Glass Lewis endorses 6 Ancora nominees

Activist investor Ancora received a powerful endorsement in its efforts to secure a board change and to oust Norfolk Southern CEO Alan Shaw on Monday, when proxy advisor Glass Lewis recommended the railroad’s shareholders vote for 6 of Ancora’s board nominees.

“We believe Ancora has presented a compelling case for supporting a substantial overahul of the Company’s current leadership,” Glass Lewis said in its report.

The recommendations for the activist nominees, rare at a company of NSC’s size and in its industry, could influence how thousands of investors with millions of shares vote ahead of Norfolk Southern’s shareholder meeting on May 9.

The proxy advisor recommended that shareholders vote in support of Ancora nominees Betsy Akins, Jim Barber, William Clyburn, Sameh Fahmy, Gilbert Lamphere and Allison Landry.

Significantly, the proxy advisor also recommended shareholders withhold their support from current CEO Shaw and board chair Amy Miles.

Furthermore, Glass Lewis said Barber, Ancora’s pick for CEO, and Jamie Boychuk, the activist’s pick for COO, “have compelling credentials and track records.”

Ancora is seeking to oust Shaw in favor of former UPS executive Barber, who began his 35-year career in the eighties as a Teamster-represented delivery driver and ended it as COO of one of the world’s largest logistics companies. He lacks direct experience as a railroad executive but noted that UPS was one of the biggest rail customers worldwide in a CNBC interview earlier this month.

Ancora also seeks to install former CSX executive Boychuk as Barber’s chief operating officer. Boychuk spent 20 years at Canadian National before joining CSX. Like Barber, Boychuk began his career as a union-represented conductor and rose through the ranks at CN and CSX, where he was executive vice president for operations until 2023.

Earlier this week, two Teamsters unions, representing around half of Norfolk Southern’s unionized workforce, said they would support Ancora’s plan for change. Their support, coupled with Glass Lewis’ endorsement, gives the activist powerful ammunition as it seeks to convince shareholders.

“We are also inclined to agree with Ancora’s critique of the Company’s current operating strategy as being one that relies on inherently incompatible railroading concepts,” the proxy advisor said in its report.

NSC had initially shied away from pursuing a precision scheduled railroading, or PSR, based approach in favor of a so-called “resiliency” model. Ancora, on the other hand, had argued from nearly the outset that Norfolk Southern’s customers, employees and investors would be best served with a PSR-rooted operating plan.

PSR focuses on making sure trains and crews stay moving to minimize wasted hours and equipment, by operating on a fixed schedule like passenger trains rather than rolling trains only when they’re filled with cargo. Investors tend to reward companies that adopt PSR and can easily track its implementation via a railroad’s operating ratio, which is working expenses as a percentage of revenue.

A resiliency model, by contrast, maintains a strategic reserve of trains and cars throughout downturns in demand, which happen frequently in rail.

The company has since changed its tune, appointing veteran railway executive John Orr to implement an operating plan that combines both PSR and resiliency approaches. Both the activist and some analysts have criticized the plan.

Winning support from proxy advisors is a top priority for both activists and management. It is atypical for activists to receive the level of support that Ancora did at a company this large, but not unprecedented.

ISS backed Pershing Square Bill Ackman’s seven director nominees at the former Canadian Pacific in 2017. At CP, however, Ackman had enlisted railroading legend E. Hunter Harrison as his CEO pick.