UNITED STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
Proxy
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Norfolk
Southern Corporation
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Table of Contents
Table of Contents
Norfolk
Southern Corporation
Three Commercial Place
Norfolk, Virginia 23510
Notice
of 2020 Annual Meeting of Shareholders
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AGENDA |
At
the Annual Meeting of Norfolk Southern Corporation (“Norfolk Southern” or the “Corporation”), shareholders
will vote on the following items: |
ITEM
1 |
Election
of the 13 directors named in the proxy statement for a one-year term |
ITEM
2 |
Approval
of proposed amendments to the Corporation’s Amended and Restated Articles of Incorporation (“Articles”):
2a. Amendment of voting standard to amend the Articles
2b. Approval of simple majority voting standard to approve a merger, share exchange, conversion, sale, or dissolution of
the Corporation
2c. Approval of majority voting standard to approve re-domestication of the Corporation and affiliated transactions |
ITEM
3 |
Ratification
of the appointment of KPMG LLP, independent registered public accounting firm, as our independent auditors for 2020 |
ITEM
4 |
Approval
of advisory resolution on executive compensation |
ITEM
5 |
A
shareholder proposal regarding the right to act by written consent, if properly presented at the meeting |
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Such
other business as properly may come before the meeting and any adjournments or postponements.
VOTING
Each
share of common stock is entitled to one vote on each of the items to be voted on at the Annual Meeting.
YOUR
VOTE IS VERY IMPORTANT
If
you do not expect to attend the virtual Annual Meeting, we urge you to vote by telephone or Internet as described below, or,
if you received your materials by mail, by completing, dating, and signing the proxy card/voting
instruction |
form,
and returning it in the accompanying envelope. You may revoke your proxy or instructions at any time before your shares
are voted by following the procedures described in “Voting and Proxies” beginning on page 72.
PROXY
VOTING METHODS
Even
if you plan to attend the virtual Annual Meeting, please vote right away by using one of the following advance
voting methods (see “Voting and Proxies” beginning on page 72 for additional details). Make sure to have
the proxy card/voting instruction form or Notice of Internet Availability in hand, and follow the instructions. You
can vote in advance in one of three ways: |
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VIA
THE INTERNET |
BY
TELEPHONE |
BY
MAIL |
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Visit
the website
listed on the proxy
card/voting
instruction form or
Notice of Internet
Availability to vote |
Call
the telephone
number on the proxy
card/voting
instruction form or
Notice of Internet
Availability to vote |
Complete,
sign, and
date, and then return
the proxy card/
voting instruction
form in the enclosed
envelope to vote |
By
order of the Board of Directors,
DENISE
W. HUTSON
Corporate
Secretary
Dated: March 27, 2020
IMPORTANT
NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE SHAREHOLDER MEETING TO BE HELD ON MAY 14, 2020
Pursuant
to rules promulgated by the Securities and Exchange Commission (“SEC”), we have elected to provide access to our proxy
materials by notifying you of the availability of our proxy materials on the Internet. On or about March 27, 2020, we are sending
an Important Notice Regarding the Availability of Proxy Materials (the “Notice of Internet Availability”) to certain
of our shareholders of record, and we are sending a paper copy of the proxy materials to employee plan participants and those
shareholders of record who have requested a paper copy. Brokers and other nominees who hold shares on behalf of beneficial owners
may be sending their own similar notice.
In
accordance with SEC rules, you may access our Notice and Proxy Statement, our Annual Report, and our form of proxy at http://www.proxyvote.com,
which does not have “cookies” that identify visitors to the site. The Notice of Internet Availability also includes
instructions for shareholders to request, at no charge, a printed copy of these materials. In addition, our Notice and Proxy Statement
and Annual Report are available on our website at www.norfolksouthern.com.
Table of Contents
Notice
of 2020 Annual Meeting of Shareholders | 2020 Annual Meeting and Proxy Statement
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March 27, 2020
Fellow Shareholder,
On
behalf of your Board of Directors, I invite you to join our 2020 Annual Meeting of Shareholders on Thursday, May 14, 2020,
in Atlanta, Georgia.
This year, in light of the public health and travel concerns arising in connection with the evolving coronavirus (COVID-19) situation, your Board has decided to hold the
Annual Meeting as a virtual-only meeting. Please refer to the Notice of Meeting page for instructions on how to access the virtual Annual Meeting.
I
encourage you to review the proxy materials and vote as soon as possible even if you are planning to join the virtual Annual
Meeting on May 14. You may vote by telephone or over the Internet, or, if you receive these materials by mail, by
completing, signing, dating, and returning the enclosed proxy card/voting instruction form. Your vote is important
to us.
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Strategic
Plan and 2019 Performance. Over the past year, the Board focused on overseeing the successful implementation of Norfolk
Southern’s three-year strategic plan to reimagine Norfolk Southern, which we launched in early 2019. The Board strongly
supports Norfolk Southern’s senior management team and is confident that this team provides the right leadership to achieve
our strategic plan goals and continue to drive shareholder value.
I
am pleased to report that the management team achieved record results in 2019 in spite of the challenging economic conditions.
For the fourth consecutive year, Norfolk Southern achieved an all-time record full-year operating ratio, and through the team’s
efforts, we believe we have the momentum needed to achieve our 2021 operating ratio goal. The team also achieved record income
from railway operations in 2019, which reflects the operational improvements made over the past year. Many of these improvements
stem from our adoption of a tailored model of precision scheduled railroading, which incorporates thoughtful planning and customer
collaboration and diligent execution of our TOP21 operating plan.
Balancing
our capital deployment remained a key focus. Your Board approved $949 million in total cash dividend payments and just over $2
billion in share repurchases, while continuing to ensure proper investment in our rail network.
New
Corporate Headquarters. Significant progress was made on our plan to consolidate our corporate headquarters in
a new building in Atlanta. Construction is on schedule, and transition of employees to Atlanta is ongoing. The Board continues
to believe that bringing our headquarters functions together in a single, integrated team will promote greater alignment and collaboration.
Corporate
Governance. The Board has maintained its commitment to effective corporate governance practices, including soliciting
and taking action on input from you, our shareholders. Our shareholder engagements this past year provided us with valuable feedback
on issues of importance to you, including implementation of the 2019 shareholder proposal on majority vote. The Board’s
recommended amendments to our Articles of Incorporation are described in the proxy materials and included as voting items on the
enclosed proxy card.
We
remained focused on maintaining an appropriate balance of new perspectives and ideas with longer-term expertise. We have nominated
for election three new director candidates—John C. Huffard, Jr., Christopher T. Jones, and Claude Mongeau—each of
whom bring valuable skills and expertise to your Board. Our board refreshment process is important to the Board, and these new
nominees demonstrate its effectiveness. I encourage you to review the qualifications, skills, and experience of each of our 13
director nominees as presented in this Proxy Statement.
