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Business News/ News / Norfolk Southern Nominates Directors to Fend Off Activist
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Norfolk Southern Nominates Directors to Fend Off Activist

Norfolk Southern Corp. nominated two new director candidates as the beleaguered railroad faces pressure from an activist shareholder aiming to replace the CEO and overhaul the board.

Norfolk Southern Nominates Directors to Fend Off ActivistPremium
Norfolk Southern Nominates Directors to Fend Off Activist

(Bloomberg) -- Norfolk Southern Corp. nominated two new director candidates as the beleaguered railroad faces pressure from an activist shareholder aiming to replace the CEO and overhaul the board.

The company proposed former Delta Air Lines Inc. Chief Executive Officer Richard Anderson and onetime North Dakota senator Heidi Heitkamp join the board as part of a 13-member slate revealed Monday. Current directors Thomas Bell and Steven Leer will not stand for reelection, while Mitchell Daniels Jr. and Michael Lockhart will retire from the board after reaching the mandatory retirement age, the company said in a statement.

Norfolk is seeking to fend off a proxy fight after activist investor Ancora Holdings Group built a stake and called for substantial changes, citing poor decision-making and underperformance. The railroad was already struggling to move past a costly derailment in East Palestine, Ohio, last year that drew national attention.

Read More: Activist Firm Calls for Norfolk CEO Ouster, Board Overhaul

Shares of Norfolk Southern were largely unchanged at 9:36 a.m. Monday in New York. The stock rose 9.2% this year through Friday’s close.

Ancora last week proposed eight new directors, including former Ohio Governor John Kasich. The investment firm also is seeking to replace Norfolk CEO Alan Shaw with Jim Barber, the former chief operating officer of United Parcel Service Inc.

Norfolk said Monday that it rejects Ancora’s nominees, calling the plan “short-sighted."

“Ancora’s nominees and plan may not only hinder the successful execution of a strategy that is yielding results, but also threaten Norfolk Southern’s progress on safety, its continued commitment to the community of East Palestine, and its improved relationships with regulators and other stakeholders," the company said.

Ancora pushed back Monday, calling the company’s proposed board plan a “weak and reactionary refresh." Shaw and the board “have no credible plan and no viable record to run on," an Ancora-led investor group said in an emailed statement. Norfolk Southern has faced criticism for having operating profit margins that lag its peers. 

Shaw and the Norfolk Southern board garnered support from the Federal Railroad Administration and union leadership after the railroad has focused on safety following the derailment that spilled chemicals in East Palestine on Feb. 4 last year. Norfolk Southern has invested more in hot-bearing detectors, worker training and was the first railroad to join an FRA pilot program for workers to report close calls on safety without concern of being disciplined. 

“Any backsliding, as a result of a change in leadership or otherwise, on the safety-oriented path you have laid out and communicated to us will likely attract renewed oversight attention from my office as we pursue our safety mission," FRA chief Amit Bose said in a letter last week.  

(Updates with shares, support from Federal Railroad Administration, unions from fourth paragraph)

More stories like this are available on bloomberg.com

©2024 Bloomberg L.P.

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Published: 27 Feb 2024, 01:45 AM IST
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