The shareholders of Norfolk Southern will vote today to determine whether to support Ancora Holdings’ bid to replace the current board of directors and oust CEO Alan Shaw. Ancora, an investment firm, has garnered backing from prominent figures such as EdgePoint Investment Group, two major rail unions, and certain customers. However, the majority of rail labor, crucial regulators, and other clients have remained loyal to the current leadership. In the event that Ancora secures all seven of its nominated positions, they will have the authority to dismiss Shaw and revamp the company’s procedures. Alternatively, if shareholders elect only some of Ancora’s proposed candidates, the activists will lack the ability to instigate radical modifications promptly.
Ancora’s preferred CEO candidate, James Barber (formerly UPS’ chief operating officer), believes that maintaining a surplus workforce during sluggish periods is unnecessary. As a result, Ancora intends to execute the standard practice of Precision Scheduled Railroading, which aims to reduce staffing levels, locomotives, and railcars. This plan revolves around running fewer, lengthier trains while minimizing the frequency of interchanging railcars among trains, thereby streamlining operations. Nonetheless, Shaw argues that implementing this strategy could compromise the advancements in safety and service that Norfolk Southern has achieved following its calamitous derailment in East Palestine, Ohio, in February 2023. Some rail unions argue that Precision Scheduled Railroading has increased hazards and raised the likelihood of derailments due to rushed inspections and possibly overlooked preventive maintenance.
If Ancora succeeds in securing all seven seats, they will possess the authority to dismiss Shaw and his recently recruited COO, John Orr, whom Norfolk Southern paid $25 million to acquire. Ancora intends to substitute Barber for Shaw as CEO and enlist Jaimie Boychuk, a previous CSX railway operations head, to oversee Norfolk Southern’s scheduling and operation procedures. Ancora predicts that it can save over $800 million in expenditures within the initial year and an additional $275 million by the conclusion of three years. According to Ancora, no job cuts are intended, and the organization will instead utilize attrition to remove roughly 1,500 jobs gradually.
In contrast, Norfolk Southern anticipates that its initiative to improve the efficiency of the business will yield approximately $400 million in savings within two years and enhance profit margins. Analysts have raised doubts about whether Norfolk Southern can match the progress of other significant freight railways pursuing similar measures. If Ancora fails to secure all seven seats, the investors will still be able to apply pressure to Shaw to accomplish results.
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