Commentary by Richard L. Beadles

August 20, 2018

 


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I believe that the rail mode of transportation, in all of its forms, is woefully unrepresented in public policy, at all levels of government, to the detriment of the interests of Americans.   We have left entirely too much discretion and responsibility to the privately-owned freight railroads, which have, under those circumstances, focused almost entirely upon shareholder and executive interests.  The public interest is not effectively represented.  We have been shortchanged in the process. 

 

Today, there is a boom in demand for domestic surface transportation of both goods and people.  However, the rail mode is generally not in position, or is otherwise unable, to respond.  Thus, we will likely see more even larger and heavier trucks on our highways.   Amtrak is effectively constrained by lack of capital, lack of access, and lack of clout. Can anything be done to improve upon this situation?

 

For years I have watched with regret as railroad executive management has transitioned from a long-standing business philosophy that served all stakeholders reasonably well for most of the 20th century, a corporate governance policy that sought quite appropriately to make as much money as possible, while at the same time striving to provide important public services.  In its place is now a single-minded objective to create unprecedented levels of shareholder and CEO wealth, at all costs, regardless of public necessity.  This is apparently the ONLY corporate business objective of the seven (7) primary freight railroads operating in America today.

 

This evolution in corporate policy occurred over many decades, often for explicable reasons, but the full force of the “new” corporate focus has only recently reached such extreme dimensions that it cannot be ignored.   Among rail advocates and friends interested in transportation in Virginia, the current “Public-Be-Dammed” attitude is frequently on display at CSX and Norfolk Southern.   The leadership of Virginians for High Speed Rail and of Virginia Rail Policy Institute, as well as Rail Solutions, will have no difficulty thinking of examples of CSX and NS indifference to the needs of Virginia business, industry and of the mobility needs of our citizens.  This is a much larger and more consequential public policy issue than just rail passenger service.  I would argue that both of these Class One Freight railroads are failing the people of Virginia, in both freight and passenger services.  If you agree, this message is worthy of dissemination in pursuit of remediation.

 

Although I have thought about corporate charter obligations, and common carrier requirements of carriers, it was only recently that I came across a proposal by Massachusetts Senator Elizabeth Warren, titled  “Accountable Capitalism Act”, to require all corporations with more than $ I billion of annual revenue to obtain a federal charter which, she would hope would strengthen the hand of government to cause the corporation to recognize and hopefully fulfill their public service obligations, implicit in their chargers, whatever such obligations might be.

 

Realistically, I don’t think Senator Warren’s bill stands any chance whatsoever of becoming law, but it does occur to me that VHSR and VRPI might wish to consider some soft-form of constructive public criticism of CSX and NS, for their public service failures, emphasizing the fact that these two railroads are shortchanging the Commonwealth from which their charters were obtained.

Right: Sen. Elizabeth Warren, with her husband Bruce Mann, announcing the formation of a committee to run for president in Cambridge, Mass. on December 31. (AP Photo/Bill Sikes)

I understand that the 1971 NRPC legislation relieved railroads of their public service obligation to operate passenger trains for their own account, but it also required them to accept, upon reasonable terms, Amtrak trains and to operate them with a high degree of reliability and responsibility.  In this latter area, the railroads have often failed outrageously.

 

This matter of public responsibility may even be more applicable to the I-81 corridor and NS’ apparent failure to embrace effective solutions for truck to rail diversion.  Rail Solutions may wish to discretely admonish Norfolk Southern, which has had a poor record of operating performance elsewhere over the past year, and seems to have completely turned its back upon the Crescent Corridor.  If I am wrong on this, it is incumbent upon NS to explain why I am.

 

The current CSX situation is notorious for its retrenchment from markets, and miserable performance in the I-95 corridor, which has had a devastating impact upon Amtrak and Virginia Railway Express.  In both cases --- NS and CSX – their stock is at or near an all-time high.  This tells us much about the focus of attention.

Senator Warren’s Op Ed, was entitled “Companies Shouldn’t Be Accountable Only to Shareholders”.   While it will undoubtedly be viewed as radical by many, it nevertheless clearly explains the background generally, and raises important points that are particularly applicable to rail.  The piece appeared in the Wall Street Journal on August 15.  A photo copy is attached

 

The Warren proposal will certainly receive harsh criticism from Republicans, and perhaps from many Democrats as well, but its provocativeness is in and of itself a worthy contribution to discussion of the subject.  While nothing can be expected to come of it anytime soon, and maybe never, those of us who believe that the nation is being shortchanged by inadequate federal transportation policy should not dismiss the possibilities for change somewhere down the line.  Consider the possibility that the current freight rail and truck boom fizzles out when the economy takes the inevitable downward plunge, the current shortage of trucks is replaced by a large surplus, that autonomous trucks take to the highways in large numbers and that captive rail shippers continue what they have been doing for years; namely, finding alternatives to rail.  By then the hedge fund bandits will likely be gone, and the residual rail executive management group may be somewhat more humble and accommodating.   We can hope.

           

Author's Note: I am one of many beneficiaries of the current record high valuations of CSX and NS stock, and I like that, but I feel somewhat guilty when I consider how it is being accomplished, and the detrimental public consequences.       R.L.B.

References

Full Text of the Accountable Capitalism Act

One Page Summary of the Accountable Capitalism Act

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