Activist investment firm Ancora Holdings Group called for new management and an overhaul of the board at Norfolk Southern Corp., the railroad that’s still reeling from a costly derailment last year in Ohio.
Ancora will nominate eight directors, including former Ohio governor John Kasich and a former executive with railroad Kansas City Southern, as part of its proxy fight with Norfolk Southern, according to a statement Tuesday. The investor proposed Jim Barber, the ex-chief operating officer of United Parcel Service Inc., to replace Alan Shaw as Norfolk Southern’s chief executive officer.
Norfolk Southern “has suffered for years due to its board’s poor decisions,” Ancora, which recently took a stake in the company, said in the statement. After Shaw was named CEO the railroad has had “industry-worst operating results, sustained share price underperformance and a tone-deaf response to the devastating East Palestine, Ohio, derailment.”
The railroad didn’t immediately respond to a request for comment.
Shaw, who vowed to improve customer service by not furloughing workers so aggressively during drops in freight demand, had been on the job less than a year before the derailment in February 2023. Norfolk Southern has paid out more than $1 billion for the accident, mostly for environmental remediation.
Norfolk Southern’s shares rose 1% as of 9:40 a.m. in New York.
The board slate includes Sameh Fahmy, who is credited with implementing at Kansas City Southern a strategy of cost cuts and operational improvements known as Precision Scheduled Railroading. William Clyburn, another board candidate, has extensive rail experience, including with the Surface Transportation Board that regulates railroads. Ancora also recruited Jamie Boychuk, an experienced railroader who just left Norfolk Southern’s main rival CSX Corp., to be chief operating officer.
Norfolk Southern and the activist firm had been in talks, but hit an impasse over keeping Shaw as CEO, according to Jim Chadwick, an executive with Ancora.
“The company has been, what I wold describe as, blindly loyal to him,” Chadwick said in an interview with CNBC.
Shaw has been leading an effort among railroads to improve customer and union relationships after several years of heavy cost-cutting that increased profit margins but resulted in spotty service and disgruntled workers. Those plans to keep a buffer of workers during a freight downturn with the goal of maintaining service when volume rebounded were derailed by the crash of a train carrying chemicals in East Palestine.
