This story originally appeared on Trains.com.
ATLANTA – Norfolk Southern has terminated the contracts of embattled CEO Alan Shaw and the railroad’s chief legal officer, Nabanita Nag, for having a consensual relationship in violation of company policy.
The NS board unanimously named Chief Financial Officer Mark George as president and chief executive officer, effective immediately, the railroad announced Wednesday evening. George joined NS in 2019 from conglomerate United Technologies Corp., where he was global chief financial officer for its Otis Elevator Co. and Carrier Corp. subsidiaries.
The change in leadership comes in connection with preliminary findings from an internal investigation that determined Shaw had violated company policies by engaging in a consensual relationship with Nag. NS said Shaw’s departure is unrelated to the railroad’s performance, financial reporting and results of operations.
“The Board has full confidence in Mark and his ability to continue delivering on our commitments to shareholders and other stakeholders,” NS Chairman Claude Mongeau said in a statement. “Mark has played an integral role in our recent progress and brings decades of financial experience and strong operational expertise. He embodies our corporate values and is a champion of our safety culture. In close partnership with our accomplished COO, John Orr, they will continue to improve NS’ operating performance and close the margin gap with peers.”
George, 57, said he was honored to be named to lead the railroad. “I look forward to my continued partnership with John and the entire Thoroughbred 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.”
Jason A. Zampi will serve as acting chief financial officer; Jason M. Morris will serve as acting corporate secretary, a role that Nag had held.
Shaw, who became chief executive in 2022, had maintained the backing of the NS board despite the fallout from the disastrous hazardous materials derailment in East Palestine, Ohio, in 2023, as well as during its bitter proxy battle with activist investor Ancora Holdings this year.
The East Palestine wreck has cost NS $1.7 billion to date and prompted scrutiny of the railroad’s safety record. It was also the impetus for wide-reaching railroad safety legislation introduced in Congress last year.
Shaw, who is married and has four children, joined NS in 1994. He served as group vice president for coal marketing, group vice president for chemicals and vice president for intermodal operations before becoming chief marketing officer in May 2015. He was named the railroad’s president in December 2021 and became CEO on May 1, 2022.
Shaw had a bumpy tenure as CEO.
The railroad’s faltering financial results – due to a combination of the impact of East Palestine and carrying extra crews during a freight recession as part of Shaw’s growth and resilience strategy – prompted Ancora to launch a proxy battle in January.
The Cleveland-based investment firm aimed to gain control of the NS board, replace Shaw with a former UPS executive and name former CSX operations chief Jamie Boychuk as chief operating officer. Ancora was highly critical of Shaw and the railroad’s plan to reduce the emphasis on operating ratio as it aimed to gain new traffic.
NS and Shaw prevailed, although Ancora managed to get three seats on the railroad’s board.
The Justice Department in July filed suit against Norfolk Southern for putting its trains in the way of Amtrak’s Crescent, which the railroad hosts between Alexandria, Virginia, and New Orleans. It was the first so-called right-of-preference lawsuit the Justice Department has filed since 1979.
CNBC on Sunday afternoon first reported that the board was probing allegations that Shaw had an inappropriate workplace relationship, citing three unnamed people said to be familiar with the matter.
Norfolk Southern confirmed late Sunday night that its board has opened an investigation into allegations of conduct by Shaw that is “inconsistent with the company’s Code of Ethics and company policy.”
“Norfolk Southern holds all its team members to the highest standards. In line with the company’s Code of Conduct and company policy, allegations of misconduct are thoroughly investigated. The code also includes resources for employees to anonymously report concerns, including through the Ethics & Compliance Hotline,” the railroad said in a statement.
Shaw is not alone in being dismissed for reasons unrelated to a company’s financial performance. In 2018, more CEOs were dismissed for ethical lapses than poor stock or financial performance or conflicts with boards of directors, according to a 2019 study by PriceWaterhouseCoopers.
More corporate boards have adopted zero-tolerance policies toward executive misconduct, partly driven by the MeToo movement. Among the companies whose CEOs were dismissed for ethics violations in recent years: Barnes & Noble, CBS, NBCUniversal, Lululemon, Intel, Best Buy and McDonald’s.
Ron Kaminkow
While there is no comment on what CEO Shaw’s removal may mean for the future direction of NS, one thing readily apparent is that this is a “gift” to NS, a “valid reason” to get rid of the face and the voice of the “old NS”, and the accompanying “bad PR” of recent years including the East Palestine wreck, chronic Amtrak delays, the recent war for control/direction of the NS Board, PSR (and its cousin whatever this means, “PSR light”), and allows NS to take on the look of having made a “fresh start” (out with the old, in with the new!). Will this convenient change at the top result in more cuts, more consolidations, even worse customer service, and “True” PSR. Most likely.