Ohio-based Ancora Holdings Group, LLC (collectively with its
affiliates, “Ancora” or “we”) today issued the below letter to the
Board of Directors (the “Board”) of Norfolk Southern Corporation
(NYSE: NSC) (“Norfolk Southern” or the “Company”), focusing on
topics that include recent public statements from CEO Alan Shaw,
Board Chair Amy Miles and Corporate Governance Committee
Chairperson Jennifer Scanlon about the firm’s engagement with the
Brotherhood of Locomotive Engineers and Trainmen Division of the
International Brotherhood of Teamsters (the “BLET”) and the
Brotherhood of Maintenance of Way Employees Division of the
International Brotherhood of Teamsters (the “BMWED”).
***
May 6, 2024
Members of the Board,
Ancora owns a meaningful equity stake in Norfolk Southern. After
sending private communications that have had no discernible impact
on Norfolk Southern’s conduct, we’re writing to publicly address
the false and misleading claims that a subset of you have been
making on behalf of the Company. We ask that the Board ensures no
further misrepresentations are disseminated about our appropriate
engagement with Teamsters affiliates and other topics that are
relevant to the outcome of the Annual Meeting of Shareholders.
Public Support for Ancora’s Full Slate
from Multiple Unions
It’s been inaccurate when Norfolk Southern has suggested in
recent days that it has the full support of rail unions. The BLET
and the BMWED – which collectively represent 41.5% of Norfolk
Southern’s unionized workforce – issued public statements of
support for Ancora’s nominees and not the
Company’s current leadership. It is equally important to
note that many, if not most, of the BLET and the BMWED members at
Norfolk Southern are both employees and shareholders. These
individuals care deeply about improving safety for both railroad
workers and the communities Norfolk Southern serves. These
employee-shareholders also have a stake in the railroad’s long-term
success. The following statements released between April 25th and
May 2nd make it quite clear that these important union stakeholders
seek a change in leadership and fully back our seven-member
slate:
BLET:
- General Chairmen of the Brotherhood of Locomotive Engineers and
Trainmen, Representing Members at Norfolk Southern, Address CEO
Alan Shaw’s “Unfounded and Desperate” Attacks on Labor Discussions
(May 2, 2024 – Link Here)
- The Brotherhood of Locomotive Engineers and Trainmen, an
Affiliate of the International Brotherhood of Teamsters, Calls for
New Leadership at Norfolk Southern (April 26, 2024 – Link
Here)
BMWED:
- The BMWED Teamsters Reiterates Support for Jim Barber at
Norfolk Southern (May 2, 2024 – Link Here)
- The Brotherhood of Maintenance of Way Employes Division of the
International Brotherhood of Teamsters Determines that a Change in
Leadership is Needed At Norfolk Southern (April 25, 2024 – Link
Here)
Facts Regarding the Ancora Nominees’
Appropriate Engagement with Unions
When Norfolk Southern has actually acknowledged management’s
loss of labor support, it has made false and unsupported claims
about our slate’s interactions with unions. These claims overlook
key facts, including the following:
- The parties are completely confident that they are in compliance with applicable law, including the Railway
Labor Act.
- The parties aligned on memoranda that
list concepts and principles for improving the treatment of
workers, including as a result of enhanced training, improved
safety and better quality of life.
- The memoranda contemplate points of alignment that would only
go into effect if the Company and the unions agreed to implement
them after the contest, including following a
customary process to negotiate and reach agreement on definitive
terms.
- Norfolk Southern’s own counsel wrote to
Ancora and acknowledged that memoranda among the parties were not
binding on the Company.
Response to Additional False and
Unsupported Claims
Although election contests are hard fought, it’s disappointing
to see some of you resorting to what we believe to be outright lies
(as laid out below). Ignoring the truth could have serious
ramifications beyond the scope of the situation. It needs to
stop.