We
also remained focused on executive succession planning, ensuring the Corporation has highly qualified executives that will successfully
execute our strategic plan. During 2019, we welcomed Mark George as our new chief financial officer. Mark joins us from outside
Norfolk Southern with more than 30 years of experience in financial management, strategy, and business development.
Thank
you for your continued confidence and investment in Norfolk Southern Corporation.
I
am proud to serve as your Lead Independent Director and look forward to the continued achievement of our strategic plan goals
that will drive long-term shareholder value.
Sincerely,
Steven
F. Leer
Lead Director
Table
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Southern Corporation |
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Table of Contents
2020
Proxy Summary
This
summary highlights information contained elsewhere in this Proxy Statement. This summary does not contain all of the information
you should consider, and you should read the entire Proxy Statement before voting.
Voting
Matters
ITEM |
DESCRIPTION |
BOARD
RECOMMENDATION |
PAGE |
1 |
Election
of the 13 directors named in the proxy statement for a one-year term |
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FOR
EACH NOMINEE |
8 |
2 |
Approval
of proposed amendments to the Corporation’s Amended and Restated Articles of Incorporation
(“Articles”): 2a. Amendment
of voting standard to amend the Articles 2b. Approval of simple majority voting standard to approve a merger, share exchange, conversion,
sale, or dissolution of the Corporation 2c. Approval
of majority voting standard to approve re-domestication of the Corporation and affiliated
transactions |
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FOR
ALL AMENDMENTS |
16 |
3 |
Ratification
of appointment of independent registered public accounting firm |
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FOR |
28 |
4 |
Approval
of advisory resolution on executive compensation |
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FOR |
30 |
5 |
Shareholder
proposal regarding right to act by written consent |
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AGAINST |
65 |
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Norfolk
Southern Corporation |
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Table of Contents
2020 Proxy Summary | 2020 Annual Meeting and Proxy Statement
Director
Nominees
· | 12
of 13 director nominees are independent |
· | Highly-qualified
directors with diversity of skills, background, and experience |
· | Average
director tenure is 5.7 years |
Name |
Age |
Director
Since |
Principal
Occupation |
Independent |
Committee
Memberships |
Thomas
D. Bell, Jr. |
70 |
2010 |
Chairman
Mesa
Capital Partners, LLC |
ü |
Compensation
Executive
Finance
and Risk Management (Chair) |
Mitchell
E. Daniels, Jr. |
71 |
2016 |
President
Purdue
University |
ü |
Compensation
Governance
and Nominating |
Marcela
E. Donadio |
65 |
2016 |
Former
Partner and Americas Oil & Gas Sector Leader
Ernst & Young LLP |
ü |
Audit
Finance
and Risk Management |
John
C. Huffard, Jr. |
52 |
2020 |
Co-Founder
Tenable
Network Security, Inc.
Tenable Holdings, Inc. |
ü |
Compensation
Finance
and Risk Management |
Christopher
T. Jones |
56 |
2020 |
Former
Corporate Vice President and President
Technology
Services Sector Northrop Grumman Corporation |
ü |
Audit
Governance
and Nominating |
Thomas
C. Kelleher |
62 |
2019 |
Former
President Morgan Stanley |
ü |
Audit
Finance
and Risk Management |
Steven
F. Leer
(Lead Director) |
67 |
1999 |
Former
CEO and Chairman
Arch Coal, Inc. |
ü |
Compensation
Executive
Governance
and Nominating (Chair) |
Michael
D. Lockhart |
71 |
2008 |
Former
Chairman, President and CEO
Armstrong
World Industries, Inc. |
ü |
Audit
Finance
and Risk Management |
Amy
E. Miles |
53 |
2014 |
Former
Chair and CEO
Regal
Entertainment Group, Inc. |
ü |
Audit
(Chair) Executive
Governance
and Nominating |
Claude
Mongeau |
58 |
2019 |
Former
President and CEO
Canadian National Railway |
ü |
Compensation
Finance
and Risk Management |
Jennifer
F. Scanlon |
53 |
2018 |
President
and CEO and Director
UL |
ü |
Compensation
Finance
and Risk Management |
James
A. Squires |
58 |
2014 |
Chairman,
President and CEO
Norfolk Southern Corporation |
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Executive
(Chair) |
John
R. Thompson |
68 |
2013 |
Former
Senior Vice President and General Manager
BestBuy.com LLC |
ü |
Audit
Governance
and Nominating |
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Norfolk
Southern Corporation |
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Table of Contents
Business
Highlights
This
summary provides highlights from our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, as filed with
the Securities and Exchange Commission (“SEC”) on February 6, 2020 (the “2019 Form 10-K”), and from
our Fourth-Quarter Earnings Presentation, filed with the SEC on Form 8-K on January 29, 2020, to assist you in reviewing
Norfolk Southern’s 2019 performance. The information contained below is only a summary, and you should refer to the
more comprehensive discussions contained in our 2019 Form 10-K, as supplemented by our Form 8-Ks filed during 2020, for
additional information about these highlights.
Delivering
On Our Strategic Plan
In
2019, we unveiled our new three-year strategic plan, announcing productivity and growth initiatives. Our achievements in 2019,
driven by a focus on improving the efficiency of our operations and the utilization of our assets, drove increased shareholder
value.
During
the first year of our strategic plan, we reduced our Operating Ratio to a record low, making progress toward our target of a 60%
Operating Ratio by 2021. This progress was achieved through a focus on productivity initiatives, including workforce reductions
and reducing the number of active locomotives. Our strategic plan reflects our continued commitment to our top priorities of running
the most efficient railroad possible, meeting customer expectations, supporting long-term growth, and increasing shareholder value.
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Southern Corporation |
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Business
Highlights | 2020 Annual Meeting and Proxy Statement
2019
Business Highlights
Norfolk
Southern achieved strong results in 2019, including:
· | earnings
per share of $10.25; |
· | record
income from railway operations of $4 billion; and |
· | record
operating ratio of 64.7 percent. |
Our
2019 railway operating revenues declined 1 percent compared to 2018 as overall volumes were down 5 percent, and railway operating
expenses decreased 3 percent, resulting in a 1 percent increase in income from railway operations as compared to 2018. These strong
financial results were the outcome of the successful execution of the initial two phases of our Precision Scheduled Railroading,
or PSR, based operating plan, TOP21, in the second half of 2019 and were achieved despite lower 2019 revenues resulting from decreased
volumes.
Improvements
driven by TOP21 were reflected in annual records for network performance and customer service metrics in 2019, including record
train performance, record terminal dwell, record level network velocity, and record shipment consistency.
We
remained committed in 2019 to a balanced deployment of capital, investing over $2 billion in our business in capital expenditures
and also returning over $3 billion to shareholders through dividends and share repurchases. We repurchased approximately $2.1
billion of Norfolk Southern stock, and we paid $949 million in dividends during the year. We raised the quarterly dividend twice
in 2019, for an overall increase of 18%.
