News / Ancora gains three seats on NS board, but fails to oust CEO Shaw

Photo: Alan Stoddard, Dreamstime.com

Ancora Capital’s $1bn push to take control of Norfolk Southern Railway (NS) has failed.

NS shareholders voted to keep 10 of the 13 board members in place, including CEO Alan Shaw and COO John Orr, while activist investor Ancora only saw three of its seven candidates accepted.

Ex-UPS COO Jim Barber and Jamie Boychuk – nominated to take over as CEO and COO respectively – failed to be endorsed by shareholders.

One of the casualties was NS chair Amy Miles and the company said it would elect a new chair at its next meeting.

Also ousted were Jennifer Scanlon, chair of the governance and nominating committee, and John Thompson,  chair of the human capital management and compensation committee.

The two sides ran an increasingly acrimonious campaign, courting shareholders, and the final days before the vote saw both parties roll out support from NS customers and labour unions.

While the Ancora camp blamed management for underperformance against the other class I railways and for its safety record, management supporters largely labelled the Ancora initiative as a short-term attempt to squeeze money for shareholders out of the company, to the detriment of long-term performance, service levels and safety.

Days before the vote, and just one day before the end of his tenure, Surface Transportation Board chairman Martin Oberman weighed in, expressing “serious concerns” about Ancora’s plans. He said while revealing “almost nothing” about how they would obtain better service or grow the number of carloads, they were full of “spreadsheets of how they are going to cut, cut, cut resources, and how fast their operating ratio is going to come down in the next few years”.

Moreover, Ancora’s strategy pointed to a neglect of intermodal traffic in favour of other, higher yielding commodities, based a failure to realise that the intemodal sector constituted the future for the rail industry, suggested Mr Oberman.

According to a recent shipper survey by Wall Street research firm Stephens, NS customers were overwhelmingly in favour of the incumbent management’s strategy and expressed concerns about Ancora’s plans.

And apparently many shareholders shared these reservations.

After the vote, Jim Chadwick, president of Ancora Alternatives, blamed “passive investors” for his firm’s failure to unseat the top management and said any future safety issues would be their responsibility. He and Ancora chairman and CEO Fran DiSanto claimed ousting three board members signalled a lack of support for management, and vowed to continue their opposition.

“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. The campaign for change at this great American railroad will continue,” they wrote.

Mr Shaw will now be dealing with a board of which more than half the members are new. Four members did not stand for re-election  and three lost their seats to Ancora candidates. He can regard the vote as an endorsement of his strategy, but in the battle for shareholder support he and his team have been pushed more in the direction of precision schedule railroading, with a board that is less supportive of their plans.