Norfolk Southern activist investor highlights past abusive behavior of new COO as proxy fight intensifies
A general view of the exterior of the headquarters of Norfolk Southern on April 1, 2023 in Atlanta, Georgia.
Icon Sportswire | Getty Images
Norfolk Southern is almost two months into a battle with activist investor Ancora, which is trying to shake up the railroad’s board and oust CEO Alan Shaw.
Now the firm is taking aim at Norfolk Southern’s new operating chief John Orr over what the activist calls an “excessive” buyout package and a career marred by allegations of racial and sexual discrimination.
Last month, Norfolk Southern hired Orr away from rival CPKC, paying tens of millions of dollars to buy him out of his contract. The move was widely seen as a response to Ancora’s operational criticisms and received praise from several Wall Street analysts.
In a letter to Norfolk Southern shareholders on Friday, Ancora highlighted past misconduct by Orr that raises questions about his hiring, even as the executive has overseen improvements in the railroad’s operations in his three weeks on the job.
Ancora documented both alleged and substantiated workplace misconduct by Orr, dating back to his time as a mid-level executive at Canadian National. An appointee of the Canadian Arbitration Board substantiated allegations that Orr used verbally abusive language toward a female employee in the early 2000s.
The employee and another witness told the employment tribunal at the time that Orr regularly cursed and shouted at the employee, and called her a “f—— b—-” and a “f—— idiot.” A witness told the arbitrator that, in one instance, Orr told the employee that she “was so f—— stupid it was embarrassing.”
The arbitrator found the claims credible.
Ancora also flagged a lawsuit filed in 2019 by a Black executive, who described Orr’s treatment of employees and subordinates as “abysmal.” The suit was filed against Canadian National, alleging racial discrimination.
Orr’s behavior was allegedly “so bad” that Canadian National was forced to provide executive coaching for him, according to a 2020 filing in the lawsuit. Orr’s deposition is sealed and the case was settled in 2022.
Prior to the announced hiring of Orr, Ancora drew attention to claims about his behavior in emails to two Norfolk Southern board members that CNBC obtained.
Ancora said in its statement on Friday that the hiring of Orr was a costly proposition that’s harming shareholders. As part of the agreement, Norfolk Southern said it would pay Orr’s prior employer $25 million in cash and provide additional unspecified concessions for a key rail hub and route in the southern U.S. Norfolk Southern values that particular part of the route at around 1% of its revenues.
When it announced Orr’s hiring, Norfolk Southern didn’t disclose the initial impact of the concessions or the estimated knock-on effects in the years to come.
‘Flawed premise’
Norfolk Southern told CNBC in a statement that Ancora’s analysis of the value of the route — the Meridian Speedway agreement — “is completely inaccurate and based on a flawed premise,” in that it assumes Norfolk Southern is forgoing more revenue than it actually is.
“As we previously stated, this revised agreement is by no means a consequential concession,” the company said.
Ancora is seeking to oust Norfolk Southern’s Shaw along with Orr in favor of former UPS CEO Jim Barber and former CSX Executive Vice President Jamie Boychuk, respectively. The activist has said that Norfolk Southern is dramatically underperforming its peers, and has laid the blame at the feet of Shaw and the board.
Regarding Orr, Norfolk Southern said he has a “track record of improving performance while operating safely and with integrity.”
“Ancora’s attempt to malign John by dredging up claims against his former employer, one of which is from over 20 years ago, is nothing more than an attempt to distract from the facts about their deeply flawed COO candidate, Jamie Boychuk,” a company spokesperson told CNBC. “Mr. Orr and Mr. Boychuk’s track records and industry reputations are simply not comparable.”
Jamie Boychuk and John Orr.
Courtesy: Longacre Square Partners and Norfolk Southern
In February 2023, a Norfolk Southern freight train derailed in East Palestine, Ohio, releasing toxic chemicals into the environment and prompting a political fight regarding railroad safety. Since then, the stock is roughly flat while the S&P 500 is up 26%.
Norfolk Southern’s shareholders meeting is scheduled for May 9.
Ancora has gained the backing of other stakeholders in its fight with the company. Neuberger Berman, which holds a small position in Norfolk Southern, said on Friday that it would support Ancora’s slate, citing a “history of poor governance that has long preceded” the railroad’s transformation efforts.
A settlement between the two sides appears unlikely, Gordon Haskett analyst Don Bilson said in a Friday note to clients. Shaw previously told CNBC that the company offered Ancora a “couple” of board seats in a settlement offer.
