the changes are taking the railroad in the wrong direction. Labor contracts and proposed federal rules regarding staffing on trains are also at play in the decision-making process for the unions.
Despite support from some unions and shareholders, Norfolk Southern’s performance has been lacking, with the company’s stock down 8% since the derailment. Ancora’s takeover effort has been endorsed by leading shareholder services firms, Glass Lewis and ISS, who believe that a substantial overhaul of the company’s leadership is necessary. The decision will ultimately rest with the shareholders, who are likely to consider the financial results of the railroad in making their choice.
The battle for control of Norfolk Southern has drawn attention to the issue of railroad safety, with stakeholders considering the implications of the takeover on the future operations of the railroad. Both management and activists are pushing for changes that they believe will improve the profitability and safety of the railroad, with competing visions for its direction. The outcome of the annual meeting will have far-reaching consequences for the future of Norfolk Southern and the rail industry as a whole.