Total
Shareholder Returns*
* | Assumes
that the value of the investment in Norfolk Southern Corporation common stock and each
index was $100 on Dec. 31, 2014, and that all dividends were reinvested. Data furnished
by Bloomberg Financial Markets. |
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Southern Corporation |
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Table of Contents
Corporate Governance and the Board
ITEM
1 |
Election
of the 13 Directors Named in The Proxy Statement for a One-Year Term
ü The
Board of Directors unanimously recommends that shareholders vote FOR each of the nominees for election as directors.
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The
following individuals have been nominated for election as directors for a one-year term expiring at the 2021 Annual Meeting: Thomas
D. Bell, Jr., Mitchell E. Daniels, Jr., Marcela E. Donadio, John C. Huffard, Jr., Christopher T. Jones, Thomas C. Kelleher, Steven
F. Leer, Michael D. Lockhart, Amy E. Miles, Claude Mongeau, Jennifer F. Scanlon, James A. Squires, and John R. Thompson.
If
any nominee becomes unable to serve, your proxy will be voted for a substitute nominee to be designated by the Board of Directors,
or the Board of Directors will reduce the size of the Board.
So
that you have information concerning the independence of the process by which our Board of Directors selected the nominees, we
confirm, as required by the SEC, that (1) there are no family relationships among any of the nominees or among any of the nominees
and any officer, and (2) there is no arrangement or understanding between any nominee or director and any other person pursuant
to which the nominee or director was selected. The age listed for each director nominee is as of May 14, 2020. Additional information
on the experience and expertise of the director nominees can be found on the following pages.
Nominees
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Thomas
D. Bell, Jr.
Compensation,
Executive, Finance and
Risk Management (Chair) |
Director
since 2010
Independent
Age
70 |
Career
Highlights
Mr.
Bell is the Chairman of Mesa Capital Partners, LLC, a real estate investment company. Mr. Bell previously served as Chairman
and CEO of Cousins Properties, a publicly-traded real estate investment trust that invests in office buildings throughout
the South, from 2002 to 2009. He is also a director of Southern Company Gas (formerly AGL Resources) and was a director
of Regal Entertainment Group, Inc. until its acquisition in March 2018.
Areas
of Expertise
CEO/Senior
Officer; Environmental and Safety; Governance/Board; Governmental and Stakeholder Relations; Human Resources and Compensation;
Marketing; Strategic Planning |
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Southern Corporation |
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Corporate Governance | 2020 Annual Meeting and Proxy Statement
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Mitchell
E. Daniels, Jr.
Compensation,
Governance and Nominating |
Director
since 2016
Independent
Age
71 |
Career
Highlights
Mr.
Daniels has been President of Purdue University since 2013 and served as Governor of Indiana from 2005 to 2013. From 1990 to
2000, Mr. Daniels worked for Eli Lilly and Company, holding the executive positions of President of North American
Pharmaceutical Operations and Senior Vice President of Corporate Strategy and Policy. Mr. Daniels is also a director of
Cerner Corporation.
Areas
of Expertise
CEO/Senior
Officer; Finance and Accounting; Governance/Board; Governmental and Stakeholder Relations; Strategic Planning |
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Marcela
E. Donadio
Audit,
Finance and Risk Management |
Director
since 2016
Independent
Age
65 |
Career
Highlights
Ms.
Donadio retired as a partner of Ernst & Young LLP, a multinational professional services firm, in 2014. From 2007
until her retirement, Ms. Donadio was Americas Oil & Gas Sector Leader, with responsibility for one of Ernst &
Young’s significant industry groups helping set firm strategy for oil and gas industry clients in the United States
and throughout the Americas. Ms. Donadio is also a director of Marathon Oil Corporation and National Oilwell Varco, Inc.
Areas
of Expertise
CEO/Senior
Officer; Finance and Accounting; Governance/Board; Human Resources and Compensation; Strategic Planning |
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John
C. Huffard, Jr.
Compensation,
Finance and Risk Management |
Director
since 2020
Independent
Age
52 |
Career
Highlights
Mr.
Huffard is a co-founder of Tenable Network Security, Inc. and Tenable Holdings, Inc., a cybersecurity software company. Mr.
Huffard served as President and Chief Operating Officer and a director of Tenable Network Security, Inc. from 2002 to 2018,
where he was responsible for driving Tenable’s global corporate strategy and business operations and was instrumental
in the venture funding and IPO process. From 2018 to 2019, Mr. Huffard focused exclusively on business operations as chief
operating officer of Tenable Holdings, Inc. Mr. Huffard has been a director of Tenable Holdings, Inc. since 2016.
Areas
of Expertise
CEO/Senior
Officer; Finance and Accounting; Governance/Board; Human Resources and Compensation; Information Technology |
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Southern Corporation |
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Corporate Governance | 2020 Annual Meeting and Proxy Statement
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Christopher
T. Jones
Audit,
Governance and Nominating |
Director
since 2020
Independent
Age
56 |
Career
Highlights
Mr.
Jones served as Corporate Vice President and President of the technology services sector of Northrop Grumman Corporation,
a global aerospace and defense technology company, from January 2013 through December 2019. Previously, he served as Vice
President and General Manager of Northrop Grumman’s integrated logistics and modernization division from 2010 through
2012. Mr. Jones was a maintenance officer in the Connecticut Air National Guard from 1997 to 2011.
Areas
of Expertise
CEO/Senior
Officer; Finance and Accounting; Governmental and Stakeholder Relations; Information Technology; Strategic Planning |
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Thomas
C. Kelleher
Audit,
Finance and Risk Management |
Director
since 2019
Independent
Age
62 |
Career
Highlights
Mr.
Kelleher served as President of Morgan Stanley, a leading global financial services firm, from 2016 until his retirement
in June 2019. He also served as Chairman and Chief Executive Officer of Morgan Stanley Bank, N.A. until June 2019. Previously,
he was President of Morgan Stanley Institutional Securities from 2010 to 2016, CEO of Morgan Stanley International from
2011 to 2016, Chief Financial Officer and co-head of Corporate Strategy from 2007 to early 2010, and served as Morgan
Stanley’s Head of Global Capital Markets from 2006 to 2007.
Areas
of Expertise
CEO/Senior
Officer; Finance and Accounting; Governance/Board; Governmental and Stakeholder Relations; Human Resources and Compensation;
Strategic Planning |
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Steven
F. Leer
Compensation,
Executive, Governance and
Nominating (Chair) |
Director
since 1999
Independent
Age
67 |
Career
Highlights
Mr.
Leer served as the Chief Executive Officer of Arch Coal, Inc., a company engaged in coal mining and related businesses,
from 1992 through 2012. He was Chairman of its board from 2006 through 2012 and its Executive Chairman from 2012 through
2014. He then served as Senior Advisor to the President and CEO of Arch Coal from 2014 through May 2015. Mr. Leer is also
a director of Cenovus Energy Inc. and Parsons Corporation. Mr. Leer served as the non-executive Chairman of USG Corporation
until April 2019.
