The evolution of activist investors in the U.S. railroad industry

The railroad industry has faced a series of prominent activist campaigns since the late 1990s, including those at CSX (2006, 2016), BNSF (2007), Norfolk Southern (2015), Canadian National (2011), and Canadian Pacific (2021). These investors, who have taken ownership interests in a variety of ways, have sought major changes in railroad operations, financial policy, and overall strategy. Rather than using traditional means of proxy contests or acquisition proposals, these high-profile activists have developed new means and tactics seeking to influence company financial policies and strategic direction. This paper begins by summarizing the rise of activist investors in general, and the changing nature of their objectives and their tactics. Some industry analysts have claimed that the recent railroad activist campaigns are novel and unprecedented. In contrast, this paper argues that the railroad industry has long been shaped by activist investors, whose objectives and tactics have changed as the industry has evolved. We define and then chronicle the evolution of activist investors in US railroads since inception and develop a taxonomy of major activist investor events and objectives. For most of its history, activist investors in railroads have been motivated by three main objectives: network growth and extension; consolidation; and bankruptcy and restructuring. But as the effects of deregulation settled out by 2000, railroads have experienced new types of investors who have sought changes that are less industry-specific and more like those in the broader economy, focusing on governance, operating strategy, and capital distributions.