After one of Norfolk Southern’s freight trains derailed last year, spilling hazardous chemicals in an Ohio town, the company’s leaders were assailed by lawmakers, regulators and angry residents, an onslaught the executives managed to survive.
But Norfolk Southern’s management faces a fresh challenge this week from an investment firm that is asking shareholders to vote to replace the company’s chief executive, Alan Shaw, and appoint new directors to its board.
The campaign by Ancora, a Cleveland investment firm, invokes the accident in East Palestine, the Ohio town, but its main aim is to overhaul Norfolk Southern’s business strategy to bolster its profits.
The company’s leaders are vulnerable because Norfolk Southern’s stock price and profit margins lag those of its peers. Ancora’s plan in large part rests on cutting costs and making the company’s 19,100-mile rail network run more efficiently. In the past, investors have reaped big gains by installing managers who have pursued similar measures at other U.S. and Canadian freight railroads.
“When a network is broken, you see poor delivery times, more severe accidents and weak financials. Everyone suffers,” Jim Barber Jr., Ancora’s proposed chief executive, said in a statement on Tuesday. “We have the people and plan to earn trust and have the railroad live up to its potential.”
Norfolk Southern’s leaders contend that they are well suited to strengthen the railroad so it can thrive regardless of the state of the economy and that the company’s financial results would improve as it addressed safety issues and legal claims stemming from the East Palestine derailment.
