Norfolk Southern CEO Alan Shaw received a 37% increase in compensation last year, even after the company’s railroad was involved in a financially and ecologically disastrous derailment in East Palestine, Ohio.
Shaw received $13.4 million in total compensation in 2023, up from $9.8 million in 2022. His base salary rose $200,000 to $1.1 million, and his stock and option awards rose $2.2 million to $10 million.
Last year was Shaw’s first full year as CEO after starting on May 1, 2022, so part of the increase in compensation can be attributed to having worked more months on the job last year than the year earlier. But he was president of the company in the first four months of 2022, and his promotion to that role in late 2021 had already resulted in his compensation more than doubling in 2022 compared to 2021.
The accident on February 3, 2023, did not result in any fatalities, but did cause a massive fire fueled by toxic chemicals and the evacuation of much of the small Ohio town. And it cost the railroad $1.1 billion, according to its most recent estimate.
The company’s overall net income fell 44% last year to $1.8 billion. Shares of Norfolk Southern (NSC) fell 22% in the two months following the accident, but the stock has since recovered most of its value, and its current share price is slightly above its pre-derailment level.
Shaw’s changes in railroad procedures have won the support of the Brotherhood of Locomotive Engineers, the union that represents the company’s engineers. But the problems at Norfolk Southern have sparked a proxy battle, as an investor group led by Ohio-based Ancora Holdings is seeking to elect an alternative slate of candidates to the company’s board of directors, with the goal of replacing Shaw.
“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 told CNN in a statement. “This failure of corporate governance … reinforces the need for sweeping changes to Norfolk Southern’s well paid board.”
The shareholder group said it wants to replace Shaw with Jim Barber Jr., a former chief operating officer at UPS.
In a statement on its site, Norfolk Southern said in the coming weeks it “will also provide details regarding how Ancora’s nominees and plan may not only hinder the successful execution of a strategy that is yielding results, but also threaten Norfolk Southern’s progress on safety, its continued commitment to the community of East Palestine, and its improved relationships with regulators and other stakeholders.”
The proxy filing from Norfolk Southern said its board has “unanimous support for the company’s strategy that balances safe and reliable service, continuous productivity improvement and smart growth under the leadership of CEO Alan Shaw.”
Norfolk Southern also announced the names 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.
The opposition investor group said the company’s new slate of board members won’t stop it from pushing its slate of eight candidates.
“Mr. Shaw and his boardroom allies have no credible plan and no viable record to run on,” said the group.
