A Norfolk Southern train is en route on Feb. 14, 2023 in East Palestine, Ohio. Earlier in the month a derailment sent millions of pounds of toxic chemicals into the environment and forced thousands of people to evacuate.
Angelo Merendino | Getty Images News | Getty Images
Activist investor Ancora received a powerful endorsement in its efforts to secure a board change and to oust Norfolk Southern CEO Alan Shaw on Monday, when proxy advisor Glass Lewis recommended the railroad’s shareholders vote for 6 of Ancora’s board nominees.
“We believe Ancora has presented a compelling case for supporting a substantial overahul of the Company’s current leadership,” Glass Lewis said in its report.
The recommendations for the activist nominees, rare at a company of NSC’s size and in its industry, could influence how thousands of investors with millions of shares vote ahead of Norfolk Southern’s shareholder meeting on May 9.
The proxy advisor recommended that shareholders vote in support of Ancora nominees Betsy Akins, Jim Barber, William Clyburn, Sameh Fahmy, Gilbert Lamphere and Allison Landry.
Significantly, the proxy advisor also recommended shareholders withhold their support from current CEO Shaw and board chair Amy Miles.
Furthermore, Glass Lewis said Barber, Ancora’s pick for CEO, and Jamie Boychuk, the activist’s pick for COO, “have compelling credentials and track records.”
Ancora is seeking to oust Shaw in favor of former UPS executive Jim Barber, who began his 35-year career in the eighties as a Teamster-represented delivery driver and ended it as COO of one of the world’s largest logistics companies. He lacks direct experience as a railroad executive but noted that UPS was one of the biggest rail customers worldwide in a CNBC interview earlier this month.
Ancora also seeks to install former CSX executive Jamie Boychuk as Barber’s chief operating officer. Boychuk spent 20 years at Canadian National before joining CSX. Like Barber, Boychuk began his career as a union-represented conductor and rose through the ranks at CN and CSX, where he was executive vice president for operations until 2023.
Earlier this week, two Teamsters unions, representing around half of Norfolk Southern’s unionized workforce, said they would support Ancora’s plan for change. Their support, coupled with Glass Lewis’ endorsement, gives the activist powerful ammunition as it seeks to convince shareholders.
Proxy advisor support historically key for activists
A general view of the exterior of the headquarters of Norfolk Southern on April 1, 2023 in Atlanta, Georgia.
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Winning support from proxy advisors is a top priority for both activists and management. It is atypical for activists to receive the level of support that Ancora did at a company this large, but not unprecedented.
ISS backed Pershing Square Bill Ackman’s seven director nominees at the former Canadian Pacific in 2017. At CP, however, Ackman had enlisted railroading legend E. Hunter Harrison as his CEO pick.
But support from proxy advisors does not guarantee a slam dunk. Nelson Peltz’s 2017 campaign at Proctor & Gamble won the endorsement of both ISS and Glass Lewis, another influential proxy advisor, but still ended up being razor close.
A settlement seems unlikely, but not impossible. NSC CEO Shaw has previously told CNBC that the company offered “a couple” board seats to the activist but was rebuffed. Ancora has repeatedly made clear that it holds Shaw accountable for Norfolk Southern’s underperformance and what it describes as mismanagement around the East Palestine, Ohio derailment.
The activist has previously said that any deal would require Shaw to step out as CEO.
NSC and Ancora will continue to make their case to investors large and small with little more than a week before the May 9 shareholder meeting. ISS, another influential proxy advisory firm, is expected to issue its recommendation this week.
WATCH: Activist Ancora makes its case for a new Norfolk Southern CEO and management
