Norfolk Southern shares down 3.2% after shareholders' split decision in board battle

By James Rogers

Norfolk Southern and activist Ancora have been trading barbs ahead of the company's annual shareholder meeting Thursday

Shares of Norfolk Southern Corp. are down 3.2% Thursday after a preliminary count of shareholder votes indicated a split decision in the keenly-fought battle for control of the company's board.

Shareholders voted to elect 10 of the company's 13 director nominees, including CEO Alan Shaw, at Thursday's annual shareholder meeting, Norfolk Southern (NSC) said, in a statement. Three nominees proposed by activist Ancora Alternatives were elected to the company's 13-member board. Ancora Alternatives is the alternative asset management division of Ancora Holdings Group, which holds a large equity stake in Norfolk Southern.

"Our shareholders recognize that positive change is underway at Norfolk Southern. Moving forward, we will continue building on the significant progress Alan Shaw, John Orr, and the entire team have already achieved," said Norfolk Southern, in a statement.

Orr, a former chief transformation officer at Canadian Pacific Kansas City Ltd. (CP) (CA:CP) and former executive vice president of operations at Kansas City Southern, was appointed Norfolk Southern's chief operating officer earlier this year.

Related: In Norfolk Southern board battle, proxy adviser Egan-Jones throws weight behind activist Ancora

Ancora had put forward seven nominees to the Norfolk Southern board and also planned to replace Alan Shaw.

"It's an extremely positive development for shareholders that this campaign has driven significant changes at Norfolk Southern, including the ouster of the Board Chair, Governance Committee Chair and Compensation Committee Chair," said Ancora Holdings CEO Frederick D. DiSanto and Ancora Alternatives President James Chadwick, in a statement.

"Notably, CEO Alan Shaw received what we deem a resounding vote of no confidence based on preliminary voting results that indicate he barely received support from holders of 50% of the Company's outstanding shares."

"Given that we have no standstill agreement and a clear mandate from a critical mass of shareholders, we will continue to hold Mr. Shaw to account and push for the appointment of a qualified operator who can actually drive shareholder value," they added.

Related: Norfolk Southern touts progress and slams activist Ancora's 'reckless' plan in board battle

Norfolk Southern and Ancora have been trading barbs ahead of the Class I railroad operator's annual meeting. Earlier this year, Ancora launched its bid to take control of the company's board, which Norfolk Southern urged its shareholders to reject.

"We're glad that the battle for control of Norfolk Southern is over for now," said Brotherhood of Locomotive Engineers and Trainmen General Chairmen Dewayne Dehart, Jerry Sturdvant and Scott Bunten, in a statement. "It's understandable why shareholders made a split decision."

"Alan Shaw and his team showed real leadership after the East Palestine disaster and made major moves to make the railroad safer and more competitive," added Dehart, Sturdvant, and Bunten, who represent members at Norfolk Southern.

Related: Proxy-advisory firm ISS steps into Norfolk Southern's board battle with activist Ancora

But the union pointed to both Norfolk Southern and Ancora's support for Precision Scheduled Railroading "PSR" which it described as "unsafe" and "a recipe for decline and ultimate failure."

PSR focuses on the movement of individual train cars, rather than whole trains. A key railroad industry trend of recent years, PSR aims to boost efficiency by streamlining operations.

"Despite our issues with Ancora over PSR, the activist investors made commitments to expand the C3RS incident reporting program systemwide and they were committed to improvements in training programs, among other positive changes," the union said. "They made it clear they had no issue with maintaining two-person crews."

Related: War of words over Norfolk Southern board battle intensifies as railroad slams activist Ancora's labor negotiation

The results are considered preliminary until final results are tabulated and certified by an independent Inspector of Elections, Norfolk Southern said. Final results will be reported on a Form 8-K filed with the Securities and Exchange Commission.

-James Rogers

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05-09-24 1211ET

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