Norfolk Southern CEO Alan Shaw's Controversial Tenure Close To End Amid Ethics Scandal: WSJ

Norfolk Southern Corporation NSC Chief Executive 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.

Also Read: Norfolk Southern Poised for Long-Term Efficiency, Analyst Projects Improved Operating Ratios.

The Wall Street Journal noted that several challenges have marred Shaw's leadership at Norfolk Southern. A notable incident under his tenure was the February 2023 train derailment in East Palestine, Ohio, where toxic chemicals spilled, sparking a major environmental clean-up and new safety regulations from lawmakers.

In April this year, the company eventually agreed to a $600 million settlement with affected residents.

Additionally, Shaw 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, the Wall Street report adds.

In May, shareholders of the freight railroad voted in favor of retaining Shaw as CEO.

Per the WSJ report, Shaw's potential departure highlights a 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.

Price Action: NSC stock closed at $256.93 on Monday.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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Photo courtesy of Norfolk Southern