Norfolk Southern announced on Wednesday that CEO Alan Shaw had been dismissed over an inappropriate consensual relationship with the company’s chief legal officer, whose contract has also been terminated.
The decision follows a brief investigation by the company’s board into Shaw’s ethical conduct, which was initiated just days prior.
The Atlanta-based railroad company has appointed Mark George, previously the chief financial officer, as Shaw’s successor.
Shaw’s tenure was marked by significant challenges, including managing the aftermath of the catastrophic train derailment in East Palestine, Ohio, in February 2023, when dangerous toxic substances spilled into a draining ditch connected to a local waterway.
Half the town had to evacuate when officials ignited five vinyl chloride tank cars, generating an enormous plume of thick, black smoke.
Additionally, Shaw’s approach to maintaining a larger workforce during an economic downturn set the stage for activist investment firm Ancora Holdings to apply pressure for change.
Ancora was able to elect three directors, but not enough to take control of the railroad and fire Shaw as it recommended.
The railroad confirmed Shaw’s termination was unrelated to the company’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.
On Thursday, the railroad announced a $1 million salary increase for its new CEO, who will also be eligible for a $2.25 million bonus and significant stock awards for performance.
“The board has full confidence in Mark and his ability to continue delivering on our commitments to shareholders and other stakeholders,” said the railroad’s Chairman Claude Mongeau, despite George being a relative newcomer to the railroad business.
George joined Norfolk Southern in 2019, after working as chief financial officer for Otis Elevator Company and air conditioning maker Carrier Corporation.
Mongeau added that George will team up with John Orr, the chief operating officer hired during Ancora’s attempted takeover, to continue improving the railroad’s profits, mainly by cutting costs and improving overall efficiency.
“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.
The 2023 derailment near the Ohio–Pennsylvania border and subsequent environmental damage sparked national concern over railroad safety and led lawmakers and regulators to push for reforms. However, these proposals have largely stalled, and the industry has made only minimal changes since the derailment.
The industry’s response has primarily been limited to the installation of additional trackside detectors aimed at identifying overheating bearings—the cause of the East Palestine incident.
Norfolk Southern is one of the six largest railroads in North America, with tracks crisscrossing the Eastern United States.
The Associated Press contributed to this article.