Chief Financial Officer Mark George was appointed CEO and will join the board, according to a statement late Wednesday. The company also said it terminated Nabanita Nag from her roles as legal chief and corporate secretary.

Shaw’s sudden downfall just over two years after he took the helm upends the leadership of one of the country’s most prominent railroads. Norfolk, which has battled an activist campaign and negative attention from a toxic train derailment over the past two years, has been looking to revamp its operations and improve service under Shaw.

Norfolk’s shares were little changed before regular trading Thursday in New York. The stock rose 7.4% this year, trailing the broader market.

Shaw’s ouster comes just days after Norfolk said its board had hired a law firm to conduct an independent investigation into allegations of conduct by the CEO that was “inconsistent with the company’s code of ethics and company policy.” The investigation is ongoing, Norfolk said Wednesday.

The board’s decision to terminate Shaw was unanimous following preliminary findings. Norfolk said the departure is unrelated to the company’s performance, financial reporting and results of operations. The company reaffirmed its financial guidance for the full year and appointed Jason Zampi as acting CFO.

Fired CEOs

While there’s a growing list of CEOs forced out for misconduct, it’s relatively unusual for companies to specify when there was a relationship with a subordinate.

Key exceptions include the dismissals of Steve Easterbrook, the former head of McDonald’s Corp. who was fired in 2019 after a consensual relationship with an employee, and Intel Corp.’s Brian Krzanich, who resigned in 2018 after allegations he failed to disclose a past consensual relationship with an employee. About a decade ago, allegations related to company relationships toppled the CEO at Best Buy Co. and an incoming leader at Lockheed Martin Corp.

BP Plc CEO Bernard Looney resigned last year after he told his board he wasn’t fully transparent during an investigation of past relationships. BP did not prohibit such relationships, but required disclosure.

The situations can cost CEOs millions of dollars in lost pay. Norfolk said in a regulatory filing that Shaw is ineligible to receive severance benefits because he was terminated for cause.

Shaw and Nag didn’t respond to requests for comment.

George, 56, had served as CFO since joining Norfolk in 2019. He’ll receive a base salary of $1 million a year plus annual bonuses, along with a $4 million equity incentive award, according to the filing.

Strategy Shift

Shaw, who started in Norfolk’s finance department in 1994, became CEO in May 2022 with a plan to move the company away from the precision scheduled railroading strategy that was pioneered by late executive Hunter Harrison and has been widely adopted across the company. 

His plans for change were roiled by a train derailment last year that spilled toxic chemicals in East Palestine, Ohio. A torrent of criticism from lawmakers and proposals for more safety regulations ensued. The company agreed to a settlement with residents in May.

Shaw had also prevailed in a campaign by activist shareholder Ancora Holdings Group to replace him and other leaders of the railroad. The investor faulted Norfolk’s response to the derailment and criticized the company’s performance. While Shaw won a shareholder vote in May to keep his job, investors opted to replace three members of the company’s 13-person board with Ancora-backed candidates.

(Updates with details of compensation beginning in the seventh paragraph.)