Norfolk Southern negotiating CEO's exit, looks for interim chief, sources say

By Svea Herbst-Bayliss

NEW YORK (Reuters) - Norfolk Southern is negotiating CEO Alan Shaw's exit, and the board is considering interim replacements, including the current chief financial officer, after finding the executive had a relationship with a subordinate, three sources familiar with the matter said on Wednesday.

The railway's board, with the help of a law firm, has been probing allegations that Shaw had a relationship with a direct report, violating the railway's ethics policy.

Shaw could not be reached for comment, while Norfolk Southern declined to comment.

The sources spoke on the condition of anonymity to discuss sensitive personnel matters.

Executives and lawyers are currently discussing terms of a potential exit package for Shaw, including severance, two of the sources said.

Shaw has been with the company for decades and was promoted to the top job in 2022. He led the company during a disastrous 2023 derailment in East Palestine, Ohio that is expected to cost the company more than $1 billion to settle claims.

The investigation into Shaw's conduct comes months after the CEO survived a bitter proxy contest with activist hedge fund Ancora Holdings that saw investors vote in three new directors to the company's 13-member board.

Mark George, Norfolk Southern's chief financial officer who had been in the running for the top job when Shaw got it, is one of the possible candidates to become interim CEO, one of the sources said.

Another potential candidate is John Orr, the company's chief operating officer. Orr joined Norfolk Southern in March after engineering the turnaround of Canadian Pacific Kansas City's Mexico operations, the source said.

The board might also consider Richard Anderson, who was appointed to the board this year and previously ran Delta Air Lines and passenger railroad Amtrak, one of the sources said.

Claude Mongeau, executive chair of the board who has been a director since 2019 and has considerable railway experience, could be another candidate, the source said.

The men could not be reached for comment.

(Reporting by Svea Herbst-Bayliss; Editing by Jamie Freed)