Areas
of Expertise
CEO/Senior
Officer; Environmental and Safety; Governance/Board; Governmental and Stakeholder Relations; Human Resources and Compensation;
Marketing; Strategic Planning; Transportation |
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Southern Corporation |
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Corporate Governance | 2020 Annual Meeting and Proxy Statement
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Michael
D. Lockhart
Audit,
Finance and Risk Management |
Director
since 2008
Independent
Age
71 |
Career
Highlights
Mr.
Lockhart served as Chairman of the Board, President and Chief Executive Officer of Armstrong World Industries, Inc., and
its predecessor, Armstrong Holdings, Inc., a leading global producer of flooring products and ceiling systems, from 2000
until his retirement in February 2010. Mr. Lockhart previously served as Chairman and Chief Executive Officer of General
Signal Corporation, a diversified manufacturer, from September 1995 until it was acquired in 1998.
Areas
of Expertise
CEO/Senior
Officer; Environmental and Safety; Finance and Accounting; Governance/ Board; Marketing; Strategic Planning; Transportation |
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Amy
E. Miles
Audit
(Chair), Executive, Governance and Nominating |
Director
since 2014
Independent
Age
53 |
Career
Highlights
Ms.
Miles served as Chief Executive Officer of Regal Entertainment Group, Inc., a leading motion picture exhibitor, from 2009
until its acquisition in March 2018. During that time, she served as a director of Regal and was named Chair of its board
in 2015. Ms. Miles previously served as Regal Entertainment’s Executive Vice President, Chief Financial Officer
and Treasurer from 2002 to 2009.
Areas
of Expertise
CEO/Senior
Officer; Finance and Accounting; Governance/Board; Information Technology; Marketing; Strategic Planning |
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Claude
Mongeau
Compensation,
Finance and Risk Management |
Director
since 2019
Independent
Age
58 |
Career
Highlights
Mr.
Mongeau served as President and Chief Executive Officer of Canadian National Railway Company (CN), a North American railroad
and transportation company, from January 2010 to June 2016 and as a director of CN from October 2009 to June 2016. During
his 22-year career at CN, he also served as Executive Vice President and Chief Financial Officer, Vice President Strategic
and Financial Planning, and Assistant Vice President Corporate Development. Mr. Mongeau is also a director of Cenovus
Energy and Toronto-Dominion Bank. He was formerly a director of Telus from 2017 to 2019.
Areas
of Expertise
CEO/Senior
Officer; Environmental and Safety; Finance and Accounting; Governance/ Board; Governmental and Stakeholder Relations;
Human Resources and Compensation; Marketing; Strategic Planning; Transportation |
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Southern Corporation |
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Corporate Governance | 2020 Annual Meeting and Proxy Statement
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Jennifer
F. Scanlon
Compensation,
Finance and Risk Management |
Director
since 2018
Independent
Age
53 |
Career
Highlights
Ms.
Scanlon has been President and Chief Executive Officer and Director of UL, a global science safety organization, since
September 30, 2019. She is the first woman to lead the organization. She previously served as President and Chief Executive
Officer of USG Corporation from 2016 until its acquisition in April 2019. During that time, she served as a director of
USG. Ms. Scanlon also previously served as President of USG’s international business, President of its L&W Supply
Corporation, and Chief Information Officer and Chairman of the Board for USG Boral Building Products.
Areas
of Expertise
CEO/Senior
Officer; Environmental and Safety; Governance/Board; Information Technology; Marketing; Strategic Planning; Transportation |
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James
A. Squires
Executive
(Chair) |
Director
since 2014
Age
58 |
Career
Highlights
Mr.
Squires has been President of Norfolk Southern since 2013 and Chief Executive Officer since June 2015. Mr. Squires was
named Chairman of the Board of Norfolk Southern in October 2015. Mr. Squires previously served as Norfolk Southern’s
Executive Vice President-Administration, Executive Vice President-Finance and Chief Financial Officer, Senior Vice President
Finance, Senior Vice President Law, and Vice President Law.
Areas
of Expertise
CEO/Senior
Officer; Finance and Accounting; Governance/Board; Governmental and Stakeholder Relations; Human Resources and Compensation;
Marketing; Strategic Planning; Transportation |
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John
R. Thompson
Audit,
Governance and Nominating |
Director
since 2013
Independent
Age
68 |
Career
Highlights
Mr.
Thompson served as a government relations consultant for Best Buy Co., Inc., a multinational consumer electronics corporation,
from October 2012 to April 2016, and as Senior Vice President and General Manager of BestBuy.com LLC, a subsidiary of
Best Buy Co., Inc., from 2002 through 2012. Mr. Thompson was formerly a director of Belk, Inc. and Wendy’s International,
Inc.
Areas
of Expertise
CEO/Senior
Officer; Finance and Accounting; Governance/Board; Governmental and Stakeholder Relations; Information Technology; Marketing;
Strategic Planning |
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Qualifications
of Directors and Nominees
Our
directors have diverse backgrounds and provide critical experience and expertise to Norfolk Southern. The Governance and Nominating
Committee carefully considers the experience and qualifications of each director standing for re-election and potential nominees
for election, including how the director will contribute to the diversity of the Board, to ensure that the Board can effectively
carry out its oversight role on behalf of our shareholders.
The
Governance and Nominating Committee has identified ten areas of expertise that are of particular importance to Norfolk Southern
given the nature of our business and our expectations for the future of our company. The categories identified by the Governance
and Nominating Committee are as follows:
CEO/Senior
Officer |
Experience
working as a CEO or senior executive of a major public, private, or non-profit entity. |
Environmental
and Safety |
A
thorough understanding of safety and environmental issues and transportation industry regulations. |
Finance
and Accounting |
Senior
executive level experience in financial accounting and reporting, auditing, corporate finance, and/or internal controls. |
Governance/Board |
Prior
or current experience as a board member of a major public, private, or non-profit entity. |
Governmental
and Stakeholder Relations |
Experience
in or a strong understanding of the workings of government and public policy on a local, state, and national level and stakeholder
strategy and engagement. |
Human
Resources and Compensation |
Senior
executive level experience or membership on a board compensation committee with an extensive understanding of compensation
programs, particularly compensation programs for executive level employees and incentive-based compensation programs. |
Information
Technology |
Senior
executive level or board experience with information technology issues for a major public, private, or non-profit entity. |
Marketing |
Senior
executive level experience in marketing combined with a strong working knowledge of Norfolk Southern’s markets, customers,
and strategy. |
Strategic Planning |
Senior
executive level experience in strategic planning for a major public, private, or non-profit entity. |
Transportation |
Extensive
knowledge and experience in the transportation industry, either as a senior executive of a transportation or logistics company
or as a senior executive of a customer of a transportation company. |
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The
table and chart below summarize the areas of expertise that our Governance and Nominating Committee has identified as being represented
on our Board, both from an individual and collective standpoint. In addition to these areas of expertise, the Governance and Nominating
Committee also considers ethical integrity, board dynamics, reputation of potential nominees, recommendations of director search
firms, and diversity of the Board.
