In a significant development, the BMWED Teamsters have announced their support for activist group Ancora in its efforts to remove Norfolk Southern CEO Alan Shaw and a majority of the railroad's board. The endorsement from the BMWED Teamsters, whose members play a crucial role in maintaining the track infrastructure for Norfolk Southern, represents a sharp rebuke of the current leadership.

After more than a year of hesitation, the BMWED-IBT has concluded that a change in leadership is necessary for the freight rail carrier and its employees. "The BMWED-IBT, after more than a year of non-committal hedging on reasonable, needed changes and untenable shakiness in management at Norfolk Southern, has determined that a change in leadership is needed for the freight rail carrier and its employees," said BMWED Teamsters President Tony Cardwell.

Labor support for the proxy contest is now divided, with several other unions previously backing Norfolk Southern's management. However, the endorsement from the BMWED Teamsters holds significant weight in an industry heavily reliant on union support.

Notably, the American Federation of Labor and Congress of Industrial Organizations (AFL-CIO), earlier supported management over Ancora, citing concerns about understaffing and other potential issues with Ancora's plan. In response, Norfolk Southern stressed the progress made in creating a safer and more productive railroad, with support from unions representing 81% of their craft workers.

Maintaining positive relationships with labor is crucial for both management and activist groups striving to persuade shareholders of their respective plans for Norfolk Southern. More than half of the U.S. railroad employees are union members, and past labor disputes have prompted intervention from the presidential and congressional levels.

Norfolk Southern's management argues that Ancora's plan to implement precision railroading (PSR) and streamline operations could harm the company's relationships with customers, regulators, and labor groups. However, the backing of the BMWED Teamsters suggests that some union members believe the opposite.

The proxy contest between Norfolk Southern and Ancora, which has been ongoing for several months, revolves around the appointment of former UPS Chief Operating Officer Jim Barber as CEO and former CSX executive Jamie Boychuk as COO. Both executives have backgrounds as union members.

Ancora asserts that Norfolk Southern has mismanaged the fallout from a high-profile derailment incident in East Palestine, Ohio, and claims the company's operating plan is unworkable. In response, Norfolk Southern expresses full confidence in Shaw and his turnaround plan. The company can also count on the support of key regulators in Washington, in addition to having recently appointed two new directors and a new COO, John Orr, who is already working towards service improvements.

The outcome of the proxy contest will heavily depend on the support of influential proxy advisors, ISS and Glass Lewis, whose recommendations will play a vital role in the decisions of institutional shareholders. Neuberger Berman, for instance, has already expressed support for Ancora, highlighting Norfolk Southern's history of poor governance and the need for changes in the boardroom.

Norfolk Southern's shareholder meeting is scheduled for May 9, where shareholders will ultimately determine the future direction of the railroad company.