UPDATE 1-Norfolk Southern investors elect three Ancora directors, CEO Shaw is re-elected

(Adds details from meeting, share price, analyst comment, Ancora comments)

By Svea Herbst-Bayliss and Deborah Mary Sophia

May 9 (Reuters) - Activist investor Ancora Holdings won three board seats at Norfolk Southern 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 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 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 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, a big Norfolk Southern 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 now is on your firms and your conscience," Chadwick added.

Last month Norfolk Southern agreed to pay $600 million to settle lawsuits related to last year's train derailment in East Palestine, Ohio. (Reporting by Svea Herbst-Bayliss; Editing by Chizu Nomiyama)