Norfolk Southern unions and pension funds invested in it should support activist Ancora’s full seven-director team at the railroad’s upcoming shareholder meeting, two different Institutional Shareholder Services (ISS) proxy advisory services said.
ISS’ Taft-Hartley Advisory Services and Social Advisory Services, which focus on recommendations for unions and socially responsible investors, said in their reports that having a majority of Ancora’s team would help deal with the current board’s “negligence” and address accountability concerns.
Both reports said the proxy contest is about deciding which management team is best for the company’s future. They emphasized the need to give the dissident (Ancora) a strong voice to make their case for management change.
The reports also supported Ancora’s CEO pick, Jim Barber, as a “credible” director and chief executive, despite criticisms about his lack of railway experience. They said Barber seems capable, with skills and experience that could work well in the railroad industry.
Earlier, ISS and Glass Lewis had already suggested that shareholders support most of Ancora’s nominees at Norfolk Southern’s upcoming meeting. Glass Lewis endorsed six of Ancora’s director picks, including Barber.
Ancora responded, saying that this news is important for union retirement plans and socially responsible investment firms. They highlighted their three-year precision-scheduled railroading strategy, which they believe differs greatly from Norfolk Southern’s model and has worked well in other railroads.
Norfolk Southern responded by saying that the ISS team behind the Taft-Hartley report didn’t engage with their management, unlike the main ISS research team, which recommended supporting most of Norfolk Southern’s director nominees.
However, the endorsements from proxy advisors signal a mandate for change at Norfolk Southern, which has performed poorly in the stock market and is dealing with fallout from a derailment in Ohio.
ISS’ recommendations are significant, especially considering the derailment, which released over 100,000 gallons of toxic chemicals into the environment.
Norfolk Southern said they’ve contributed over $105 million to the region affected by the derailment, not including a $600 million class-action settlement.
These recommendations also matter because unions have a big influence in the railroad industry.
Union support is split between management and the activist investor. Two different Teamsters unions, representing about 42% of Norfolk Southern’s unionized workforce, are supporting the activist. Another group of unions is backing management.
Union support for activist campaigns at railroads is unusual, as they typically focus on cutting costs and improving financial metrics. However, Ancora has managed to get support from unions and other shareholders.
Top institutional shareholders, including Vanguard, BlackRock, State Street, Dodge & Cox, and pension funds like CalPERS, CalSTRS, and Colorado’s public pension fund, are among those being appealed to.
