Eastern Railroad Discussion > they come for the NS (takeover attempt)

I haven't seen this takeover attempt linked to on TO:

Ancora-Led Group Takes Aim at Norfolk Southern, Pushes to Oust CEO Shaw (msn.com)
 



Edited 1 time(s). Last edit at 02/01/24 06:50 by ts1457.

When will it end?

So Wall Street forces an operational philosophy (PSR) on NS that directly results in the problems the railroad is experiencing today. Their solution is to point the finger at the CEO, attempt to force him out, and double down on PSR.

If he's ousted, I hope Shaw has the courage to tell Ancora that they and their ilk ("Activist Investors") are THE reason why NS is in such poor shape today.

Posted from Android



Edited 1 time(s). Last edit at 02/01/24 07:21 by bioyans.

If you don't do a good job, the owners can fire you.

The billion dollar holding is impressive, it amounts to about 2% of the total capitalization outstanding.

This is exactly the road map followed at Canadian Pacific, CSX, etc. Accumulate a decent share, and agitate for changes. Speak with the major owners and trustees like Vanguard, American funds, Fidelity, etc.  As an S&P 500 index company, about 75% of the NS shares are owned by institutions and endownments. Pension plans, 401k operators, etc.

Lackawanna484 Wrote:
-------------------------------------------------------
> If you don't do a good job, the owners can fire
> you.
>
> The billion dollar holding is impressive, it
> amounts to about 2% of the total capitalization
> outstanding.
>
> This is exactly the road map followed at Canadian
> Pacific, CSX, etc. Accumulate a decent share, and
> agitate for changes. Speak with the major owners
> and trustees like Vanguard, American funds,
> Fidelity, etc.  As an S&P 500 index company,
> about 75% of the NS shares are owned by
> institutions and endownments. Pension plans, 401k
> operators, etc.


I am cashing out!

Lackawanna484 Wrote:
-------------------------------------------------------
> If you don't do a good job, the owners can fire
> you.
>
> The billion dollar holding is impressive, it
> amounts to about 2% of the total capitalization
> outstanding.
>
> This is exactly the road map followed at Canadian
> Pacific, CSX, etc. Accumulate a decent share, and
> agitate for changes. Speak with the major owners
> and trustees like Vanguard, American funds,
> Fidelity, etc.  As an S&P 500 index company,
> about 75% of the NS shares are owned by
> institutions and endownments. Pension plans, 401k
> operators, etc.

Shaw isn't the reason why NS is in such lousy shape. PSR cost cutting and running monster "land barges" that can't get across the system ARE the reasons. The locomotive fleet is in horrible shape. They're lucky if they can find one lead-capable locomotive in a 3 unit consist. Shops don't stock parts to fix anything. They either strip parts off locomotives with more serious defects, or slap a "trail only" tag on it. All the deferred maintenance and overworking the equipment is coming home to roost. Service was terrible, but seems to be improving a bit over the past few months.

All Wall Street and the hedge funds care about is OR and quarterly earnings. They don't care if they literally beat the property into the ground in the process. They'll fill their pockets with money, and hope someone else comes along to pick up the pieces.

Posted from Android

engineerinvirginia Wrote:
-------------------------------------------------------
> I am cashing out!

Don't do it right away.  Currently, (11 AM EST, 2/1) NS stock is up a whopping $14.14 per share, a 6.05% jump..



Edited 1 time(s). Last edit at 02/01/24 08:11 by calumet.

Yes these funds want to take as much money out of the railroad that they can than sell it off.  They could car less about the long term of the railroad just bleed it dry and move on.

"Union Pacific, the largest freight-railroad operator in the U.S., last year named Jim Vena chief executive after a major shareholder urged the company’s board to oust Lance Fritz from the job. Union Pacific also announced staff cuts to put a lid on operating costs."

