In a surprising turn of events, railroad unions are siding with management in a heated proxy battle at Norfolk Southern (NS). While traditionally not involved in such corporate matters, these unions are united in their opposition to activist investor Ancora Holdings, which aims to overhaul the company's leadership and implement sweeping operational changes.
The core of this unusual alliance lies in the contrasting stances of both sides regarding safety, working conditions, and potential job security. Union officials representing over half of NS's workforce publicly voiced their support for CEO Alan Shaw, expressing concerns that Ancora's proposed changes would negate the recent improvements in safety, morale, and staffing levels.
Ancora, on the other hand, claims that NS has underperformed financially and needs a complete leadership and operational overhaul. They propose precision scheduled railroading (PSR), a strategy criticized by unions for potentially jeopardizing safety and leading to job cuts.
This criticism resonates with regulators such as the Surface Transportation Board (STB), which has expressed concerns about potential PSR implementation at NS. They point to past instances where PSR, while boosting shareholder returns, led to service disruptions and worsened working conditions for railroad employees.
Furthermore, NS train crews themselves have spoken out against Ancora's plan, valuing the recent improvements in staffing, scheduling, and working environment under Shaw's leadership. They fear a return to the "antagonistic" dynamics and increased pressure experienced during past implementations of PSR.
Notably, this is not the first time an activist investor has targeted a major railroad company. Last year, Soroban Capital Partners attempted to replace the CEO of Union Pacific with a PSR advocate, Jim Vena, without receiving public support from unions.
This case underscores the complex and often conflicting interests at play within the railroad industry. While investors prioritize financial returns, unions and regulators focus on safety, working conditions, and long-term industry stability. The upcoming vote on NS's board nominees will reveal the outcome of this unique power struggle, with potentially far-reaching consequences for the entire railroad landscape.
