NSC - Norfolk Southern highlights its balanced strategy and clear pathway to delivering sustainable shareholder value | Benzinga
Files definitive proxy statement and mails letter to shareholders
Urges shareholders to vote "FOR" ONLY Norfolk Southern's highly qualified nominees on the WHITE proxy card
Launches VoteNorfolkSouthern.com, providing additional information for shareholders
ATLANTA, March 20, 2024 /PRNewswire/ -- Norfolk Southern Corporation (NYSE:NSC) announced Wednesday that it has filed its definitive proxy materials with the Securities and Exchange Commission (SEC). Norfolk Southern also announced its 2024 Annual Meeting of Shareholders will be held on May 9, 2024. Shareholders of record as of the close of business on March 4, 2024 are entitled to vote at the meeting. In conjunction with the filing of the definitive proxy statement, Norfolk Southern issued a letter to shareholders. The letter highlights information critical to shareholders' decision making, including:
- CEO Alan Shaw is a crisis-tested leader who is delivering change. Following his appointment in 2022, Shaw took decisive action and began implementing a balanced strategy to deliver safe and reliable service, continuous productivity improvements, and growth.
- Following the East Palestine incident, the board and management took urgent and necessary steps to protect both the franchise and shareholders. Norfolk Southern accelerated its investments in safety and made fundamental changes to operating processes to help achieve the company's goal of becoming the gold standard of safety in the industry.
- Norfolk Southern is now on a clear and achievable path to close the gap with its peers. The company is on track to deliver top-tier earnings and revenue growth, with industry competitive margins – including ~400 basis points of operating ratio improvement during the second half of 2024.
- Norfolk Southern has brought on John Orr as COO to accelerate the execution of its strategy. John Orr is a Precision Scheduled Railroading expert and comes to Norfolk Southern following a long and successful career at multiple railroads including Canadian National and CPKC.
- Norfolk Southern's board is committed to ensuring management accountability and responsiveness. The board is meaningfully refreshed, and highly skilled in areas related to effective, independent oversight of the company's strategy and management.
- Ancora's strategy would add significant risk, impede progress, and destroy long-term value. Ancora is attempting to recycle a slash-and-burn playbook without understanding the current regulatory, labor, and competitive environments.
The full text of the letter to shareholders follows:
Dear Fellow Shareholder,
Norfolk Southern's transformation is at an inflection point. The board of directors has taken action to strengthen our business, protect our franchise, and ensure Norfolk Southern is positioned to deliver long-term shareholder value. Our railroad has been a pillar of the American economy for generations, providing a reliable and growing dividend over the past quarter of a century. We are taking the necessary steps to ensure we continue to play this critical role for generations to come.
An activist hedge fund, Ancora Alternatives LLC ("Ancora"), is attempting to take control of your company. They want to replace a majority of the board. They want to appoint an unproven CEO candidate with no railroad experience and a controversial COO candidate. This agenda would introduce significant risks to the business and disrupt our path to deliver long-term sustainable shareholder value.
Norfolk Southern's Board urges you to protect your investment by VOTING the WHITE proxy card FOR ONLY Norfolk Southern's 13 nominees. DISCARD any Blue proxy cards you may receive from Ancora.
As you consider your vote, these are the facts:
- The board recognized an opportunity to accelerate shareholder value creation at Norfolk Southern. Accordingly, in 2022 the board appointed Alan Shaw as CEO to address post-pandemic operating problems, further extend the progress he had demonstrated in improving our operating ratio, embrace customer and employee relations, and create a balanced and sustainable strategy for our company.
- Alan took decisive action. He made several management changes and began implementing a strategy that demonstrated it can deliver safe and reliable service, continuous productivity improvements, and growth. During Alan's tenure as CEO, we have seen a 27% improvement in velocity and a 14% improvement in dwell time, and through the execution of our plan, we will deliver top-tier earnings and revenue growth, with industry competitive margins.
- Following the East Palestine incident, the board and management took the urgent and necessary steps to protect both the franchise and shareholders. The company has kept its promises and is making it right with the community. While this incident significantly disrupted the network and introduced unplanned costs, execution of our strategic plan remains the best path to mitigate risk and create sustainable shareholder value.
- Alan led the company through an extremely challenging corporate crisis. Alan restored relationships and built trust with elected officials, regulators, labor unions, and the communities in which we operate – while maintaining and strengthening partnerships with customers – all critical constituencies.
- Norfolk Southern has significantly improved safety and service during Alan's tenure – which is essential to continuing the execution of our balanced strategy – while adhering to scheduled railroading principles. We have a clear path for further progress. We will exit 2024 with an operating ratio1 run-rate that is ~400 basis points lower than the 2023 exit rate, substantially narrowing the margin gap with peers.
- To identify and implement further operating improvements, and consistent with direct feedback from shareholders, the board recruited John Orr, a well-regarded executive with extensive PSR expertise, to become COO. John is a proven scheduled railroading operator known for improving operations at multiple railroads, including Canadian National and, most recently, CPKC where he worked under CEO Keith Creel and spearheaded the turnaround of their Mexico operations from late July to early October 2023. Alan and the board are confident that he will bring the operational excellence needed to seamlessly execute our strategy.
Alan Shaw – A Crisis-Tested Leader Who is Delivering Change
The board is overseeing a wholesale transformation of Norfolk Southern.
Exiting the pandemic in late 2021, the company faced significant service challenges. This was, in part, due to staffing constraints that impacted all railroads as business levels rebounded sharply following the pandemic. For Norfolk Southern, the problems were exacerbated by a prior, inflexible operational approach that was at odds with the pillars of scheduled railroad operations. Specifically, certain operating principles were overemphasized at the expense of plan adherence, car handlings, and balance.
When Alan became CEO in May 2022, he took immediate action to address these issues, leveraging his broad background in all major aspects of our railroad, having started his career in finance, and having worked in senior roles across operations and marketing. His priority was reorienting the company's strategy and tackling operational performance issues.
Alan and his team's new, balanced strategy is centered on three pillars:
- Safely delivering reliable and resilient service
- Driving continuous productivity improvement
- Propelling smart and sustainable growth
Under the improved strategy that he implemented, Alan immediately made significant investments in operations leadership, resources, and the company's operating plan. And despite inheriting a poor service product, Alan's strong leadership and clear strategic direction drove substantial operating improvements, even through the East Palestine incident, for the benefit of the franchise and shareholders. Norfolk Southern has improved fluidity across its network, reflected in increased train speed and reduced terminal dwell hours as Alan and the management team successfully turned around performance through a scheduled operating model.
Alan and the management team's strategy to enhance operations resulted in improved service levels, starting with our Intermodal business, which is our most service-sensitive product.
The East Palestine Derailment Occurred as Our Company Was Improving Operations and Delivering Results
Prior to the derailment in East Palestine, Ohio in February 2023, the balanced strategy that Alan and the management team implemented was improving operations and driving results:
- Delivered record revenue in 2022
- Operating ratio in the low ~60s in 2022 – in line with Class 1 peers
- Quarterly operating ratio gap to CSX narrowed to ~260 basis points by the end of 2022
After the East Palestine derailment in February 2023, the board and management team took decisive actions to protect the future of our franchise and long-term shareholder interests by staying true to our values. The incident response required rapidly dedicating extensive resources to ensure we made things right for affected individuals and businesses. This included our pledge to become the gold standard in safety in the rail industry.
With close ...