Norfolk
Southern defines diversity as the collective mixture of similarities and differences that impact our workforce, workplace, and
marketplace. Our Governance and Nominating Committee views diversity broadly, seeking to nominate individuals from varied backgrounds,
perspectives, and experiences. The Governance and Nominating Committee does not have a specific written policy on the diversity
of the Board of Directors at this time. However, more information on Norfolk Southern’s diversity principles and philosophy
can be found on our website on the “Work at NS” page under “Learn more about NS.”
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Bell |
Daniels |
Donadio |
Huffard |
Jones |
Kelleher |
Leer |
Lockhart |
Miles |
Mongeau |
Scanlon |
Squires |
Thompson |
CEO/Senior Officer |
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Environmental and Safety |
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Finance and Accounting |
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Governance/Board |
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Governmental and Stakeholder Relations |
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Human Resources and Compensation |
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Information Technology |
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Marketing |
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Strategic Planning |
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Transportation |
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More
information on director qualifications and nomination is contained in Norfolk Southern’s Corporate Governance Guidelines,
posted on the “Invest in NS” page under “Corporate Governance Documents” on our website.
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Director
Independence
The
Board of Directors has considered whether the members of our Board of Directors are independent. A director is considered “independent”
if the Board determines that the director has no material relationship with Norfolk Southern (directly or as a partner, shareholder,
or officer of an organization that has a relationship with Norfolk Southern). The Board makes these determinations after full
deliberation, considering all relevant facts and circumstances. To aid in its evaluation of director independence, the Board has
adopted categorical independence standards. Under the standards, an individual director is “independent,” unless the
Board determines otherwise, if none of the following relationships exist between Norfolk Southern and the director:
· | the
director is, or has been within the last three years, an employee, or an immediate family
member of the director is, or has been within the last three years, an Executive Officer
of Norfolk Southern or any of our consolidated subsidiaries; |
· | the
director or an immediate family member of the director has received during any twelve-month
period within the last three years more than $120,000 in direct compensation from Norfolk
Southern or any of our consolidated subsidiaries, other than director and committee fees
and deferred compensation for prior service (provided such deferred compensation is not
contingent in any way on continued service); |
· | (a)
the director is a current partner or employee of a present or former internal or external
auditor of Norfolk Southern or any of our consolidated subsidiaries, (b) the director
has an immediate family member who is a current partner of such a firm, (c) the director
has an immediate family member who is a current employee of such a firm and personally
works on Norfolk Southern’s audit, or (d) the director or an immediate family member
was within the last three years a partner or employee of such a firm and personally worked
on Norfolk Southern’s audit within that time; |
· | the
director or an immediate family member is, or has been within the last three years, employed
as an executive officer of another company where one of our Executive Officers serves
as a director and sits on that company’s compensation committee; |
· | the
director is an executive officer or employee, or an immediate family member of the director
is an executive officer, of a company that makes payments to, or receives payments from,
Norfolk Southern or any of our consolidated subsidiaries for property or services in
an amount which, in any of the last three fiscal years, exceeds the greater of $1 million
or 2% of such other company’s consolidated gross revenues; and |
· | the
director is an executive officer or compensated employee, or an immediate family member
of the director is an executive officer, of a charitable organization that receives donations
from Norfolk Southern, any of our consolidated subsidiaries, or the Norfolk Southern
Foundation in an amount which, in any of the last three fiscal years, exceeds the greater
of $1 million or 2% of such charitable organization’s donations. |
For
purposes of these categorical standards, “immediate family member” has the definition used in the New York Stock Exchange’s
Listing Standards. These categorical independence standards are available on our website at www.norfolksouthern.com on the “Invest
in NS” page under “Corporate Governance Documents.”
The
Board has determined that all the director nominees other than Mr. Squires satisfy the above categorical standards and
qualify as independent directors of Norfolk Southern. Mr. Squires serves as our Chairman, President and Chief Executive
Officer and, therefore, is not an independent director. In addition, the Board determined that Messrs. Wesley Bush and Martin
Nesbitt, who served as directors during 2019 but were not director nominees at our 2019 Annual Meeting, and Mr. Daniel Carp,
who served as a director during 2019 but is not a director nominee at our 2020 Annual Meeting, were “independent”
directors. In making these independence determinations, our Board of Directors considered the following
transactions:
· | The
Norfolk Southern Foundation made charitable grants to Purdue University during the past
three years, pursuant to Norfolk Southern’s College Partnership program. From time
to time, the Norfolk Southern Foundation makes charitable contributions to Purdue University
pursuant to the Foundation’s employee-directed matching gift program. Mr. Daniels
has been President of Purdue University since January 2013. |
· | Mr.
Kelleher served as President of Morgan Stanley from 2016 until his retirement in June
2019. Morgan Stanley provided banking/financial advisory services to Norfolk Southern
in the past and is a participating lender in Norfolk Southern’s credit facility.
These transactions were in the ordinary course, on substantially the same terms as those
prevailing at the time for comparable services provided by other investment banks and
participating lenders in the credit facility, and the dollar amounts involved were not
material to either Norfolk Southern or Morgan Stanley. |
· | Norfolk
Southern provided transportation services to and received lease payments from USG Corporation
during the past three years. Ms. Scanlon has served as President and Chief Executive
Officer of USG Corporation from November 2016 until its acquisition in April 2019. |
These
transactions did not exceed our categorical independence standards and were not sufficiently material as to require
disclosure as a Related Persons Transaction under Item 404(a) of Regulation S-K. In addition, the Board considered these
relationships in its nomination of Ms. Scanlon and Messrs. Daniels and Kelleher and determined that their independence as
directors of Norfolk Southern is not impaired.
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ITEM
2 |
Approval
of Proposed Amendments to Our Amended and Restated Articles of Incorporation
ü The
Board of Directors unanimously recommends that you vote FOR the approval of each of the proposed amendments set forth in each
of the sub-Items below to the Articles to revise voting standards.
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The
Board of Directors presents Item 2 for vote by shareholders in response to the non-binding shareholder proposal that
received support from a majority of the votes cast at the 2019 Annual Meeting of Shareholders. The proposal, submitted by one
of our shareholders, requested that the Board take the steps necessary to eliminate the supermajority voting provisions in
the Corporation’s Amended and Restated Articles of Incorporation (“Articles”) or Bylaws or implicit due to
a default to state law. After considering corporate governance best practices for our shareholders and taking into account
last year’s shareholder vote, the Board, at its meeting on July 26, 2019, voted to recommend shareholders approve
certain amendments (as described below) to the Articles to revise voting standards for certain items (the “Proposed
Amendments”), in accordance with Virginia law, which requires such changes to be presented to shareholders for
approval. The Proposed Amendments are set forth in Items 2(a), 2(b), and 2(c) below, which will be voted on separately.
