ATLANTA – Norfolk Southern today 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 change in leadership comes in connection with preliminary findings from an internal investigation that determined Shaw 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, who is 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.”
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, prompted scrutiny of the railroad’s safety record, and was 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 coal marketing, group vice president chemicals, and vice president intermodal operations before becoming chief marketing officer in May 2015. He was named the railroad’s president in December 2021 and then 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 the 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, Va., 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.
It was proper and necessary to fire Shaw as well as Nag. Favoritism, even just the appearance of it, erodes trust between everyone – the boss and his/her direct reports, and among the direct reports themselves. It encourages office politics – the withholding, or using, adverse information for personal gain. What is so painfully is when the favored employee needs to be discharged. Being a leader can be hard enough without the temptation to cover up or protect someone within a relationship.
My only hope is that this doesn’t signal a wholesale dumping of “the better way” in lieu of a return to pursuing the Wall Street Marching Orders that are ruining railroads and pushing business to trucks. Of course Ancora doesn’t care (just like Shingles doesn’t care) as long as they rip off the company profits and can then move on to the next victim. The Original board members who remained should remember who they represent, the majority of stock holders looking at the long path, not the minority who wanted turn a fast buck and make NS the laughing stock of the railroad industry…
Don’t dip your pen in the company inkwell.
The Class I’s continue their Clown Posse drama….
I have seen some very good management men destroyed by this foolish type of conduct. This time the woman got fired too. I also saw some people get by with it.
All I ever wanted to say was: “Was she worth it?”
I remember having an attractive young female administrative assistant come up behind me and give me a neck and shoulder massage while I was working on a computer. I did not respond at all. That’s unnatural for a man. But I kept my job at the railroad and preserved my marriage.
SMART MAN!
Have to wonder if all the board that voted to oust Shaw and Nag have clean hands. would not surprise this poster if Acora was behind some of these revelations. Private detectives are a cheap cost in a monstrous proxy fight.
D. W. Brosnan, Graham Clayton, Stanley Crane, Wick Moorman….. must be either rolling in their graves or shaking their heads wondering what the*&*%! happened to our beloved Southern Railway!!!!!!!!!!!!!!!!!!!!!!!
As I posted earlier, if he is found complicit, then action should be taken (and they did).
I still find it odd that the investigation started right after the Ancora debacle.
Sometimes these activities “affairs” occur when people are having to spend a great deal of time together professionally. With the craziness of East Palestine, I would surmise Mr. Shaw was spending a large amount of time with Mrs Nag. (yes, she is married too) going over the myriad of legal issues NS was having to deal with and the implications there of.
If this seems strange to people, this happens in Hollywood constantly. 2 starring actors (male & female) shooting a movie in a remote location, spend large amounts of time together with not much else to do when not working will tend to co-habitate a lot. (read Carrie Fishers book on her life with Harrison Ford in Tunisia while filming Star Wars as a classic example)
The last time this happened in the railroad industry was probably when the Morrison-Knudsen CEO (Bill Agee) took up with his CFO.
Sure seems like he was set up with all the B.S. that has been going on at N.S. Maybe he did maybe he didn’t only two people know for sure, Himself and the woman. Everything else is speculation. Be careful throwing stones, anybody in any work environment can be accused of the same thing.
Wonder who snooped and squealed?
It’s usually Finance. They have to process the expenses, meaning expense reports, receipts, etc.
Hi honey, how was your day at the office?
He was her direct boss.
Doubt it, the General Counsel doesn’t usually report directly to the CEO, they usually report to the VP of Legal if there is one. However it would have been easy to look up before todays action as I’m sure both of them have already been removed from any heirarchy reports.
Gerald, I trust Clayton’s statement as 100% factual.
The Thoroughbreds of Transportation!
I am very curious as to why the Board named a new CEO immediately upon dismissing Shaw. Normally, a Board will name an interim CEO while they conduct a search. It is almost as if the Board was prepared to dismiss Shaw for whatever reason it could find and had already determined on his successor. Further, I am very concerned that George had no previous railroad experience before his appointment five years ago.
What the story leaves unsaid is whether Shaw remains on the Board or not. It would probably be uncomfortable if he stayed, but on the other hand stockholders just reelected him.
James, I think you are on to something. It was as if they were looking to get rid of Shaw, but not int he context of the attempted Ancora coup. So once NS’s board dispatched Ancora (properly, IMHO), they needed a “clean” reason to dispatch Shaw. They apparently found/constructed one.
