April 30, 2021

Friends Fiduciary’s Executive Director Jeff Perkins announced today that leading independent proxy advisory firms Institutional Shareholder Services (ISS) and Glass Lewis, which advise institutional investors on how to vote at companies’ shareholder meetings, has each recommended that shareholders support Item 5 at the Norfolk Southern Corporation (NSC) annual shareholders meeting on May 13, 2021.

FFC submitted the Item 5 shareholder proposal asking NSC’s Board of Directors to conduct an evaluation and issue a report describing if, and how, the company’s lobbying activities (through its trade and other associations) align with the Paris Climate Agreement’s goal of limiting average global warming to well below 2 degrees Celsius and how NSC plans to mitigate risks presented by any misalignment.

In its April 29th report recommending FOR Item 5, ISS concluded:

  • Given that NSC’s industry sector “is likely to face increased physical and transition risk related to climate change…[its s]hareholders would benefit from more transparency about actions taken to loosen environmental restrictions that are in place and block future laws and regulations.”
  • Additional disclosure on the company’s climate lobbying-related activities and oversight would allow its shareholders to “better gauge how well the company is [managing,] assessing and mitigating risks related to climate.”

In its April 21st report recommending FOR FFC’s climate lobbying proposal, Glass Lewis cited its view that the requested reporting would:

  • “provide shareholders with assurance that Company funds were being spent in a manner that furthered its stated objectives”;
  • “ensure that the Company was being transparent in its policy objectives” and that “its positions are not misconstrued” due to its trade association memberships; and
  • “mitigate against reputational risks” from direct or indirect lobbying activity that can “result in the inefficient use of corporate resources” and “confuse a company’s messages”.

Friends Fiduciary encourages other shareholders to join in voting FOR Item 5, because both the risks and opportunities presented by climate change are highly relevant to Norfolk Southern’s business.  Further, trade and other associations to which NSC belongs have been among the leading opponents of Paris-aligned climate policy. NSC currently makes no disclosure about its direct or indirect climate-related lobbying, which prevents shareholders from discerning whether its lobbying is aligned with the Paris Agreement’s goal and how the company is managing risks related to misalignment.  In opposing FFC’s proposal, NSC’s Board of Directors makes arguments that are vague and focus on information irrelevant to the proposal.

The recommendations from these proxy advisory firms follow FFC’s April 1st letter to NSC shareholders. At Friends Fiduciary we will continue our leadership on these important stewardship issues.