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 East Palestine, Ohio in February 2023. The fight for control could determine the future of the railroad, including the use of longer trains, a practice criticized by some rail safety advocates. The current management of Norfolk Southern, led by CEO Alan Shaw, has been credited with improving safety practices at the railroad since the derailment and is facing a challenge from activist investor Ancora Holdings.
The battle for control has split the railroad’s unions, with disagreements on which management team would be best for safety and the railroad’s employees. Ancora seeks to have its own slate of directors elected and a new CEO and COO put in charge of the railroad, claiming that the current management is incapable of running a safe and profitable railroad. Ancora wants to implement the Precision Scheduled Railroading (PSR) operating philosophy to improve profitability, which is opposed by both rail unions and many rail customers.
Despite initial opposition to the takeover effort, the railroad’s unions are now split on the issue. While most unions remain supportive of current CEO Alan Shaw and Norfolk Southern’s management, some have switched their support to Ancora. The Brotherhood of Locomotive Engineers and Trainmen (BLET) initially endorsed Norfolk management, praising the safety improvements made since the derailment, but later decided to support Ancora’s slate and CEO choice due to concerns about Norfolk Southern’s direction under current leadership.
The decision on the control of Norfolk Southern will ultimately rest with the shareholders, who have been displeased by the company’s stock performance and financial results. Shares of Norfolk Southern are down since the derailment, and the company’s profit margin is lower than industry averages. The Ancora takeover effort has received endorsements from two leading shareholder services firms, Glass Lewis and ISS, who believe that a substantial overhaul of the company’s leadership is necessary for its success.
The unions and safety regulator have differing opinions on the leadership of Norfolk Southern, with some supporting the current management and others favoring Ancora’s proposed changes. Shaw and his team have been praised for prioritizing safety, employees, and customers, but Ancora believes that a change in leadership is necessary for the railroad’s success. The outcome of the annual meeting will have far-reaching implications for the future of Norfolk Southern and the railroad industry as a whole.