Approval of any sub-Item is not conditioned upon approval of the other sub-Items.
Overview
of the Proposed Amendments
Article
VII of the Corporation’s current Articles establishes a voting standard of the majority of all votes entitled to be
cast in order to amend the Articles, but gives the Board of Directors the ability to require a higher standard. In addition,
because our Articles and Bylaws are silent on certain other voting standards, the voting standards are determined by certain
default provisions in the Virginia Stock Corporation Act (“VSCA”). In many cases this default would require a
voting standard greater than a majority of votes cast, unless and until a lower standard is adopted and included in the
Articles. After consideration of the vote results at the 2019 Annual Meeting and the Corporation’s engagement with
shareholders, the Board recommends an amendment to our Articles adding explicit voting standards, where permitted by the
VSCA. More information on the Proposed Amendments to revise these voting standards is set forth in the descriptions of Items
2(a), 2(b), and 2(c) below.
ITEM
2(a): RESOLVED, Article VII of the Articles is amended to provide, the shareholder vote required, of each voting group entitled
to vote thereon, to approve an amendment to the Corporation’s Articles of Incorporation is a majority of all votes entitled
to be cast by that voting group, unless the VSCA conditions approval of such an amendment upon a greater vote.
Description
of Amendment. Currently Article VII of the Articles establishes a voting standard of the majority of all votes entitled to
be cast in order to amend the Articles, but gives the Board of Directors discretion to require a higher voting standard. Item
2(a) requests that shareholders approve an amendment to Article VII to delete and replace the language that provides the Board
with this discretion and replace it with language indicating that a higher voting standard would only be required if the VCSA
conditioned approval of the amendment upon a greater vote.
ITEM
2(b): RESOLVED, the Articles are hereby amended to add a new ARTICLE VIII to provide, in whole or in part, any action on a matter
involving: (i) a plan of merger or acquisition for which the VSCA requires shareholder approval; (ii) a share exchange for which
the VSCA requires shareholder approval; (iii) the conversion of the Corporation; (iv) a sale of all or substantially all the Corporation’s
property for which the VSCA requires shareholder approval; or (v) the dissolution of the Corporation shall require the approval,
by the affirmative vote, of a majority of the votes cast thereon.
Description
of Amendment. Currently, because the Articles and Bylaws are silent on certain voting standards for certain actions, those
voting standards are determined by default to provisions in the VSCA. In many cases, this default would require a voting standard
greater than a majority of votes cast, unless and until a lower standard is adopted in the Articles.
This
Item 2(b) requests that shareholders approve an amendment to the Articles to add a new Article VIII. As a result of the
amendment, the default VSCA voting standards for certain actions would no longer apply as the Articles would now contain an
explicit voting standard. If Item 2(b) is approved, the new Article VIII would revise the voting standard to be the
affirmative vote of a majority of the votes cast for (i) a plan of merger or acquisition for which the VSCA requires
shareholder approval; (ii) a share exchange for which the VSCA requires shareholder approval; (iii) the conversion of the
Corporation; (iv) a sale of all or substantially all the Corporation’s property for which the VSCA requires shareholder
approval; and (v) the dissolution of the Corporation.
ITEM
2(c): RESOLVED, the Articles are hereby amended to add a new ARTICLE VIII to provide, in whole or in part, any action on a matter
involving: (i) the re-domestication of the Corporation; or (ii) an affiliated transaction for which the VSCA requires shareholder
approval shall require the approval, by the affirmative vote, of a majority of the votes entitled to be cast thereon.
Description
of Amendment. Currently, because the Articles and Bylaws are silent on certain voting standards for certain actions, the voting
standards are determined by default to provisions in the VSCA. In many cases this default would require a voting standard greater
than a majority of votes cast, unless and until a lower standard is adopted in the Articles.
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This
Item 2(c) requests that shareholders approve an amendment to the Articles to add a new Article VIII. As a result of the amendment,
the default VSCA voting standard for certain items would no longer apply as the Articles would now contain an explicit voting
standard. If Item 2(c) is approved, the new Article VIII would revise the voting standard to be the affirmative vote of a majority
of the votes entitled to be cast for (i) the re-domestication of the Corporation; and (ii) an affiliated transaction for which
the VSCA requires shareholder approval.
Additional
Information
The
full text of the Proposed Amendments, in each case marked to show the proposed deletions and insertions, is set forth in Exhibit
A to this Proxy Statement. The general description of provisions of our Articles and the Proposed Amendments set forth herein
are qualified in their entirety by reference to the text of Exhibit A.
If
shareholders approve any of the Proposed Amendments by the requisite vote, we will file Articles of Amendment that include
only those amendments that were approved by the shareholders with the Virginia State Corporation Commission promptly after
this Annual Meeting. The Articles of Amendment will become effective upon the issuance of a certificate of amendment by the
Virginia State Corporation Commission. For any Proposed Amendment that does not receive the requisite vote, that Proposed
Amendment will not be implemented and the Corporation’s current voting standards relating to such Proposed Amendment
will remain in place.
Governance
Framework and Practices
The
Board of Directors has adopted Corporate Governance Guidelines that, among other matters, describe procedures for
shareholders and other interested parties to communicate with the non-employee members of the Board (the
“outside” directors). Communications will be forwarded to the Lead Independent Director after review by the
Corporate Secretary, as appropriate. Communications that are unrelated to the duties and responsibilities of the Board may
not be forwarded. These include matters involving individual grievances or that are otherwise not of general concern to all
shareholders, and items that are business solicitations or advertisements, resumes or other job-related inquiries, spam, and
hostile, threatening, or similarly unsuitable communications, each of which will be handled by management, as appropriate.
However, all shareholder and interested parties’ communications are made available to the Board of Directors upon the
Board’s request. The Corporate Governance Guidelines are available on our website at www.norfolksouthern.com on the
“Invest in NS” page under “Corporate Governance Documents.”
Board
Leadership Structure
Mr.
Squires has served as Chief Executive Officer since June 1, 2015, and as Chairman since October 1, 2015. While the Board believes
that combining the CEO and Chairman positions provides a leadership structure that is in the best interests of Norfolk Southern
and our shareholders, the Board of Directors recognizes the importance of strong independent board leadership and has provided
for such leadership by designating a Lead Independent Director, as discussed in detail below under “Lead Independent Director.”
Combining
the CEO and Chairman positions provides for consistency of leadership of the Board and management and maintains clear lines of
authority. Given that Mr. Squires’ knowledge of the Corporation is more extensive than that of any other director, he is
particularly well equipped to lead the Board and set the Board’s agenda in collaboration with our Lead Independent Director.
Further, Mr. Squires’ experience gives him a depth of knowledge about the broader industry that the Board believes is a
highly valuable feature for the Chairman.
