By Svea Herbst-Bayliss
NEW YORK (Reuters) – South Norfolk (NYSE:) is negotiating the departure of CEO Alan Shaw, and the board is considering interim replacements, including the current chief financial officer, after discovering that the executive had a relationship with a subordinate, three sources familiar with the matter said Wednesday.
The railroad's board of directors, with the help of a law firm, has been investigating allegations that Shaw had a relationship with a direct report, violating the railroad's ethics policy.
Shaw could not be reached for comment, while Norfolk Southern declined to comment.
The sources spoke on condition of anonymity to discuss sensitive personal matters.
Executives and lawyers are currently discussing the terms of a possible exit package for Shaw, including a severance payment, 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 through a disastrous derailment in 2023 in East Palestine, Ohio, which 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 fight with activist hedge fund Ancora Holdings, in which investors voted three new directors to the company's 13-member board.
Mark George, Norfolk Southern's chief financial officer who was in the running for the top job when Shaw landed 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 company's transformation Canadian Pacific (NYSE:) Kansas City's operations in Mexico, the source said.
The board could also consider Richard Anderson, who was appointed to the board this year and previously ran Delta Air Lines (NYSE:) and passenger railroad Amtrak, one of the sources said.
Claude Mongeau, the executive chairman of the board of directors who has been a director since 2019 and has considerable rail experience, could be another candidate, the source said.
The men could not be reached for comment.
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