Norfolk Southern Corporation (NSC) CEO Alan Shaw is expected to step down this week as the company investigates an alleged relationship with an employee. The railroad’s board announced on Sunday that it had launched an inquiry into potential ethics violations by Shaw and has engaged a law firm for an independent investigation.
This news comes amidst a turbulent period for Shaw’s leadership at Norfolk Southern. The company faced significant backlash following the February 2023 train derailment in East Palestine, Ohio, where toxic chemicals spilled, leading to a major environmental cleanup and new safety regulations from lawmakers. In April, the company settled with affected residents for $600 million.
Shaw also faced criticism earlier this year from activist investor Ancora Holdings, which sought his removal due to dissatisfaction with the company’s financial performance and its handling of the derailment. While Shaw retained his position, Ancora successfully campaigned to replace three of the company’s board members. The company will refrain from further discussion until the investigation concludes.
Shaw’s potential departure is a stark reminder of the growing trend of high-profile executives losing their positions due to violations of company ethics policies. In 2019, Steve Easterbrook was ousted as CEO of McDonald Corporation (MCD) after a consensual relationship with an employee. Easterbrook later agreed to return over $105 million in compensation to settle legal disputes. Similarly, Bernard Looney resigned as CEO of BP Plc (BP) last year following the revelation of past relationships with colleagues, forfeiting as much as $40.6 million in potential compensation.
The growing frequency of executive dismissals over personal relationships and violations of company policies has prompted many firms to adopt pay recoupment policies to recover compensation under certain circumstances.
In May, shareholders of the freight railroad voted in favor of retaining Shaw as CEO. However, this recent investigation casts a shadow over his future at the company.
NSC stock closed at $256.93 on Monday.
Photo courtesy of Norfolk Southern © 2024 Benzinga.com.