Things didn't really hit the fan with UP unless you witnessed the testimony by Fritz in front of the STB on freight service issues.    His disdain for the Board, and the process, and even showing up, was evident.   Oberman was not amused.  It's still out on YouTube if you want to see it for yourself.  Fritz's departure was announced shortly after.   Shaw, at least, didn't dodge responsibility for East Palestine, doesn't fix the problem but he at least didn't fail to own it.   

It's whack-a-mole now on trying much of anything to artifically inflate EPS to keep these guys happy short term by cutting cost.   UP decided to 'streamline' management responsibility, which removes layers of people that had experience with people that have little, we'll see how that goes.   NS has vowed not to cut all the crews they just hired, so everybody else gets the axe in non-agreement units, including the people that are responsible for generating new strategy and sales and support responsibilities.   And we'll see how that goes.   

All the class 1's and now the holding companies have huge responsiveness issues on almost everything simply because there's nobody there anymore.   Most people would be shocked to find out how thin the support ranks are and apparently getting thinner.   Try to bring on a new customer or get a new movement priced between multiple carriers.   The basic decision on rail growth is 'what does it actually cost and what is your transit time?'   Hello?  Hello?  We're not giving you any new business until that gets answered....

I just don't understand how a minority investor in comparison to Vanguard, Fidelty, etc. gets to steer the ship?   Why don't these larger investment firms call ths shots?

bioyans Wrote:
-------------------------------------------------------
> So Wall Street forces an operational philosophy
> (PSR) on NS that directly results in the problems
> the railroad is experiencing today. Their solution
> is to point the finger at the CEO, attempt to
> force him out, and double down on PSR.
>
> If he's ousted, I hope Shaw has the courage to
> tell Ancora that they and their ilk ("Activist
> Investors") are THE reason why NS is in such poor
> shape today.
>
> Posted from Android

Unfortunately, if he does get ousted, they will likely buy his silence with a huge severance package.  JUST ONCE, I wish somebody in the railroad industry had the balls to just say "screw the money, I'm going air all the dirty laundry for the whole world to see". Where are the Stan Crane's of the world who stuck to their guns on principal and refused to take the path of least resistance?  Misguided as he was, even Dave LeVan had more intergrity than most of the current cast of jokers. 

cjvrr Wrote:
-------------------------------------------------------
> I just don't understand how a minority investor in
> comparison to Vanguard, Fidelty, etc. gets to
> steer the ship?   Why don't these larger
> investment firms call ths shots?

Many institutional investors are passive fiduciaries. Which means they do what share advisers like ISS tell them to do.

The fiduciary part means they are required by law to do what's in the best interest of the share owners.

Not the employees, local community, shippers, etc. Not even the long term good of the company.

This isn't woke nonsense, it has been in law since the 1980s.

Posted from Android

junctiontower Wrote:
-------------------------------------------------------

>
> Unfortunately, if he does get ousted, they will
> likely buy his silence with a huge severance
> package. 

Just about everyone in senior management has severance agreements. And deferred compensation agreements which require you not to bad mouth the company, not reveal trade secrets, not work for a competitor, etc. If you do, your post-employment stream of goodies will be severely limited.

When Hunter Harrison was recruited by Pershing Capital to front the attack on Canadian Pacific, the first order of business was securing his former employer's agreement that he could work for CP. Canadian National agreed, and released him from parts of his contract with them.

This was predicted by several financial advisors almost immediately after NS released their 2023 full year numbers last week. Compared to the other railroads, NS had a big miss. Their Operating Income was down 18% from 2022. This compares to down 8% for CSX, down 8% for Union Pacific and down 4% for Canadian National. The outlier was CPKC which was up 4%, but that is the result of operational efficiencies from the merger (i.e. costs that were present in 2022 are no longer there in 2023). The NS number does NOT include costs associated with East Palestine, OH. If costs of the Ohio derailment are included, income is down 41%.

When you look this bad compared to others in your industry, it attracts activists like roadkill attracts vultures.