Ancora told CNBC that it’s made repeated attempts to settle with the company, both directly and through advisors. Any settlement, from Ancora’s perspective, would be contingent on a board refresh and Shaw’s ouster. The board has repeatedly expressed confidence in Shaw and has said it isn’t interested in a settlement that would lead to his departure.
Technology
Tesla’s Model Y debuts in India priced at a hefty $70,000 as the EV maker ‘tests the waters’
In this photo illustration, logo of Tesla is displayed on a mobile phone screen in front of the Indian flag in Ankara, Turkiye on November 28, 2023.
Cem Genco | Anadolu | Getty Images
Tesla has made its long-awaited debut in India, where it will sell its electric SUV, the Model Y, starting at $69,770, a significant markup from other major markets, its website showed Tuesday.
The sales launch comes the same day the American electric vehicle maker opened a showroom in Mumbai, its first in the country.
Isabel Fan, Southeast Asia Director at Tesla, also announced that the company would soon launch a showroom in the Indian capital of New Delhi, according to a report from CNBC-TV18.
The report added that Tesla would hire staff locally and set up experience centers, service centers, delivery systems, charging stations and logistics hubs throughout the country.
There has long been speculation about when Tesla would enter India, the third-largest automotive market in the world by sales. However, the high price tag may come as a surprise to many. For example, the Model Y starts from $44,990 in the U.S.
Why are prices so high?
Vaibhav Taneja, Tesla’s Chief Financial Officer, in April, confirmed the company’s interest in India but said it would take a careful approach to the market considering its 70% tariff on EV imports and about 30% luxury tax.
These high taxes explain why Tesla was forced to set its prices so high in India, despite the country’s preference for EVs at much lower price ranges.
Experts told CNBC that this will see Tesla in India compete in the premium segment of the market with the likes of BMW, rather than with local EV companies like Tata Motors.
“I won’t say that these prices are completely out of range because you will find buyers in India for all price points,” Vivek Vaidya, global client leader for mobility at research firm Frost & Sullivan, told CNBC’s “Inside India” on Tuesday.
“The question is whether they are going to threaten the mass market. The answer to that is no because the most popular selling cars probably sell at one-tenth of this price,” he added.
Testing the waters
While the Model Y will struggle to be price competitive, Tesla is likely more focused on “testing the waters” than generating sales in India, Puneet Gupta, Director for the Indian automotive market at S&P Global Mobility, told CNBC.
India first announced a new EV policy last year that promised to reduce duties for companies that commit to building up a local supply chain. While this could help Tesla push its prices down, the company has yet to commit to building any local manufacturing plants in India.
“The Mumbai showroom is a strategic ‘soft power’ move, not a full commitment,” Diwakar Murugan, automotives analyst at Canalys, told CNBC in a statement, adding that Tesla’s hesitation in India is pragmatic, as the market still lacks the demand to justify a large-scale manufacturing facility.
“Shifting a significant portion of its production to India would require a major re-evaluation of its global manufacturing strategy, something it’s not ready to do while its primary focus remains on scaling production in its established markets,” he said.
Murugan predicted that Tesla may only commit to full-scale Indian manufacturing between 2028 and 2030, with incentives like land subsidies and tax holidays, as well as the maturity of the local battery market expected to be important factors.
In the meantime, the Model Y will be a “niche, limited-volume product for wealthy, tech-savvy early adopters who seek a status symbol,” he added.
S&P’s Gupta noted that India’s tariffs on EV exports could also soon change as a result of ongoing trade negotiations between Washington and New Delhi, as well as further tweaks to its EV policy.
Tesla CEO Elon Musk spoke with India’s Prime Minister Narendra Modi on topics including collaboration on technology and innovation in April.
“The Indian government has been very proactive in terms of pushing green, cleaner, electric cars, and I think that Tesla has a clear advantage due to the India-U.S. relationship,” Gupta said.
-
Sports3 years ago‘Storybook stuff’: Inside the night Bryce Harper sent the Phillies to the World Series
-
Sports1 year agoStory injured on diving stop, exits Red Sox game
-
Sports2 years agoGame 1 of WS least-watched in recorded history
-
Sports2 years agoMLB Rank 2023: Ranking baseball’s top 100 players
-
Sports4 years ago
Team Europe easily wins 4th straight Laver Cup
-
Sports2 years agoButton battles heat exhaustion in NASCAR debut
-
Environment2 years agoJapan and South Korea have a lot at stake in a free and open South China Sea
-
Environment2 years agoGame-changing Lectric XPedition launched as affordable electric cargo bike