Facing pressure from an activist investor firm, Atlanta-based Norfolk Southern announced Wednesday it is replacing its chief operating officer.
The railroad said John Orr, a longtime railroad executive, will become executive vice president and COO immediately. Orr is joining Norfolk Southern from Canadian Pacific Kansas City (CPKC), where he has been chief transformation officer.
Because Orr had a non-compete agreement, Norfolk Southern said it has agreed to pay CPKC $25 million for a waiver of the non-compete provisions and other “financial and commercial considerations.”
Orr replaces Paul Duncan, who had been Norfolk Southern’s COO for a little more than a year, joining the company from BNSF Railway.
In a written statement, CEO Alan Shaw thanked Duncan “for the leadership, passion, and dedication he brought to Norfolk Southern throughout his tenure. His contributions were instrumental in enhancing our safety culture and improving our service product. On behalf of the management team, I wish Paul all the best in his future endeavors.”
The move comes after Ancora Holdings Group, an Ohio-based activist investment firm, pushed for former UPS Chief Operating Officer Jim Barber to replace Shaw, and for former CSX executive Jamie Boychuk to be named COO.
Ancora said change was needed to turn Norfolk Southern into “a safer, more sustainable railroad that is growing profitably while also yielding more stability for customers and employees.” The railroad has faced harsh scrutiny since the derailment of its train carrying hazardous materials in East Palestine, Ohio, more than a year ago.
Norfolk Southern’s independent board chair Amy Miles said Shaw and the board “took decisive action in recruiting John (Orr), an exceptional talent who will help accelerate the execution of our strategy and deliver results for our shareholders.”
Orr spent much of his career at Canadian National Railway, where he started out as a conductor and rose to chief transportation officer in 2018, before departing the company the following year. He was also a union representative for 15 years.
“I am excited to work with the full leadership team and the company’s dedicated craft railroaders to enhance operating performance and strengthen Norfolk Southern’s industry leadership for years to come,” Orr said in a written statement.
At CPKC, Orr remediated the railroad’s Mexican operations by implementing a “high-efficiency operating model,” according to Norfolk Southern. Orr is also known as an expert in precision scheduled railroading, a system to increase efficiency and reduce costs that has generated some criticism because of concerns about effects on rail safety. Norfolk Southern said at Canadian National Railway, Orr drove improvements in safety and operational performance.
Miles called Orr “a proven railroad operator” and said “we are confident he brings the right skills and experience to drive profitable growth over the long term.”'
Norfolk Southern also announced the date – May 9 – of its annual meeting, where shareholders will vote on whether to approve Norfolk Southern’s proposed board members, or Ancora’s competing slate as part of a plan to replace Shaw as CEO.In a letter to shareholders, Norfolk Southern’s board said it is “overseeing a wholesale transformation of Norfolk Southern.” It said Shaw “effectively led the company through a challenging corporate crisis” and has prioritized reorienting the company’s strategy, “tackling operational performance issues” and making safety improvements.”These initiatives required temporary setbacks to both service and profitability,” the board acknowledged.
Norfolk Southern’s 2023 profit was down 44% compared to 2022, as the railroad accumulated more than $1 billion in charges from the East Palestine derailment. The company’s board contends that Ancora’s strategy “adds significant risk to our transition,” saying Ancora’s proposed CEO candidate, Barber, has no CEO experience and is not familiar with railroad operations.
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