Norfolk Southern fires CEO Alan Shaw over inappropriate relationship with employee
Norfolk Southern said Wednesday it has fired CEO Alan Shaw for having an inappropriate relationship with a subordinate.
He was ousted after two difficult years in the top job and just days after the company's board announced it was investigating allegations of ethical lapses.
The Atlanta-based railroad said Shaw had an inappropriate consensual relationship with Norfolk Southern's chief legal officer, who was also fired. Norfolk Southern has promoted Chief Financial Officer Mark George as the railroad's next CEO.
Shaw was leading the Norfolk Southern in February 2023 when one of its trains derailed, spilled toxic chemicals and caught fire in East Palestine, Ohio, the worst railroad disaster in decades. Then, activist investor Ancora Holdings tried to take control of the railroad earlier this year and fired Shaw.
He avoided congressional hearings and tough community meetings after the East Palestine derailment, while Norfolk promised to make the South the “gold standard for security” in the industry. He also managed to persuade investors not to support the majority of Ancora's board nominees. Three of its nominees won seats on the railroad's board, but that wasn't enough to give it control.
The derailment near the Ohio-Pennsylvania border prompted the nation to reexamine railroad safety and prompted lawmakers and regulators to call for reforms. But those proposals have largely stalled, and the industry has made only minimal changes since the derailment, such as installing more trackside detectors to identify the overheating bearings that caused the East Palestine disaster.
Norfolk Southern's dismal financial results after the derailment, combined with questions about Shaw's strategy for keeping more workers on hand during the recession, made the railroad ripe for pressure from an investor like Ancora. Norfolk Southern's profits have consistently lagged other major railroads that have more aggressively adopted the lean operating model that has become the industry standard.
The railroad said Shaw's firing was unrelated to Norfolk Southern's financial performance and the board reaffirmed its financial guidance. The railroad said it will improve productivity by about $550 million and increase its profit margins over the next two years.
Shaw received $13.4 million in compensation last year in his first full year as CEO. The railroad said earlier this year that Shaw would be entitled to about $9.6 million in severance pay if he leaves the company. It was not immediately clear how the dismissal would affect the $2.3 million severance pay Norfolk Southern had previously promised him. More details about his final compensation are expected to be released Thursday.
“The board has full confidence in Mark and our ability to deliver on our commitments to shareholders and other stakeholders,” said railroad chairman Claude Mongeau, despite only working on the railroad since 2019. Previously, George was CFO of air conditioner manufacturer Carrier Corporation and Otis Elevator Company.
Mongeau said George will work with John Orr — who was hired during the fight with Ancora — to continue improving the railroad's profitability by cutting costs and becoming more efficient.
“I look forward to my continued partnership with John and the entire (Norfolk Southern) team as we continue to optimize our operations and serve our customers, create a safe and satisfying workplace, and deliver enhanced value for our employees, customers, shareholders.” and communities,” George said in a statement.
Norfolk Southern is one of the six largest railroads in North America whose tracks cross the eastern United States.
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