Lead
Independent Director
In
order to provide strong independent Board leadership, the Board’s leadership structure is enhanced by the role of our Lead
Independent Director, who:
· | is
selected from the independent directors of the Board by the independent directors; |
· | presides
at all meetings of the Board at which the Chairman is not present, including all meetings
of the outside directors; |
· | calls
additional meetings of the outside directors as necessary; |
· | serves
as a liaison between the Chairman and CEO and the independent directors, conferring with
the Chairman and CEO on a number of topics, including the effectiveness of Board meetings; |
· | develops
and approves, together with the Chairman and CEO, Board and committee meeting agendas,
meeting schedules, and other materials to be distributed to the Board in order to ensure
sufficient time for informed discussions of complex issues; |
· | monitors
the flow of information from the committee chairs to the directors, reviews shareholder
communications, meets with significant shareholders as appropriate, and interviews potential
director candidates; and |
· | presides
over our annual board self-evaluation process. |
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Mr.
Leer was selected by the independent directors to be our Lead Independent Director in 2013. Mr. Leer is an experienced director
with extensive knowledge of Norfolk Southern’s business, drawing from his perspectives both as a board member and as a former
customer. While Mr. Leer has extensive experience as a public company CEO and chairman, because he is not currently a standing
executive he is able to devote extensive time and focus to his role as Lead Independent Director. Mr. Leer has served as a director
of Norfolk Southern through two leadership transitions and has been instrumental in providing continuity in the leadership of
the Board, and in facilitating communication amongst board members.
More
information on the position of Lead Independent Director is contained in Norfolk Southern’s Corporate Governance Guidelines,
posted on the “Invest in NS” page under “Corporate Governance Documents” on our website.
Board
Self-Evaluation Process
Our
Lead Independent Director presides over our annual board self-evaluation process. For the 2019 evaluation, the Board retained
a third-party firm to facilitate the evaluation, with evaluation results sent directly to the directors without input or interpretation
by management. The evaluation included an assessment of the effectiveness of the Board and its committees, director performance,
board dynamics, director succession planning, the effectiveness of our Lead Independent Director and committee chairs, and the
level of independence between the Lead Independent Director and our Chairman and CEO. The individual assessments were organized
and summarized by the third-party firm for discussion by our Lead Independent Director with the Board. In addition, our Lead Independent
Director supplemented the evaluation process with one-on-one reviews with individual directors following the evaluation as he
deemed appropriate. The Board believes utilizing a third-party firm and reviewing and updating the questionnaire each year as
appropriate ensures the evaluation process remains robust and that the process is free from any conflicts of interest and is truly
an independent review.
Board
Refreshment and Succession Planning Policy
Our
Governance and Nominating Committee adopted a policy under our Corporate Governance Guidelines requiring that it discuss succession
planning for directors, including the committee chair and lead director positions, at least annually. The Committee considers
any upcoming retirements under its retirement policy for directors, desired skills and expertise for the Board, and tenure of
current directors. In evaluating tenure, the Committee reviews average tenure and distribution of individual tenures for the Board
(that is, the number of directors having less than five years of service, five to ten years of service, and over ten years of
service), with the goal of maintaining an appropriate balance of new perspectives and longer-term expertise.
Retirement
Policy
Under
our Corporate Governance Guidelines, a director must retire effective as of the date of the annual meeting that falls on or next
follows the date of that director’s 75th birthday.
Director
Education
Directors
will receive continuing education from time to time through presentations about the Corporation and new legal and regulatory developments
relating to directors. Directors are encouraged to participate in outside director education seminars at the Corporation’s
expense. In addition, Directors periodically participate in site visits to our railroad facilities.
Director
Elections Majority Voting Policy and Resignation Requirement
Norfolk
Southern’s Bylaws require that in an uncontested election of directors, a director will be elected by a majority of
votes cast. Any incumbent director who is not re-elected will promptly tender his or her resignation to the Board of
Directors for consideration by our Governance and Nominating Committee. The Governance and Nominating Committee will promptly
consider the resignation and recommend to the Board of Directors whether to accept or reject the tendered resignation. The
Board of Directors will act on the Committee’s recommendation within 90 days following certification of the election
results. Any director who tenders his or her resignation pursuant to this provision will not participate in the Governance
and Nominating Committee’s recommendation or Board of Directors’ consideration regarding whether or not to accept
the tendered resignation. If the resignation is accepted, the Governance and Nominating Committee will recommend to the Board
whether to fill the vacancy or reduce the size of the Board. We will publicly disclose the Board of Directors’ decision
within four business days, including a full explanation of the process by which the decision was reached and, if applicable,
the reasons why the Board rejected the director’s resignation.
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Proxy
Access
The
Corporation’s Bylaws permit a group of shareholders holding 3% of our outstanding shares for at least 3 years, and who otherwise
comply with the Corporation’s Bylaws, to nominate up to 20% of the Board of Directors (with a minimum of 2 nominees). Up
to 20 shareholders may aggregate their holdings to reach the 3% threshold. Our Bylaws are posted on our website on the “Invest
in NS” page under “Corporate Governance Documents.”
Special
Meetings
A
special meeting will be called by the Corporate Secretary of the Corporation upon written request by one or more shareholders
who in the aggregate represent at least 20% of the Corporation’s voting shares and who otherwise comply with the Corporation’s
Bylaws, which are posted on our website on the “Invest in NS” page under “Corporate Governance Documents.”
Shareholder
Engagement
Norfolk
Southern regularly engages with its shareholders on our strategic plan, governance, executive compensation, sustainability,
and other matters of interest to shareholders. During 2019, we continued our shareholder outreach program and met with many
of our largest institutional investors. Our outreach program included one-on-one meetings with members of our governance
team, as well as members of our investor relations, human resources, and sustainability teams. Feedback we received from
shareholders was presented to our Board of Directors and to our Governance and Nominating Committee or Compensation
Committee, as appropriate, for that committee’s consideration. Our Governance and Nominating Committee, headed by our
Lead Independent Director, discussed both the process for conducting this outreach program and the results of these
shareholder meetings with our Board of Directors. In response to these engagements, our Board recommended amendments to our
Articles of Incorporation, as described in Item 2 of this Proxy Statement, in response to shareholder approval of the
shareholder proposal on majority vote at the 2019 Annual Meeting.
Corporate
Sustainability and Responsibility
Moving
freight by rail is more fuel- and carbon-efficient than moving freight by truck: on average four times more efficient. In addition,
Norfolk Southern strives to continuously reduce our fuel consumption and lower our carbon emissions. In support of these goals,
we continue to implement technology-driven initiatives that benefit both the environment and our bottom line.
Our
Governance and Nominating Committee’s charter includes oversight of sustainability initiatives. We have entwined sustainability
into daily operations in ways that advance our business goals and honor our environmental and social commitments as a responsible
corporate citizen. We strive to satisfy these commitments while driving business forward, to ensure success for all stakeholders:
investors, customers, employees, communities, and industry partners.
