Norfolk Southern CEO Alan Shaw may be at odds with the railroad as the company’s board has launched an investigation into possible allegations of misconduct.
While the Class I railroad itself confirmed the investigation on Sunday evening, numerous news agencies subsequently reported that Shaw was expected to resign from his post.
More from Sourcing Journal
The railroad company said Shaw’s possible conduct was inconsistent with its code of ethics and company policy. The Wall Street Journal reported that the investigation allegedly involved an undisclosed relationship between Shaw and a female employee.
Sourcing Journal contacted Norfolk Southern.
Shaw, who had worked for the company since 1994, was named CEO of Norfolk Southern in May 2022. Less than a year later, Shaw’s tenure came under scrutiny when a Norfolk Southern train derailed in East Palestine, Ohio, in February 2023. That accident released dangerous chemicals that forced residents of the city to evacuate for days and posed a threat to the area’s environment.
The company must pay $600 million to affected residents within a 20-mile radius as part of a class-action lawsuit and an additional $310 million in federal damages. These two costs are part of the total $1.7 billion Norfolk Southern incurred in connection with the derailment.
While the accident was the public crisis that made national headlines, a dispute within the board of directors posed the greatest threat to Shaw’s position as CEO. Shaw survived a three-month proxy battle by activist investor Ancora Holdings in early 2024 that ended with the ouster of then-Chairwoman Amy Miles and the installation of three new board members.
At the time, Ancora wanted to replace Shaw with former UPS COO Jim Barber and change the company’s operating infrastructure to support precision scheduled railroading (PSR).
After the board dispute was resolved, Norfolk Southern announced it planned to achieve an operating ratio of less than 60 percent – an industry measure of a railroad’s profitability – within three to four years. In the second quarter, which ended June 31, the operating ratio was 62.8 percent.
For the quarter, Norfolk Southern generated revenue of $3 billion, up 2 percent from the previous year, while net income more than doubled to $737 million.
Norfolk Southern said the board’s audit committee had commissioned a law firm to conduct an independent investigation into the allegations. The company said it was “committed to a complete and reliable review of all relevant facts.”
To ensure a fair investigation, the company and its board of directors stated that they could not provide further comment until the investigation was completed.
If Shaw leaves, it is still unclear who might be named as interim CEO. Current board members with CEO experience include Claude Mongeau, former head of Canadian National Railway; Richard Anderson, former CEO of Delta Air Lines and Amtrak, who was elected to the board this year; and Thomas Kelleher, who was formerly chairman and CEO of Morgan Stanley Bank North America.
Sameh Fahmy, former executive vice president of PSR at Class I railroad operator Kansas City Southern, and Gilbert Lamphere, former CEO of Illinois Central Railroad, are the other two board members with extensive rail experience.
The possible restructuring of the management comes at a time when the railway is negotiating collective agreements in advance.
In recent weeks, Norfolk Southern has reached tentative collective bargaining agreements with nearly 65 percent of its entire unionized workforce. Most recently, the railroad signed a contract with SMART-TD that ensures representation for all Norfolk Southern conductors.
The agreement, which still has to be ratified, comes four months before the start of the next round of collective bargaining and provides for an average wage increase of 3.5 percent per year over the next five years.
Since the end of August, Norfolk Southern has reached tentative agreements with nine of its 13 unions.
Norfolk Southern is one of the largest railroads in the United States, moving more than 7 million carloads annually. It serves most of the country’s population and manufacturing base and has connections to all major container ports on the Atlantic coast, as well as to the major ports on the Gulf of Mexico and the Great Lakes.
