“The proxy contest is centered on a debate over which management team is best suited to the lead the company forward. It is therefore important to provide the dissident with a voice that is loud enough to have its case for management change appropriately considered,” both reports said.
The recommendations also voiced their support for Ancora’s CEO pick Jim Barber as a “credible” director and chief executive, undercutting criticisms that his lack of railway experience was a liability. The former UPS executive “appeared to to be a capable candidate with experience and skills that should be transferable to the railroad industry,” the reports said.
ISS’ main advisory arm and Glass Lewis, the two proxy giants, had already said that shareholders should support most of Ancora’s nominees at Norfolk Southern’s May 9 meeting. Glass Lewis endorsed six of Ancora’s director picks, including Barber.
ISS earlier endorsed five of Ancora’s nominees, withholding support for the activist investors’s proposed CEO Barber, but noting that he would likely be a capable executive as well.
Thursday’s news “represents an important message to union retirements plans and firms prioritizing both socially responsible investments and enhanced value,” Ancora said in a statement to CNBC, adding that Ancora’s three-year precision-scheduled railroading strategy “differs greatly from Norfolk Sothern’s resilience railroading model” and has worked well at the other four publicly-traded Class I railroads.
The proxy advisor endorsements thus far have backed a clear mandate for change at the troubled railroad, which has underperformed its peers in the stock market and is still grappling with the fallout from a derailment in East Palestine, Ohio.
ISS’ two more tailored recommendations carry particular weight in light of the derailment, which caused more than 100,000 gallons of toxic chemicals to be released into the environment, and because of the outsize influence that unions have in the railroad industry.
Union support has been divided between management and the activist investor. Two different Teamsters unions are backing the activist, around 42% of NSC’s unionized workforce. Another coalition of unions is backing management.
Union support is unusual for activist campaigns at railroads, which are typically focused on reducing costs and headcount to improve operating ratio, a key financial metric for rails.
But Ancora has managed to secure those union endorsements and backing from several shareholders. Neuberger Berman said earlier it would support Ancora’s case for change at Norfolk Southern, while Canadian asset manager EdgePoint also reaffirmed on Thursday it would be voting its shares with the activist. (EdgePoint was initially partnered with Ancora’s campaign at Norfolk Southern but dissolved that arrangement months earlier)
Top institutional shareholders include Vanguard, BlackRock, State Street and Dodge & Cox, as well as California’s pension funds, CalPERS and CalSTRS, and Colorado’s public pension fund.
Read More: Norfolk Southern unions, pensions should back activist Ancora: ISS