In the media and throughout a recent Council of Institutional
Investors webinar led by three of you, Norfolk Southern
affirmatively stated that Ancora (i) entered into agreements on
behalf of the Company, (ii) violated the Railway Labor Act, (iii)
committed a crime and (iv) gave away shareholder value via
purported backroom deals.1 These statements are simply unsupported
by facts. Many other statements also fall into the category of
falsehoods and misrepresentations:
- East Palestine – You say the “East
Palestine incident was not due to bad management or inattention to
safety,”2 while the reality is the National Transportation Safety
Board concluded the derailment was “100% preventable” and that the
Company’s people on the ground “lacked the scientific background”
to recommend what has been deemed an unnecessary toxic chemical
burn.3
- Management’s Commitments – You say
“[w]e make promises and we’ve continued to keep our promises […].”4
In reality, you have presided over an industry-worst Trip Plan
Compliance rate that significantly lags the government’s 82%
target, meaning on-time delivery commitments to many customers
aren’t met. Additionally, you have overseen six straight quarters
of misses on consensus EBIT, meaning the expectations of the
financial community aren’t met. You also have union leaders making
statements about how your “failure to adequately address
significant safety and operations concerns raised by BMWED and
others has seriously undermined the railroad.”5
- Settlement Discussions – You say
when it is convenient that Ancora will only settle for control.6
The reality is we have repeatedly stated a desire to settle for
minority change of the Board and an orderly CEO transition, which
appears inevitable at this point given fading confidence in Mr.
Shaw.7 Mr. Shaw also continues to conflate a CEO transition with
majority representation on the Board when talking about
settlements. When we made all of our unaffiliated nominees
available for interviews prior to proxies being filed, it was the
Board that showed no real desire to settle by interviewing each
candidate once for between 20 minutes to 30 minutes at a time.
- Shipper Sentiment – Mr. Shaw says
80% of customers may leave due to our slate’s plan. In reality, you
are exploiting an anonymized and opaque survey put together by a
friendly firm.8 The survey has been best addressed by a leading
independent proxy advisor, who notes “in the absence of further
information and a more comprehensive breakdown of the total number
of shippers and the types of shippers who were surveyed, we are
hesitant about putting much, if any, stock into the results of that
survey.”9 You also fail to acknowledge that Cleveland-Cliffs Inc.,
perhaps Norfolk Southern’s largest customer on a revenue basis, has
publicly supported our slate.
- Director Claude Mongeau – Your
promotion of Mr. Mongeau’s purported expertise in governance,
regulatory affairs and risk management lacks foundational
support.10 With regard to governance, he is a champion of the
costly and poorly-disclosed deal with Canadian Pacific Kansas City
Limited to acquire new COO John Orr – without a shareholder vote –
during an election contest.11 Reports from leading independent
proxy advisors detail the governance issues, including insufficient
disclosure, associated with the Board’s deal to obtain Mr. Orr, who
is Mr. Mongeau’s former underling.12 Although it is curiously
omitted from his campaign-related biographies, Mr. Mongeau is also
a former long-term director of AtkinsRéalis (f/k/a SNC-Lavalin
Group Inc.), the parent of the supposedly independent safety
consultant – Atkins Nuclear Secured – retained by the Company
following the East Palestine disaster.13 The Company appears to
want to obscure this, even though Mr. Mongeau serves on the Board’s
Safety Committee, which is involved in the relationship. In
multiple forms of engagement with Ancora and our nominees, Mr.
Mongeau demonstrated an inability to maintain a collegial and
professional demeanor, indicating his continuing presence on the
Board may be disruptive to incumbents and new members. With respect
to regulatory matters and risk mitigation, it is notable that Mr.
Mongeau is Chair of the Human Resources Committee and a member of
the Corporate Governance Committee at TD Bank, which is reportedly
being probed by the U.S. Department of Justice and other regulators
due to the bank’s failure to detect money laundering.14 Since Mr.
Mongeau became a director in 2015, TD Bank’s board of directors has
encountered a number of high-profile regulatory and legal issues
stemming from the bank’s apparent failure to maintain a culture of
compliance and mitigate money laundering risks.15 A railroad with
so many regulatory and legal issues of its own, like Norfolk
Southern, can do better when it comes to populating its
boardroom.
In light of the foregoing points, we hope the several members of
the Board who are credible, effectively experienced and open-minded
guide the Company to accommodate our multiple requests to cease
making false and unsupported claims. Our unaffiliated nominees look
forward to moving past this contest and partnering with those of
you who continue to serve to do what is best for Norfolk Southern
over the near-term and long-term. A lot needs to be fixed in order
to drive shareholder-friendly governance and enhanced service,
safety and value.
Sincerely,
Frederick D. DiSanto
Chairman and Chief Executive Officer
Ancora Holdings Group LLC
James Chadwick
President
Ancora Alternatives LLC
CC:
Tony Cardwell, President of the BMWED Scott Bunten, General
Chairman BLET Dewayne Dehart, General Chairman BLET Jerry
Sturdivant, General Chairman BLET
***
About Ancora
Founded in 2003, Ancora Holdings Group, LLC offers integrated
investment advisory, wealth management, retirement plan services
and insurance solutions to individuals and institutions across the
United States. The firm is a long-term supporter of union labor and
has a history of working with union groups and public pension plans
to deliver long-term value. Ancora’s comprehensive service offering
is complemented by a dedicated team that has the breadth of
expertise and operational structure of a global institution, with
the responsiveness and flexibility of a boutique firm. For more
information about Ancora, please visit https://ancora.net.
