May 9 (Reuters) - Activist investor Ancora Holdings won

three board seats at Norfolk Southern ( NSC ) but failed to oust the

railway's chief executive, disappointing investors who pushed

the stock price lower in early trading.

The preliminary results were announced on Thursday after

Ancora waged a proxy fight and pushed to get seven newcomers

elected to the 13-member board. Ancora also urged investors to

oust CEO Alan Shaw who was re-elected.

The fight was one of the year's most closely watched votes

because Ancora was pushing for so many seats at such a sizable

company at a time railroad safety has been in the headlines

following several derailments, analysts and bankers said.

Investors reacted poorly to the vote news as many hoped for

a new chief executive and sent shares down as much as 6% in

early trading. By mid-morning the shares were at $224.56, down

3.3%.

"We expect investors who owned the stock for a 'change

event' will sell the stock today (and this could leak to

tomorrow as well). Importantly, though, change is already

afoot," wrote Evercore analyst Jonathan Chappell.

Ancora nominees William Clyburn, Sameh Fahmy and Gilbert

Lamphere won seats, according to preliminary voting results.

Investors ousted board chair Amy Miles, Jennifer Scanlon, chair

of the governance and nominating committee, and John Thompson,

chair of the human capital management and compensation

committee.

The company said positive change is happening at the

railway, adding "we will continue building on the significant

progress Alan Shaw, John Orr, and the entire team have already

achieved."

Earlier this year Norfolk Southern ( NSC ) reacted to

disgruntled investors by recruiting John Orr as chief operating

officer.

Orr, who has expertise in precision scheduled

railroading or PSR, was hired away from Canadian Pacific Kansas

City and Norfolk Southern ( NSC ) paid its rival railroad $25 million to

buy Orr out of his non-competition agreement.

The hedge fund argued new blood was needed to improve

financial and operational metrics and said on Thursday that it

will continue to hold the company accountable for any future

railway accidents or underperformance.

Ancora had proposed investors push Alan Shaw off the

board and elect Jim Barber, a former chief operating officer at

UPS, so that he could eventually replace Shaw as CEO. Ancora

also proposed Jamie Boychuk, who had worked with legendary

railroad executive Hunter Harrison at CSX, to become Norfolk

Southern's ( NSC ) chief operating officer.

Three prominent proxy advisory firms last week recommended

that investors elect at least five of Ancora's seven candidates,

arguing that change is needed at the railway which is valued at

$52 billion. Institutional Shareholder Services endorsed Shaw

for re-election while Glass Lewis and Egan-Jones recommended

investors not remove him.

Ancora had won support of large railroad unions and

steel maker Cleveland-Cliffs ( CLF ), a big Norfolk Southern ( NSC )

client.

As some of the vote was still coming in late on

Wednesday just hours before Thursday's annual meeting, much of

the outcome hinged on large index funds.

On Thursday morning, Ancora's Chadwick had harsh words

for the index funds and how they voted.

"For the passive investors: If anything should go wrong

here and there's another derailment and people die, this is on

you," Chadwick said at the annual meeting. "You gave us

literally no support and we still won three board seats without

you. What happens to Norfolk Southern ( NSC ) now is on your firms and

your conscience," Chadwick added.

Last month Norfolk Southern ( NSC ) agreed to pay $600 million

to settle lawsuits related to last year's train derailment in

East Palestine, Ohio.