Norfolk Southern activist investor highlights previous abusive behavior of latest COO as proxy fight intensifies

A favorite rely on of the exterior of the headquarters of Norfolk Southern on April 1, 2023 in Atlanta, Georgia.

Icon Sportswire | Getty Photography

Norfolk Southern is quite two months proper into a fight with activist investor Ancora, which is making an strive to shake up the railroad’s board and oust CEO Alan Shaw.

Now the firm is taking intention at Norfolk Southern’s recent working chief John Orr over what the activist calls an “outrageous” buyout kit and a profession marred by allegations of racial and sexual discrimination.

Closing month, Norfolk Southern hired Orr faraway from rival CPKC, paying tens of hundreds of hundreds of greenbacks to aquire him out of his contract. The journey modified into once broadly seen as a response to Ancora’s operational criticisms and received praise from several Wall Avenue analysts.

In a letter to Norfolk Southern shareholders on Friday, Ancora highlighted previous misconduct by Orr that raises questions about his hiring, even because the chief has overseen enhancements in the railroad’s operations in his three weeks on the job.

Ancora documented both alleged and substantiated space of work misconduct by Orr, dating aid to his time as a mid-level executive at Canadian Nationwide. An appointee of the Canadian Arbitration Board substantiated allegations that Orr faded verbally abusive language toward a female employee in the early 2000s.

The employee and any other witness suggested the employment tribunal on the time that Orr steadily cursed and shouted on the employee, and called her a “f—— b—-” and a “f—— fool.” A witness suggested the arbitrator that, in one instance, Orr suggested the employee that she “modified into once so f—— boring it modified into once embarrassing.”

The arbitrator discovered the claims credible.

Ancora furthermore flagged a lawsuit filed in 2019 by a Sunless executive, who described Orr’s treatment of staff and subordinates as “abysmal.” The journey smartly with modified into once filed against Canadian Nationwide, alleging racial discrimination.

Orr’s behavior modified into once allegedly “so unsightly” that Canadian Nationwide modified into once forced to provide executive teaching for him, in accordance with a 2020 submitting in the lawsuit. Orr’s deposition is sealed and the case modified into once settled in 2022.

Sooner than the launched hiring of Orr, Ancora drew attention to claims about his behavior in emails to two Norfolk Southern board members that CNBC got.

Ancora acknowledged in its assertion on Friday that the hiring of Orr modified into once a costly proposition that is harming shareholders. As part of the settlement, Norfolk Southern acknowledged it might per chance per chance well pay Orr’s prior employer $25 million in money and provide extra unspecified concessions for a key rail hub and route in the southern U.S. Norfolk Southern values that particular particular person part of the route at round 1% of its revenues.

When it launched Orr’s hiring, Norfolk Southern did now not bid the preliminary influence of the concessions or the estimated knock-on effects in the years to return.

Norfolk Southern suggested CNBC in a assertion that Ancora’s evaluation of the trace of the route — the Meridian Speedway settlement — “is entirely incorrect and in accordance with a unsuitable premise,” in that it assumes Norfolk Southern is forgoing extra revenue than it in level of truth is.

“As we previously stated, this revised settlement is by no formulation a consequential concession,” the corporate acknowledged.

Ancora is searching for to oust Norfolk Southern’s Shaw alongside with Orr in desire of ragged UPS CEO Jim Barber and ragged CSX Govt Vice President Jamie Boychuk, respectively. The activist has acknowledged that Norfolk Southern is dramatically underperforming its guests, and has laid the blame on the feet of Shaw and the board.

Concerning Orr, Norfolk Southern acknowledged he has a “observe myth of bettering efficiency while working safely and with integrity.”

“Ancora’s strive to malign John by dredging up claims against his ragged employer, one of which is from over two decades ago, is nothing extra than an strive to distract from the info about their deeply unsuitable COO candidate, Jamie Boychuk,” an organization spokesperson suggested CNBC. “Mr. Orr and Mr. Boychuk’s observe records and industry reputations are simply now not related.”

Jamie Boychuk and John Orr.

Courtesy: Longacre Square Partners and Norfolk Southern

In February 2023, a Norfolk Southern freight thunder derailed in East Palestine, Ohio, releasing toxic chemicals into the ambiance and prompting a political fight concerning railroad security. Since then, the stock is roughly flat while the S&P 500 is up 26%.

Norfolk Southern’s shareholders assembly is scheduled for Might per chance per chance per chance simply 9.

Ancora has won the backing of different stakeholders in its fight with the corporate. Neuberger Berman, which holds a dinky situation in Norfolk Southern, acknowledged on Friday that it might per chance per chance well enhance Ancora’s slate, citing a “history of uncomfortable governance that has lengthy preceded” the railroad’s transformation efforts.

A settlement between the two facets appears to be like unlikely, Gordon Haskett analyst Don Bilson acknowledged in a Friday veil to customers. Shaw previously suggested CNBC that the corporate supplied Ancora a “couple” of board seats in a settlement provide.

Ancora suggested CNBC that or now not it’s made repeated makes an strive to select with the corporate, both straight and via advisors. Any settlement, from Ancora’s perspective, would be contingent on a board refresh and Shaw’s ouster. The board has many instances expressed self belief in Shaw and has acknowledged it is now not interested by a settlement that can well lead on to his departure.

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