Norfolk Southern is almost two months into a battle with activist investor Ancora, which is trying to shake up the railroad's board and oust CEO Alan Shaw. Now the firm is taking aim at Norfolk Southern's new operating chief John Orr over what the activist calls an "excessive" buyout package and a career marred by allegations of racial and sexual discrimination. Last month, Norfolk Southern hired Orr away from rival CPKC, paying tens of millions of dollars to buy him out of his contract. The move was widely seen as a response to Ancora's operational criticisms and received praise from several Wall Street analysts. In a letter to Norfolk Southern shareholders on Friday, Ancora highlighted past misconduct by Orr that raises questions about his hiring, even as the executive has overseen improvements in the railroad's operations in his three weeks on the job. Ancora documented both alleged and substantiated workplace misconduct by Orr, dating back to his time as a mid-level executive at Canadian National. An appointee of the Canadian Arbitration Board substantiated allegations that Orr used verbally abusive language towards a female employee in the early 2000s. The employee and another witness told the employment tribunal at the time that Orr regularly cursed and shouted at the employee, and called her a "f------ b----" and a "f------ idiot." A witness told the arbitrator that, in one instance, Orr told the employee that she "was so f------ stupid it was embarrassing."The arbitrator found the claims credible. Ancora also flagged a lawsuit filed in 2019 by a Black executive, who described Orr's treatment of employees and subordinates as "abysmal." The suit was filed against Canadian National, alleging racial discrimination. Orr's behavior was allegedly "so bad" that Canadian National was forced to provide executive coaching for him, according to a 2020 filing in the lawsuit. Orr's deposition is sealed and the case was settled in 2022. Prior to the announced hiring of Orr, Ancora drew attention to claims about his behavior in emails to two Norfolk Southern board members that CNBC obtained. Ancora said in its statement on Friday that the hiring of Orr was a costly proposition that's harming shareholders. As part of the agreement, Norfolk Southern said it would pay Orr's prior employer $25 million in cash and provide additional unspecified concessions for a key rail hub and route in the southern U. S. Norfolk Southern values that particular part of the route at around 1% of its revenues. When it announced Orr's hiring, Norfolk Southern didn't disclose the initial impact of the concessions or the estimated knock-on effects in the years to come. Norfolk Southern told CNBC in a statement that Ancora's analysis of the value of the route — the Meridian Speedway agreement — "is completely inaccurate and based on a flawed premise," in that it assumes Norfolk Southern is forgoing more revenue than it actually is.
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