Norfolk Southern said Wednesday it has fired CEO Alan Shaw for having an inappropriate relationship with a subordinate.
His ouster comes after two difficult years in the top job and just days after the company’s board announced it was investigating him for alleged ethical lapses.
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The Atlanta-based railroad said Shaw had an inappropriate consensual relationship with Norfolk Southern's chief legal officer, who was also terminated. Norfolk Southern promoted Chief Financial Officer Mark George to be the railroad's next CEO.
Shaw was leading 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 the last decade. Then, activist investor Ancora Holdings tried to take control of the railroad earlier this year and fire Shaw.
He weathered congressional hearings and difficult community meetings after the East Palestine derailment, while promising to make Norfolk Southern the “gold standard for safety” in the industry. He also managed to persuade investors not to back the majority of Ancora’s board nominees. Three of its nominees did win 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 re-examine railroad safety and led 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 spot overheating bearings like the one that caused the East Palestine crash.
The disappointing financial results Norfolk Southern delivered after the derailment, combined with questions about Shaw’s strategy of keeping more workers on hand during a downturn, made the railroad ripe for pressure from an investor like Ancora. Norfolk Southern's profits have consistently lagged behind the other major railroads that 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 has said it expects to improve productivity by about $550 million and boost its profit margin over the next two years.
Shaw received $13.4 million compensation last year in his first full year as CEO. The railroad said earlier this year that Shaw would be entitled to nearly $9.6 million in retirement compensation if he left the company. It wasn’t immediately clear how being fired for cause will affect the $2.3 million severance pay Norfolk Southern had previously promised him. More details on his final compensation are expected to be disclosed Thursday.
The railroad's Chairman Claude Mongeau said, “The Board has full confidence in Mark and his ability to continue delivering on our commitments to shareholders and other stakeholders” despite having only worked on the railroad since 2019. Previously, George was CFO for air conditioning maker Carrier Corporation and Otis Elevator Company.
Mongeau said George will work with John Orr — the chief operating officer hired during its fight with Ancora — to continue improving the railroad's profits by cutting costs and getting more efficient.
“I look forward to my continued partnership with John and the entire (Norfolk Southern) team as we further our progress on optimizing operations and serving our customers, while creating a safe and satisfying workplace and delivering 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 with tracks crisscrossing the Eastern United States.