Lackawanna484 Wrote:
-------------------------------------------------------
> The fiduciary part means they are required by law
> to do what's in the best interest of the share
> owners.
>
> Not the employees, local community, shippers, etc.
> Not even the long term good of the company.

You bring this up in just about every financial discussion here on TO as if it somehow justifies the potentially wreckless and greedy behavior of acitvist investors, but it's so subjective that I really wonder if the courts would side with them if it came up, esp. if the big long-term investors were on the other side. That is, the vast majority of people in this country through their retirement accounts. For instance, what exactly is in the "best interest" of a company, higher short-term quarterly (or whatever small timeframe) gains that could wreck the company or produce much lower gains longer term versus the stance that the institutional investors (and their investors, you and I) usually follow to produce good returns sustainably? To reasonably accomodate for all constituencies, with the investors at the forefront? Does a looted company that no longer produces returns or is a shell of itself really something a court would say follows the law? The large institutional investors really should be more involved, so where is their fudiciary responsibility to their own clients by rejecting these activist investors when it's clear their goal is not the eventual health of the thing that produces returns in the first place? Maybe they should step up and fight it out if they have to...

JG

Some years ago the late Cornell Law School Professor, Lynn Stout, wrote a small book regarding the role of the corporation titled: "The Myth of Shareholder Value>"  She suggests that much of the belief that the corporation must only make decisions based upon how it benefits the share holder is falsely based upon a court ruling involving Henry Ford and the Dodge brothers wherein Ford stopped dividends to shareholders in an effort to stop the Dodge brothers from benefiting from their ownership of some of Ford's stock. I believe it was a case decided not by the US Supreme Court but by a state supreme court. Her reading of corporate responsibility is to five constituents: the customer, the creditor, the employee, the community and finally to the share owner. Of course, Milton Freeman teaching in Chicago proclaimed that the sole duty of a corporation is to the shareholder, excluding all others. Maybe it is time to revisit the whole thing.

You've got a generation of MBAs who were taught Milton Friedman. Don't expect much else from them. Or, in the words of Gordon Gecko whom a lot of people on Wall Street today would like to emulate: https://www.americanrhetoric.com/MovieSpeeches/moviespeechwallstreet.html.

You guys raise several excellent points. The pension plans are severely restrained from activist stances by the ERISA laws. Relying on outside advisors like ISS gives the plans a lot of cover.

jgilmore, I think it is time to revisit the obligations of a corporation. But, with an extremely right wing Supreme Court, I expect they would deny any obligations to employees, communities, etc. And lock that precedent into law. Not just for pension plans.

Posted from Android

Lackawanna484 Wrote:
-------------------------------------------------------
> junctiontower Wrote:
> --------------------------------------------------
> -----
>
> >
> > Unfortunately, if he does get ousted, they will
> > likely buy his silence with a huge severance
> > package. 
>
> Just about everyone in senior management has
> severance agreements. And deferred compensation
> agreements which require you not to bad mouth the
> company, not reveal trade secrets, not work for a
> competitor, etc. If you do, your post-employment
> stream of goodies will be severely limited.
>
> When Hunter Harrison was recruited by Pershing
> Capital to front the attack on Canadian Pacific,
> the first order of business was securing his
> former employer's agreement that he could work for
> CP. Canadian National agreed, and released him
> from parts of his contract with them.

I understand ALL of that, what I'm waiting for is somebody tho FINALLY puts integrity ahead of raking in a few more dollars. It's not like any of these guys would be missing any meals if they forfeited some severance. The personal satisfaction of burning these jackwagons down on the public stage HAS to be worth SOMETHING.

Posted from iPhone

calumet Wrote:
-------------------------------------------------------
> engineerinvirginia Wrote:
> --------------------------------------------------
> -----
> > I am cashing out!
>
> Don't do it right away.  Currently, (11 AM EST,
> 2/1) NS stock is up a whopping $14.14 per share, a
> 6.05% jump..

I'm already out....it's a matter of principle not money...if I don't like what's happening I won't be investing.