Glass Lewis endorses 6 of activist Ancora’s nominees for Norfolk Southern board

Activist investor Ancora acquired a robust endorsement in its efforts to safe a board change and to oust Norfolk Southern CEO Alan Shaw on Monday, when proxy advisor Glass Lewis advisable the railroad’s shareholders vote for 6 of Ancora’s board nominees.

“We believe Ancora has presented a compelling case for supporting a substantial overhaul of the Company’s current leadership,” Glass Lewis mentioned in its report.

The suggestions for the activist nominees, uncommon at an organization of NSC’s measurement and in its trade, might affect how 1000’s of buyers with tens of millions of shares vote forward of Norfolk Southern’s shareholder assembly on May 9.

The proxy advisor advisable that shareholders vote in help of Ancora nominees Betsy Akins, Jim Barber, William Clyburn, Sameh Fahmy, Gilbert Lamphere and Allison Landry.

Significantly, the proxy advisor additionally advisable shareholders withhold their help from present CEO Shaw and board chair Amy Miles.

Furthermore, Glass Lewis mentioned Barber, Ancora’s decide for CEO, and Jamie Boychuk, the activist’s decide for COO, “have compelling credentials and track records.”

Ancora is looking for to oust Shaw in favor of former UPS govt Barber, who started his 35-year profession within the eighties as a Teamster-represented supply driver and ended it as COO of one of the world’s largest logistics corporations. He lacks direct expertise as a railroad govt however famous that UPS was one of the largest rail clients worldwide in a CNBC interview earlier this month.

Ancora additionally seeks to put in former CSX govt Boychuk as Barber’s chief working officer. Boychuk spent 20 years at Canadian National earlier than becoming a member of CSX. Like Barber, Boychuk started his profession as a union-represented conductor and rose by the ranks at CN and CSX, the place he was govt vp for operations till 2023.

Earlier this week, two Teamsters unions, representing round half of Norfolk Southern’s unionized workforce, mentioned they’d help Ancora’s plan for change. Their help, coupled with Glass Lewis’ endorsement, provides the activist highly effective ammunition because it seeks to persuade shareholders.

“We are also inclined to agree with Ancora’s critique of the Company’s current operating strategy as being one that relies on inherently incompatible railroading concepts,” the proxy advisor mentioned in its report.

NSC had initially shied away from pursuing a precision scheduled railroading, or PSR, based mostly strategy in favor of a so-called “resiliency” mannequin. Ancora, then again, had argued from practically the outset that Norfolk Southern’s clients, workers and buyers could be finest served with a PSR-rooted working plan.

PSR focuses on ensuring trains and crews keep transferring to attenuate wasted hours and gear, by working on a hard and fast schedule like passenger trains relatively than rolling trains solely after they’re full of cargo. Investors are likely to reward corporations that undertake PSR and may simply observe its implementation by way of a railroad’s working ratio, which is working bills as a proportion of income.

A resiliency mannequin, in contrast, maintains a strategic reserve of trains and automobiles all through downturns in demand, which occur steadily in rail.

The firm has since modified its tune, appointing veteran railway govt John Orr to implement an working plan that mixes each PSR and resiliency approaches. Both the activist and a few analysts have criticized the plan.

ISS backed Pershing Square Bill Ackman’s seven director nominees on the former Canadian Pacific in 2017. At CP, nonetheless, Ackman had enlisted railroading legend E. Hunter Harrison as his CEO decide.

But help from proxy advisors doesn’t assure a slam dunk. Nelson Peltz’s 2017 marketing campaign at Proctor & Gamble gained the endorsement of each ISS and Glass Lewis, one other influential proxy advisor, however nonetheless ended up being razor shut. 

A settlement appears unlikely, however not inconceivable. NSC CEO Shaw has beforehand instructed CNBC that the corporate provided “a couple” board seats to the activist however was rebuffed. Ancora has repeatedly made clear that it holds Shaw accountable for Norfolk Southern’s underperformance and what it describes as mismanagement across the East Palestine, Ohio derailment. 

The activist has beforehand mentioned that any deal would require Shaw to step out as CEO.

NSC and Ancora will proceed to make their case to buyers massive and small with little greater than every week earlier than the May 9 shareholder assembly. ISS, one other influential proxy advisory agency, is predicted to difficulty its advice this week.

WATCH: Activist Ancora makes its case for a new Norfolk Southern CEO and management