Not hard to figure out…but it’s not anyone who cares about running safe, efficient railroads!
We have a horrible derailment happen in a community. We have several tank cars that are leaking hazardous materials. In the aftermath of this derailment, the first word we see and think is “greed.” Well, maybe it’s “greed” and could be “greed,” but derailments can have many causes, like a broken rail and bad wheel bearings. “Greed” could be to blame for derailments that have a backstory of workers working too many hours doing the work once done by laid-off carmen and inspectors. Yes, the railroad CEOs and their Boards will, indeed, behave like greedy bastards, which will in turn portray the railroad itself as a “greedy bastard railroad.” Yes, the CEO and the railroad are greedy bastards, indeed, but they are doing it for the great cause of higher dividends for shareholder-owners, returns for investors, and especially a smile from Wall Street. The life and limb of all of us be damned if it comes against “shareholder value!”
How Shareholder Primacy turns Railroad CEOs and Boards into Greedy Bastards
Whether the railroad, its CEO, and Board like it or not, the tenets of Shareholder Primacy, which they were likely indoctrinated into in business school, define the railroad company, like all other companies, as existing only for the benefit and profit of shareholders, who are the “owners” of the company. “The profit for shareholders-owners is the only goal of their railroad, since the only goal of any publicly traded company is profits for shareholder-owners.”
Shareholder Primacy demands that the railroad CEO and Board take on the Greedy Bastard mentality and “maximize shareholder value” of the railroad company, no matter the harm and who is hurt. During E Hunter Harrison and Mantle Ridge’s “taking of CSX,” their blood bath first included laying off 1,000 managers at the Jacksonville HQ . As we will see, laying off highly skilled railroad workers with specialized skills and decades of experience is tragic. The layoffs of railcar inspectors was believed to be in the backstory of the horrible derailment of a Norfolk Southern train in East Palestine in February 2023. After the East Palestine derailment, Norfolk Southern attempted skip the cleanup of toxic chemicals and attempted to rebuild their tracks over contaminated soil. The Environmental Protection Agency of the US Government had to order NS to clean up contaminated soil.
Under the Shareholder Primacy, the railroad’s CEO and Board “owe a fiduciary duty to the owners, the shareholders,” so this means the CEO and Board have a responsibility to increase dividends and returns on their investments. Railroad CEOs are forced to satisfy “shareholder-owners” by laying off workers, undermining safety, and mothballing locomotives. Wall Street is often an accomplice, approving or disapproving of the railroad’s governance through a higher or lower value of the railroad’s stock price. So, the management of railroads will lie cheat, steal and put human health and life at risk if it means just a little bit more for the “shareholder-owners.”
No more selfish, Greedy Bastard “shareholder owners” running and ruining our railroads!
No, the railroads, their CEOs, and Boards, are not the real Greedy Bastards. The truth is that the REAL Greedy Bastards in American Railroading – the “shareholder owners” and activist hedge funds – don’t know how to run a railroad, and could care less about running a railroad that actually serves customers and shippers. They don’t care about how very, very important railroads are to our national economy. They are only about profits for shareholders, because all publicly traded companies- including railroads- exist only for shareholders. For each Greedy Bastard railroad CEO (who usually get lots company stocks as part of their compensation packages), there are many Greedy Bastard activist hedge funds and their Greedy Bastard “shareholder-owners.” It has been this Author’s observation that there are great people out there who want to run our railroads for the long-term benefit of all stakeholders of each and every American railroad. However, those CEOs, like Joe Hinrichs and Lance Fritz were doing good things for their railroads, until both of these great railroad CEOs ran afoul of PSR-Shareholder Primacy activists and then fell victim to Boards that surrendered to hedge fund pirates’ demands.
Both UP and CSX have lost the shine and joy they had when they were run as railroads that were building for the future, that acknowledged many stakeholders, celebrated employees, the communities they run their tracks through, and placed customers first and center! No more selfish, Greedy Bastard “shareholder owners” running and ruining our railroads!
So, out with Mantle Ridge;
Out with Ancora Holdings;
Our with Soroban Capital;
Out with Hunter Harrison, Precision Scheduled Railroading;
Out with “shareholder owners”;
Out, out, out with Shareholder Primacy!