UPDATE 2-Norfolk Southern proposes two new candidates to board after activist push

(Adds details about Norfolk's plan, quotes from company and Ancora, background and stock price)

Feb 26 (Reuters) - Norfolk Southern plans to add two new directors to its board to defend against activist investment firm Ancora Holdings which wants to oust the railroad operator's chief executive and eight of its current board members.

Norfolk Southern said it will nominate former railroad and airline executive Richard Anderson and former U.S. Senator Mary Kathryn "Heidi" Heitkamp as directors for investors to vote on.

The railroad operator also rejected all eight of Ancora's candidates, saying none would bring fresh skills or experience.

Amy Miles, the independent board chair, said it would be "highly disruptive" to replace the majority of the board "in order to adopt Ancora’s short-sighted strategy."

Ancora last week

nominated eight candidates

, including former Ohio Gov. John Kasich and Jim Barber, a former United Parcel Service Chief Operating Officer that the firm has proposed as a replacement for Norfolk Southern's CEO Alan Shaw.

Norfolk shares fell nearly 5% in 2023 amid operating challenges and the fallout from a costly derailment in East Palestine, Ohio, which prompted scrutiny from regulators.

The stock price traded down slightly on Monday at $257.59 but is up 9.5% this year.

A spokesman for Ancora said Shaw and his team "have no credible plan and no viable record to run on" and called the planned addition of Anderson, who ran railroad Amtrak and passenger airline Delta Airlines, and Heitkamp, "weak and reactionary."

(Reporting by Abhinav Parmar and Svea Herbst-Bayliss; Editing by Sriraj Kalluvila, Tasim Zahid and Editing by Franklin Paul)