Norfolk Southern has set May 9 as the date for its annual meeting, when an insurgent campaign to put outside directors on the company’s board and a new CEO in place will come to a head.
The Class 1 railroad formally set the date in its proxy letter to shareholders, sent last week. The meeting will be virtual and can be streamed on the company’s website, though participation is limited to shareholders. It begins at 8:30 a.m. Eastern.
Amy Miles, Norfolk Southern’s (NYSE: NSC) board chair, is the signatory of the letter aimed at the shareholders who will determine whether the various entities that operate under the name Ancora Catalyst Institutional will prevail in its effort to place eight candidates chosen by the investor group on the company’s board.
Those candidates include John Kasich, the former governor of Ohio, cable news pundit and unsuccessful Republican presidential candidate in 2016. It also includes Allison Landry, a director at XPO (NYSE: XPO) who was a longtime equity analyst covering transportation at Credit Suisse. At 44, Landry is the youngest of the insurgent candidates nominated by Ancora.
“In 2023, Norfolk Southern took the necessary steps to restore service, improve safety, and protect our franchise,” Miles wrote in the letter. “We worked together with our customers and economic development partners to facilitate broad-based industrial development and create a robust 2024 projects pipeline to serve a diverse customer portfolio, while driving productivity so we can deliver profitable growth and enhanced shareholder value as the market improves.”
Norfolk Southern isn’t sitting still prior to the vote. Last week, it announced it had paid $25 million to CPKC (NYSE: CP), the combination of the former Canadian Pacific and Kansas City Southern railroads, to release John Orr from his position as chief transformation officer at CPKC to become chief operating officer at Norfolk Southern. There were also nonspecific considerations for the Meridian Speedway, a joint venture track between Louisiana and Mississippi where Norfolk Southern and CPKC are partners.
Orr came out of the Kansas City Southern side of the merger between the two Class 1 railroads. Earlier in his career he had worked at Canadian National (NYSE: CNI).
In a report on the change, Amit Mehrotra, who heads the transportation team at Deutsche Bank, said Orr had been passed over for an earlier promotion to COO at CN. Orr is replacing Paul Duncan, who had only been in the job for a year.
Mehrotra noted that Orr will be COO No. 3 in as many years at Norfolk Southern. “This level of churn in such an important position at a company of NSC’s size and scale is highly unusual,” Mehrotra wrote. But he added, “Based on our conversations with many industry stakeholders, it appears John Orr is a well regarded operating executive, though with limited COO experience.”
In its report last week on Norfolk Southern, Jason Seidl of TD Cowen noted that Ancora has vowed to put Jamie Boychuk into the COO role at NS if it lands its eight board members. “We ultimately think that Ancora’s board demands are not an ‘all or nothing’ proposition, and believe the most likely outcome of the proxy fight will be a deal that meets somewhere in the middle,” Seidl wrote.
Boychuk was announced as Ancora’s proposed COO last month at the same time Ancora said its proposed CEO for Norfolk Southern would be Jim Barber Jr. Barber had been COO of UPS (NYSE: UPS); Boychuk had been executive vice president at CSX (NASDAQ: CSX).
The annual meeting will feature the election of 13 directors overall. Of the candidates for those slots, only current CEO Alan Shaw is an insider.
Two of the proposed directors put forth by the company are new: Richard Anderson and Mary Kathryn Heitkamp, better known as Heidi, a former U.S. senator elected to one term as a Democrat from the deep red state of North Dakota.
Anderson has a long record running transportation-related companies. He has been CEO of Delta Air Lines and Northwest Airlines, had several jobs at Continental Airlines and most recently was president and CEO at Amtrak.
In her letter, Miles addressed the railroad’s continuing work in the wake of the East Palestine, Ohio, derailment in February 2023 that sent massive plumes of toxic smoke into the atmosphere and forced evacuations of thousands of local residents.
“Your Board of Directors is highly engaged and will continue to actively oversee management’s execution of our strategy and response to East Palestine,” Miles wrote. “We will continue to work with federal, state, and local agencies and regulators to respond to the East Palestine derailment.”
Ancora, in its latest proxy filing, summed up its views on the need to replace Shaw and now new COO Orr, though he was not identified in the letter, and to make changes on the board.
“We believe that prompt changes in Norfolk Southern’s leadership and strategy are necessary to allow the Company to meet its full potential and produce enhanced value for its customers, employees, communities and shareholders,” it wrote. “For many years, Norfolk Southern has lagged behind its peers in terms of operational metrics, safety and financial performance. The Company’s recent record, particularly the derailments of Norfolk Southern-operated trains in February 2023 in East Palestine, Ohio and on March 2, 2024 in Lower Saucon Township, Pennsylvania, reinforces the urgent need for a shareholder-driven constitution of the Company’s Board of Directors and the appointment of a new Chief Executive Officer.”
The Lower Saucon derailment spilled fuel into the Lehigh River but was not on the scale of the East Palestine derailment. Trains were running through the site two days after the derailment.
In terms of stock market performance, if Norfolk Southern is compared to CSX, its Class 1 rival in the Eastern half of the country, neither has done particularly well. Norfolk Southern’s stock performance is essentially flat since the start of 2021 but is up more than 26% in the past 52 weeks.
CSX opened up 2021 at just under $32 a share and is now at about $37.20. In the past 52 weeks, it is up about 31.8%.
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