There is a pet conspiracy theory that Ancora had hired a PI to look into Mr. Shaw and his background and discovered the affair. Once the proxy was over and Ancora got the 3 board seats they wanted, they dropped the bomb on Shaw. The theory goes on to say this was their strategy to shed him regardless of the proxy vote. While there is no publicly printed facts backing it up, the swiftness of the board actions so soon after the new members were seated is driving that narrative. I am sure someone (a reporter) will dig further into and write a book on the whole thing. And if Clint Eastwood is still alive, he will direct a movie about it from a nursing home. 🙂
She must be a hot property to throw away a great job like the head of a railroad and all its perks. Not to worry, however. He’ll fall into another job somewhere else as I’m sure he is networked with his peers, etc.. Phones and emails, etc., will be coming in. I agree with the first poster. We sure don’t need Delta Dick anywhere near RRs.
He ought to pursue working for an Airline. Doesn’t take much qualifications… Look at Anderson… He couldn’t run Delta or Amtrak…lol
Comment Charles?
For my part, this is a real disappointment. I thought Shaw had the correct vision for the future, for customers and for employees. I had voted my stock that way (except for Delta Dick of course).
Yes I will comment. I see nothing wrong with a relationship between two consenting adults, regardless of their ranks.
Can’t argue that it violates Company Policy and the prevailing consensus in USA. But it’s my opinion.
The more I see of consensus ethics in America the less I like. In America it’s fine for people to be naked on the streets of Milwaukee, or to perform live hard-core S+M shows in the streets of San Francisco, but everyone (except me) goes into orbit if two consenting adults in a corporation love each other.
Best to all.
That’s fine and all Charles, but you’re glossing over the fact that Alan Shaw’s a married man. What’s your opinion on adultery?
Jason, Adultery is outside of my moral values. (I am married.) Yet I’m not aware that Franklin D. Roosevelt or John F. Kennedy lost their job over it. Even Bill Clinton kept his job — he was impeached for perjury, not adultery … either way he survived in office.
@Charles Landey: I will agree with you (wow, did I actually say that?) that there should be nothing wrong with two consenting adults. The marital status of the participants is a moral one and should be outside of the scope of the discussion (as you have also said). but in this case, Nag was a direct subordinate of Shaw, and because, I think that Shaw needs to be sanctioned.
Charles: Please share your thoughts with Tiffany Shaw and his four children. I’m curious how they would react to “I see nothing wrong.” 50/50 you’re still standing after the reaction.
This isn’t just two consenting adults; it’s two people trusted to guide a company, and no matter how much us humans can try, intimacy clouds the judgment of everyone and everything around two consenting people. It doesn’t matter if it’s in the C-suite or the maintenance department – even the hint of an affair will raise suspicion and bitterness in any given area of a company. Kinda hard to grow the business with that drama going on.
It is nice to see that the CEO and General Counsel that knowingly broke ethics rules get canned. Good riddance. Unfortunately they are typical of the grossly overpaid C-suite monsters.
You mean totally useless and irrelevant ethics rules that most companies seem to have in place, forgetting that employees are human beings. The only rule that should be in place regarding workplace relationships is one of being a direct boss of the other. As for your other comment, Shaw was leading NS in the right direction, my guess is this was orchestrated by Ancora because they lost their proxy war. Now we will see NS revert back to PSR and not the growth strategy that Shaw had put in place. Does it really affect a CEO’s performance if he’s having a daliance with anothe senior leader? Not in the least, especially when it’s with someone completely unrelated to operations and not directly under his office. This is 2024, not 1924 or 1954, the world and companies need to get with the times.
Sorry, Gerald, but “getting with the times” doesn’t mean we should condone infidelity anymore now than it was in 1924 or ’54. Are you serious? Companies have a Code of Ethics as much or more for saving their butts from legal action (especially after the #MeToo movement) and so that favoritism due to knowing a co-worker a little “too well” doesn’t impact the work and progress of whole departments. This is a sad situation – after all that Shaw and his team had been through the last two years, this was the time to shine and grow the business. Instead, more turmoil for everyone. So yes, a dalliance DOES affect a CEO’s performance; it clouds his/her judgment; fosters suspicion and resentment with their whole team. And guess what? Shaw has a wife – Tiffany – and four kids. How do you think they feel right now? The ethics rules are utterly relevant and being a human being doesn’t mean you can cheat on your family.