Norfolk Southern CEO Alan Shaw’s Compensation Surges by 37% Despite Disastrous Derailment and Financially Strained Year
Norfolk Southern Corporation’s CEO, Alan Shaw, received a substantial increase in compensation last year, totaling $13.4 million – a 37% hike compared to his 2022 earnings of $9.8 million. Shaw’s base salary rose from $960,000 to $1.1 million, while his stock and option awards jumped significantly, from $7.8 million in 2022 to $10 million in 2023.
Shaw began his tenure as CEO on May 1, 2022, and spent the first four months of that year serving as president of the company. His compensation already experienced a considerable increase when he was promoted from his previous role in late 2021, which resulted in a doubling of his compensation compared to 2021.
However, Norfolk Southern faced a significant challenge during Shaw’s first full year as CEO – a financially and ecologically disastrous derailment in East Palestine, Ohio, which occurred on February 3, 2023. Though no fatalities were reported during the incident, a massive fire fueled by toxic chemicals ensued, and much of the small Ohio town was evacuated. The derailment led to an estimated $1.1 billion in costs for the railroad.
Despite these events, Norfolk Southern’s overall net income dropped by 44% to $1.8 billion in 2023. The accident led to a 22% decrease in the company’s shares, but they have since regained most of their value, with the current share price only slightly below its pre-derailment level.
Support from the Brotherhood of Locomotive Engineers and Controversial Compensation
The changes Shaw implemented in railroad procedures have gained the support of the Brotherhood of Locomotive Engineers, which represents Norfolk Southern’s engineers. However, the company’s issues at Norfolk Southern have sparked a proxy performance, as an investor group – Ohio-based Ancora Holdings – seeks to elect an alternative slate of candidates to the company’s board of directors. Their ultimate goal is to replace Shaw himself.
Ancora Holdings expressed their disappointment with Shaw’s compensation package, stating: “It’s alarming that the board rewarded Mr. Shaw with a massive raise and total compensation of $13.4 million during the same year he presided over industry-worst operating results, sustained underperformance, and a tone-deaf response to the derailment in East Palestine.” The group emphasized that this “failure of corporate governance” underscores the need for extensive changes at Norfolk Southern.
Board Nominations and Pushing for Change
Norfolk Southern announced the names of two of its 13 board member nominees – Richard H. Anderson, a former CEO of Amtrak and Delta Air Lines, and Mary Kathryn “Heidi” Heitkamp, the former US senator of North Dakota – to fill the seats of two retiring board members and two who are not running for re-election.
However, the opposition investor group intends to push their own slate of eight candidates against the company’s nominees, declaring: “Mr. Shaw and his boardroom allies have no credible plan and no viable record to run on.”
