Union Coalition: Replacing Norfolk Southern CEO Would be ‘A Tremendous Mistake’
Union rail workers are now chiming in on the Norfolk Southern proxy fight.
The AFL-CIO’s Transportation Trades Department, a coalition that represents 37 unions across transportation modes, is throwing its support behind Norfolk Southern CEO Alan Shaw as an activist investor attempts to replace the exec and overhaul the rail company’s board of directors.
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In a letter to Norfolk Southern shareholders, Transportation Trades Department president Greg Regan said it would be “a tremendous mistake and a detrimental step” to replace Shaw with former UPS chief operating officer Jim Barber, who is the handpicked candidate from hedge fund Ancora Holdings.
Regan went after Ancora on its insistence that the rail company should shift to a precision scheduled railroading (PSR) model, accusing the investment firm of “putting short-term profits above all else, including the long-term functional operation of Norfolk Southern.”
Adding to the PSR criticisms, Regan claims that Ancora’s candidate for chief operating officer, Jamie Boychuk, oversaw deteriorating service and safety issues in his time as COO of CSX.
“During his last full year in 2022, CSX’s rate of total accidents and incidents per million train miles rose to its highest levels since 2005,” Regan said. “CEO Joe Hinrichs let him go because PSR broke the railroad and destroyed relationships with their customers and workers.”
The union coalition head went after the wider implementation of PSR across the industry, saying that it leads to increased operational and safety issues, worsening service performance and less capacity to move volume.
“The rate of total accidents/incidents per million train miles increased by 19 percent across the Class I railroads from 2014 to 2022 according to federal data,” said Regan. “The Surface Transportation Board held unprecedented hearings in April 2022 on the freight rail service crisis and issued emergency service orders because the Class I railroads, including Norfolk Southern, were unable to meet their basic common carrier service obligations under federal law.”
According to Regan, replacing Shaw with a new CEO “doubles down on a failed strategy,” which he said would not eliminate complaints from elected officials and local communities that Norfolk Southern serves.
The letter comes a day after Ancora’s slate of eight board candidates and suggested management team called out a recent train derailment in Lower Saucon Township, Pa. as “preventable.” The derailment marks the second such incident in 13 months, after a high-profile accident in East Palestine, Ohio resulted in the release of hazardous and toxic chemicals, effectively forcing many of the town’s residents to evacuate for days.
Ancora’s proposed leadership team said it plans to require every train on a mainline to have a two-person crew, and aims to reduce congestion by having fewer assets in transit, using existing assets more efficiently and reducing equipment failures.
“We realize that the most important assets of any railroad are its experienced operators,” Ancora’s proposed directors said in a statement. “Conductors, engineers and other workers on the railroad are the essential factor in ensuring safe and productive operations. We recognize that railroads are complex organizations, and railroading is dangerous work. While we appreciate the technological advances that continue to enhance safety and operational performance, safe railroading still relies primarily on human oversight and ingenuity.”
Norfolk Southern solely responsible for East Palestine cleanup
Aside from the proxy fight, Norfolk Southern is still dealing with the fallout from the February 2023 incident on multiple fronts.
Already having to pay up $1.1 billion for the cleanup of the East Palestine derailment, the rail operator has been declared solely responsible for the bill, a federal judge ruled Wednesday.
The decision threw out the railroad company’s claim that the companies that made chemicals that spilled and owned tank cars that ruptured should share the cost of the cleanup.
At a Senate hearing on the same day, the chair of the National Transportation Safety Board (NTSB) said the decision to blow open five tank cars and deliberately burn the toxic chemical inside them was not necessary.
At the time, the decision was made to instigate a “controlled burn” to prevent a larger explosion. But according to NTSB chair Jennifer Homendy, the evidence gathered since the incident suggested that this was the wrong move because the temperature in one tank car was coming down, while the other four were all less than 70 degrees—thus meaning there was no risk of explosion.
The vinyl chloride released as a result of the burn, combined with all the other chemicals that spilled and caught fire after the derailment, have left residents with lingering fears about possible long-term health consequences.
