Glass Lewis Backs 6 Activist Nominees for Norfolk Southern's Board

By Dean Seal

Norfolk Southern leaders were dealt a heavy blow in their proxy fight with activist investor Ancora Holdings on Monday after proxy advisory firm Glass Lewis endorsed six of Ancora's eight proposed board nominees.

In a report, Glass Lewis said Ancora has "presented a compelling case" for overhauling Norfolk Southern's leadership, including Board Chair Amy Miles and Chief Executive Alan Shaw.

"Based on our review, we believe the operating performance of the company has been consistently worse than its peers for an extended period," the report said.

Glass Lewis said it was further swayed by the fact that multiple labor unions are publicly supporting Ancora, raising questions about whether current management would be able to improve its relationship with Norfolk Southern's workforce.

Two of the three largest railroad unions, which represent 41% of Norfolk Southern's union workforce, pulled their support for Norfolk Southern's director slate last week and said they are now backing Ancora's dissident board candidates.

The influential proxy advisory firm also raised concerns about Norfolk Southern's decision last month to replace its chief operating officer with John Orr, the former chief transformation officer for Canadian Pacific Kansas City. To hire Orr away, Norfolk Southern had to pay the rival freight railroad $25 million in cash and provide other considerations related to the Meridian Speedway that the companies jointly operate.

Glass Lewis has endorsed six of Ancora's seven candidates, including Sameh Fahmy, a former executive at railroad Kansas City Southern. The endorsement didn't extend to former Ohio Gov. John Kasich.

The firm is also backing Ancora's picks for Jim Barber Jr., also a board nominee, and Jamie Boychuk, a former executive vice president of operations at CSX, to take over as chief executive and chief operating officer, respectively.

"It's not readily evident to us the company's current leadership had built up a sufficiently positive track record such that investors might reasonably have the patience to allow management to implement a relatively novel operating strategy," Glass Lewis said.

A representative for Norfolk Southern didn't immediately respond to a request for comment.

Ancora and other investors launched their proxy fight earlier this year, saying the railroad under current management has been operating inefficiently and failing to meet financial targets.

Separately on Monday, Norfolk Southern took a shot at Ancora for negotiating and signing a memorandum of understanding with The Brotherhood of Locomotive Engineers and Trainmen, one of the two unions that are now supporting Ancora.

Norfolk Southern is accusing Ancora and the union of reaching an unauthorized agreement that purports to offer specific concessions to the union in exchange for its support of Ancora's attempted takeover.

Ancora doesn't have the authority as a Norfolk Southern investor to enter into such an agreement and has violated Railway Labor Act rules by doing so, the railroad said.

A representative for Ancora said Norfolk Southern's claims are disingenuous.

"We ask shareholders to recognize that current leadership is simply making meritless allegations to distract from its lack of a credible plan and its inability to retain stakeholder confidence," the activist firm said.

Write to Dean Seal at dean.seal@wsj.com

Corrections & Amplifications

This was corrected at 9:03 a.m. ET because the original version incorrectly said the activist investor still has eight nominees, including former auto industry executive Nelda Connors, who has been removed from Ancora's candidate slate.

(END) Dow Jones Newswires

April 29, 2024 08:30 ET (12:30 GMT)

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