Advisors
Cadwalader, Wickersham & Taft LLP is serving as legal
advisor, with Longacre Square Partners LLC serving as
communications and strategy advisor and D.F. King & Co., Inc.
serving as proxy solicitor.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
STATEMENTS
The information herein contains “forward-looking statements.”
Specific forward-looking statements can be identified by the fact
that they do not relate strictly to historical or current facts and
include, without limitation, words such as “may,” “will,”
“expects,” “intends,” “believes,” “anticipates,” “plans,”
“estimates,” “projects,” “potential,” “targets,” “forecasts,”
“seeks,” “could,” “should” or the negative of such terms or other
variations on such terms or comparable terminology. Similarly,
statements that describe our objectives, plans or goals are
forward-looking. Forward-looking statements relate to future events
or future performance and involve known and unknown risks,
uncertainties, and other factors that may cause actual results,
levels of activity, performance or achievements or those of the
industry to be materially different from those expressed or implied
by any forward-looking statements. Norfolk Southern Corporation, a
Virginia corporation (“Norfolk Southern”), has also identified
additional risks relating to its business in its public filings
with the Securities and Exchange Commission (the “SEC”). Ancora
Alternatives LLC (“Ancora Alternatives”), and as applicable the
other participants in the proxy solicitation, have based these
forward-looking statements on current expectations, assumptions,
estimates, beliefs, and projections. While Ancora Alternatives and
the other participants, as applicable, believe these expectations,
assumptions, estimates, and projections are reasonable, such
forward-looking statements are only predictions and involve known
and unknown risks and uncertainties, many of which involve factors
or circumstances that are beyond the participants’ control. There
can be no assurance that any idea or assumption herein is, or will
be proven, correct. If one or more of the risks or uncertainties
materialize, or if the underlying assumptions of Ancora
Alternatives or any of the other participants described herein
prove to be incorrect, the actual results may vary materially from
outcomes indicated by these statements. Accordingly,
forward-looking statements should not be regarded as a
representation by Ancora Alternatives that the future plans,
estimates or expectations contemplated will ever be achieved. You
should not rely upon forward-looking statements as a prediction of
actual results and actual results may vary materially from what is
expressed in or indicated by the forward-looking statements. Except
to the extent required by applicable law, neither Ancora
Alternatives nor any participant will undertake and specifically
declines any obligation to disclose the results of any revisions
that may be made to any projected results or forward-looking
statements herein to reflect events or circumstances after the date
of such projected results or statements or to reflect the
occurrence of anticipated or unanticipated events. Certain
statements and information included herein have been sourced from
third parties. Ancora Alternatives does not make any
representations regarding the accuracy, completeness or timeliness
of such third party statements or information. Except as may be
expressly set forth herein, permission to cite such statements or
information has neither been sought nor obtained from such third
parties. Any such statements or information should not be viewed as
an indication of support from such third parties for the views
expressed herein.
CERTAIN INFORMATION CONCERNING THE PARTICIPANTS
The participants in the proxy solicitation are Ancora Catalyst
Institutional, LP (“Ancora Catalyst Institutional”), Ancora Merlin
Institutional, LP, (“Ancora Merlin Institutional”), Ancora Merlin,
LP (“Ancora Merlin”), Ancora Catalyst, LP (“Ancora Catalyst”),
Ancora Bellator Fund, LP (“Ancora Bellator”), Ancora Impact Fund LP
Series AA (“Ancora Impact AA”) and Ancora Impact Fund LP Series BB
(“Ancora Impact BB”) (each of which is a series fund within Ancora
Impact Fund LP) (Ancora Catalyst Institutional, Ancora Merlin
Institutional, Ancora Merlin, Ancora Catalyst, Ancora Bellator,
Ancora Impact AA and Ancora Impact BB, collectively, the “Ancora
Funds”), Ancora Advisors, LLC (“Ancora Advisors”), The Ancora Group
LLC (“Ancora Group”), Ancora Family Wealth Advisors, LLC (“Ancora
Family Wealth”), Inverness Holdings LLC (“Inverness Holdings”),
Ancora Alternatives, Ancora Holdings Group, LLC (“Ancora Holdings”)
and Frederick DiSanto (collectively, the “Ancora Parties”); and
Betsy Atkins, James Barber, Jr., William Clyburn, Jr., Sameh Fahmy,
John Kasich, Gilbert Lamphere and Allison Landry (the “Ancora
Nominees” and, collectively with the Ancora Parties, the
“Participants”).
