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Cleveland-Cliffs Inc. CEO Lourenco Goncalves has thrown his support behind Cleveland-based activist shareholder Ancora Holdings in its proxy fight with Norfolk Southern Corp., the railroad responsible for a headline-grabbing derailment in East Palestine, Ohio, more than a year ago.
"As one of the largest customers of Norfolk Southern as well as a meaningful supplier of steel rails, I am writing to express my support in your current proxy fight with Norfolk Southern," Goncalves wrote in an April 27 letter to Ancora CEO Fred DiSanto and President James Chadwick.
Ancora, which made the Goncalves letter public on Sunday evening, has been soliciting proxies from other Norfolk Southern shareholders to elect seven independent directors to the railroad's 13-member board who could help improve its safety record and financial performance. The proxies would be voted at Norfolk Southern's annual shareholders' meeting on May 9.
On Monday, Norfolk Southern (NYSE: NSC) claimed that Ancora had negotiated and signed a memorandum of understanding with the Brotherhood of Locomotive Engineers and Trainmen, a division of the International Brotherhood of Teamsters, that purported to offer specific contract concessions by Norfolk Southern in exchange for the labor union's support of Ancora's "attempt to gain control of the company's board."
The agreement would provide concessions to the union "that limit operational flexibility and destroy significant value for the company," Norfolk Southern said in a statement.
The outcome of the proxy fight would not affect Cleveland-Cliffs (NYSE: CLF) or its customer relationship with Norfolk Southern, said Goncalves, who alluded to his own shareholder activism that put him at the helm of the Cleveland company and replaced its board in 2014.
"We believe in shareholder activism when the activist has a plan and knows how to execute the plan," Goncalves said in his letter. "That seems to be the case of your current effort, and therefore you have my support."
On Monday, San Francisco-based proxy advisory firm Glass, Lewis & Co. recommended that Norfolk Southern investors vote to replace the railroad's CEO, Alan Shaw, and other board members with six of the activist investor's director candidates, Reuters reported.
And on Friday, the Brotherhood of Maintenance of Way Employes Division of the International Brotherhood of Teamsters said in a statement it had determined that a change in leadership at Norfolk Southern was necessary.
