Norfolk Southern, which spent $4 billion on stock buybacks last year, creates $1 million fund for Ohio train-derailment victims
Norfolk Southern Corp. is facing criticism about the amount of financial support it has given East Palestine, Ohio, in the wake of the train derailment that spewed toxic chemicals and forced residents to leave their homes for several days.
As locals seek answers about whether the air is safe to breathe, the railroad company announced a $1 million fund for the affected community. Norfolk Southern
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has also distributed more than $1.7 million in direct financial support to “more than 1,000 residents” and a “number of businesses,” and donated $25,000 to the Red Cross, the company said.
The state’s Republican governor, Mike DeWine, said Norfolk Southern’s financial gestures aren’t yet sufficient.
“The governor expects Norfolk Southern to make the residents of East Palestine whole,” a spokesman for DeWine said. “He does not view what has been done to date as having completed that obligation. We intend to hold the company’s feet to the fire to continue to remediate the site and make citizens whole.”
Some observers have pointed out that Norfolk Southern’s value, which was $53 billion as of Friday, far eclipses donations the company has made since the Feb. 3 disaster. CNN anchor Jake Tapper on Wednesday noted the disparity between Norfolk Southern’s $1.3 billion quarterly income and the $1 million the company set aside for local families.
Norfolk Southern did not immediately respond to a request for comment on criticisms of its donations.
The company said the $1 million community fund for the East Palestine community “will supplement other efforts to support residents, businesses, and first responders,” which have included spending $220,000 on air packs for the East Palestine Fire Department, providing “more than 100” air purifiers for local residents’ homes, and paying for air monitoring at local schools.
Norfolk Southern spent $4.23 billion on stock buybacks in 2022
Other critics have zeroed in on Norfolk Southern’s recent stock buybacks.
The company set a new $15 billion share-repurchase program in August 2022, with no expiration. The company said it spent $4.23 billion on share repurchases in 2022. The $1 million earmarked for the community fund represents 0.02% of the money Norfolk Southern spent on share repurchases in 2022.
Companies buy back their own shares as a way to decrease the number of shares in circulation, which can in turn boost the earnings per share and elevate the share price. This ultimately benefits the company’s executives and shareholders.
Buybacks have their detractors, including President Joe Biden, who took aim at the practice in this month’s State of the Union address and proposed quadrupling the tax on corporate stock buybacks.
“Stock buybacks enable corporations to funnel tax-advantaged payouts to wealthy and foreign investors, instead of paying dividends that shareholders are required to pay taxes on,” the White House said on Feb. 6. “In addition, a number of experts have argued that CEOs — who are compensated mostly in stock — use buybacks to enrich themselves to the detriment of the long-term growth of the company.”
Some critics, including former Labor Secretary Robert Reich, have argued that Norfolk Southern could have spent the money it used for stock buybacks on safety upgrades that may have prevented the derailment.
‘A down payment on our commitment to help rebuild’
In addition to establishing the community fund, Norfolk Southern is giving cash payments to residents to cover expenses they incurred when they evacuated their homes.
The railroad company initially said it would reimburse people within one mile of the evacuation zone, but expanded the eligible area to the entire East Palestine ZIP code after elected officials including Sen. J.D. Vance and Rep. Bill Johnson, both Republicans of Ohio, asked Norfolk Southern to include more households. The company’s website instructs residents seeking reimbursement money to provide receipts for evacuation-related expenses.
One local attorney has raised concerns that the $1,000 checks Norfolk Southern has been handing out could limit possible future payments from the company, but a spokesman for the railroad said that wasn’t the case. Vance and Ohio’s other senator, Democrat Sherrod Brown, have both said that the reimbursement money shouldn’t release the railroad from any liability in the disaster. Norfolk Southern seemed to confirm that on Twitter, writing, “Contrary to rumors, there are no hidden legal risks to accepting these funds.”
Brown said hundreds of East Palestine families are “rightfully concerned about long-term health risks due to the Norfolk Southern train derailment.”
“No American family should be forced to face the horror of fleeing their homes because hazardous materials have spilled or caught fire in their community,” he added. “We will work to make sure that Norfolk Southern is held accountable and pays for cleanup and continued monitoring.”
Norfolk Southern CEO Alan Shaw, in an open letter to the East Palestine community, called the $1 million fund a “down payment on our commitment to help rebuild.” He added, “I know there are still a lot of questions without answers. I know you’re tired. I know you’re worried. We will not let you down.”
Norfolk Southern share prices have fallen since the derailment; shares closed at $252.12 on Feb. 3, and at $228.15 on Friday. Norfolk Southern shares were down 16.6% over the past 12 months, compared to a 1.47% decline for the Dow Jones Industrial Average
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and a 6.62% drop for the S&P 500 Index
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Tomi Kilgore contributed reporting to this story.
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