Ancora Alternatives and the other Participants have filed a
definitive proxy statement and accompanying BLUE proxy card (the
“Definitive Proxy Statement”) with the SEC on March 26, 2024 to be
used to solicit proxies for, among other matters, the election of
its slate of director nominees at the 2024 annual meeting of
shareholders of Norfolk Southern.
IMPORTANT INFORMATION AND WHERE TO FIND IT
ANCORA ALTERNATIVES STRONGLY ADVISES ALL SHAREHOLDERS OF NORFOLK
SOUTHERN TO READ THE DEFINITIVE PROXY STATEMENT, ANY AMENDMENTS OR
SUPPLEMENTS TO SUCH DEFINITIVE PROXY STATEMENT, AND OTHER PROXY
MATERIALS FILED BY ANCORA ALTERNATIVES AS THEY CONTAIN IMPORTANT
INFORMATION. SUCH PROXY MATERIALS ARE AVAILABLE AT NO CHARGE ON THE
SEC’S WEBSITE AT WWW.SEC.GOV AND AT ANCORA ALTERNATIVE’S WEBSITE AT
WWW.MOVENSCFORWARD.COM. THE DEFINITIVE PROXY STATEMENT AND
ACCOMPANYING PROXY CARD WILL BE FURNISHED TO SOME OR ALL OF THE
COMPANY’S SHAREHOLDERS. SHAREHOLDERS MAY ALSO DIRECT A REQUEST TO
THE PARTICIPANTS’ PROXY SOLICITOR, D.F. KING & CO., INC., 48
WALL STREET, 22ND FLOOR, NEW YORK, NEW YORK 10005 (SHAREHOLDERS CAN
CALL TOLL-FREE: +1 (866) 227-7300).
Information about the Participants and a description of their
direct or indirect interests by security holdings or otherwise can
be found in the Definitive Proxy Statement.
1 See Trains.com article entitled, “NS says activist investor
violated Railway Labor Act by negotiating deal with engineers’
union (updated),” dated April 29, 2024 (link) and Council for
Institutional Investors webinar entitled, "Webinar: Norfolk
Southern on Staying the Course," dated May 2, 2024 (link). 2 See
Company presentation issued on April 19, 2024 (link). 3 See public
statements from National Transportation Safety Board Chair
Jennifer L. Homendy. 4 See Associated Press article entitled,
“Investors trying to take control of Norfolk Southern railroad pick
up key support,” dated April 29, 2024 (link). 5 See press release
from the BMWED issued on May 2, 2024 (link). 6 See Council for
Institutional Investors webinar entitled, "Webinar: Norfolk
Southern on Staying the Course," dated May 2, 2024 (link). 7 See
Ancora disclosures from April 5, 2024 (link) and March 1, 2024
(link). 8 Stephens' lead analyst has thanked Mr. Shaw for being a
supporter of the firm’s events and is listed under supportive
parties on the Company’s campaign website. 9 See Glass, Lewis &
Co., LLC report issued on April 28, 2024. Permission to quote was
neither sought nor obtained. 10 See Norfolk Southern’s proxy
statement. 11 See Norfolk Southern press release entitled, “Norfolk
Southern appoints industry veteran John Orr as chief operating
officer,” dated March 20, 2024. 12 See Glass, Lewis & Co., LLC
report issued on April 28, 2024 and Institutional Shareholder
Services Inc. report issued on April 30, 2024. Permission to quote
was neither sought nor obtained. 13 See Norfolk Southern’s proxy
statement and website, and Atkins Nuclear Secured’s initial report
dated September 14, 2023 (link). 14 See The Wall Street Journal
article entitled, “TD Bank Probe Tied to Laundering of Illicit
Fentanyl Profits,” dated May 2, 2024 (link). 15 See press release
from TD Bank issued on April 30, 2024 (link) and CNN article
entitled, “TD Bank reaches $1.2 billion settlement in Ponzi scheme
lawsuit,” dated February 27, 2023 (link).
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240506237376/en/
Longacre Square Partners Greg Marose / Joe Germani, 646-386-0091
MoveNSCForward@longacresquare.com D.F. King & Co., Inc. Edward
McCarthy 212-229-2634 MoveNSCForward@dfking.com
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