Our
Corporate Social Responsibility Report is published annually and informed by the Global Reporting Initiative’s G4 Core Level
guidelines. The report is available on our website on the “Get to Know NS” page under “Environment.” (Please
note that information contained on our website is not incorporated by reference in this Proxy Statement or considered to be part
of this document.)
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Highlights
from our most recently reported sustainability cycle include:
Integrating Sustainable
Business Practices into Daily Operations
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Safety is a Core Value
and Pillar of Our Strategy
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· Maintained
record-level locomotive fuel efficiency for the second consecutive year. Over the past two years, our fuel-efficiency initiatives
have conserved more than 47.3 million gallons of diesel compared to 2016 fuel-economy performance and avoided more than 481,000
metric tons of greenhouse gas emissions.
· Advanced
our favorable trend of reducing greenhouse gas emissions. Year-over-year, we reduced absolute emissions (Scope 1 and 2) by 2.6%
even as business volumes, as measured by revenue ton miles, increased by nearly 3%. We lowered our emissions intensity per revenue
ton mile by 5%.
· Continued
to make gains in energy performance, reducing electricity use by more than 1% and lowering electricity costs by more than 5%.
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· Experienced
zero employee work-related fatalities and reduced the number of serious on-the-job injuries.
· Expanded
our “Don’t just work here, thrive here” program to enhance employee experience.
· Provided
free training to more than 6,200 emergency responders, including police and firefighters, on how to prepare for and safely respond
to potential rail- related incidents involving hazardous materials.
· Visited
22 communities in 15 states on our territory in our safety train, a mobile training lab, providing classroom and hands-on rail-safety
training to more than 2,060 first responders.
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Generating Economic Benefits for
Businesses and Communities
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Increasing the Diversity of Our
Workforce and Improving our Communities
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· Financed
an employee payroll of more than $2.4 billion and disbursed more than $6 billion in taxes, purchases, and other payments in 22
states and the District of Columbia.
· Invested
$1.95 billion in capital projects to ensure safe and efficient operations and support growth. Gained more than 60,000 carloads
of new business through industrial development efforts. The additional traffic was generated by 90 industries that built new or
expanded existing facilities on our rail network, representing customer investment of more than $1.5 billion that created more
than 2,970 customer jobs.
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· 84%
of employees are represented by 13 trade unions.
· Became
the first railroad to sign the CEO Action for Diversity and Inclusion pledge, a public commitment to cultivate a workplace environment
where diverse experiences and perspectives are welcome and where employees feel comfortable and empowered to discuss diversity
and inclusion.
· Recognized
externally as a military-friendly employer. In 2018, we hired more than 400 people who are veterans, or nearly 18% of new hires
for the year.
· Donated
more than $8.8 million in charitable contributions to communities where we work.
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Sustainability
and Climate Change Risk Management
Norfolk
Southern, through its Enterprise Risk Management (“ERM”) program and disclosure procedures, reviews and monitors sustainability
and climate change risks relating to volatility in energy prices, business interruptions from severe weather, and legislative
and regulatory efforts to limit greenhouse gas emissions. Our Board receives updates on these risks, and our management works
with employees to identify, assess, and mitigate these risks and any potential emerging risks associated with sustainability and
climate change. For more information on these risks, please see our annual and quarterly reports filed with the SEC.
Risk
Oversight
Norfolk
Southern considers and manages opportunities, threats, and uncertainties that may impact the Corporation’s business objectives
by employing a robust ERM program. The ERM program supports the Corporation’s achievement of business objectives by enabling
a collaborative risk management environment to proactively identify, assess, monitor, and mitigate business risk.
While
the Board of Directors is ultimately responsible for oversight of the ERM program, the Finance and Risk Management Committee has
been delegated oversight of the ERM program. The Finance and Risk Management Committee:
· | recommends
ERM program procedures and processes to the Board; |
· | oversees
the ERM program and requests reports from management on its monitoring and mitigation
of risks; |
· | discusses
with management the relationship between Norfolk Southern’s risk appetite and business
strategies; and |
· | collaborates
with the Audit Committee to assist it in its review of major financial risk exposures
and its oversight of the guidelines and policies used to govern the ERM program. |
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Other
Board committees also play a role in risk oversight:
· | The
Audit Committee is responsible for oversight of ERM program guidelines and policies,
and considers Norfolk Southern’s major financial risk exposures, as well as risks
associated with financial reporting and fraud. |
· | The
Compensation Committee considers major compensation-related risks when reviewing our
compensation strategy, plans, and programs. |
Management
implements the ERM program through its Enterprise Risk Council. The Council comprises executive leadership and the chief risk
officer, who coordinate with business leaders across Norfolk Southern to assess and mitigate enterprise risks. Management provides
regular presentations and updates on risk management efforts to the Finance and Risk Management Committee. In addition, the Board
or the Finance and Risk Management Committee may conduct additional risk assessments at any time, and the Board - and each of
its committees - is empowered to engage outside advisors to assist in performing its risk oversight duties.
Related
Persons Transactions
During
2019, Norfolk Southern did not have any related persons transactions.
We
may occasionally participate in transactions with certain “related persons.” Related persons include our
Executive Officers, directors, beneficial owners of 5% or more of our common stock, immediate family members of these
persons, and entities in which one of these persons has a direct or indirect material interest. We refer to transactions with
these related persons as “related persons transactions.” We have adopted a written policy to prohibit related
persons transactions unless they are determined to be in Norfolk Southern’s best interests. Under this policy, the
Audit Committee of our Board is responsible for the review and approval of each related persons transaction exceeding
$120,000. In instances where it is not practicable or desirable to wait until the next meeting of the Audit Committee for
review of a related persons transaction, the Chair of the Audit Committee has been delegated authority to act between Audit
Committee meetings. The Audit Committee, or its Chair, considers all relevant factors when determining whether to approve a
related persons transaction, including whether the proposed transaction is on terms and made under circumstances that are at
least as favorable to Norfolk Southern as would be available in comparable transactions with or involving unaffiliated third
parties. Among other relevant factors, they consider:
· | the
size of the transaction and the amount of consideration payable to the related person(s); |
· | the
nature of the interest of the applicable director, director nominee, Executive Officer,
or 5% shareholder, in the transaction; and |
· | whether
we have developed an appropriate plan to monitor or otherwise manage the potential conflict
of interest. |
The
Chair must report any action taken pursuant to this delegated authority to the Audit Committee at its next meeting. In
addition, at the Audit Committee’s first meeting of each fiscal year, it reviews all previously approved related
persons transactions that remain ongoing and have a remaining term or remaining amounts payable to or receivable from us of
more than $120,000. Based on all relevant facts and circumstances, taking into consideration our contractual obligations, the
Audit Committee determines whether it is in our and our shareholders’ best interest to continue, modify, or terminate
the related persons transaction.
Anti-Hedging
and Anti-Pledging Policies
In
September 2019, the Board of Directors amended the Corporation’s anti-hedging policy to extend the policy to all
officers and members of the Board, effective for transactions entered into after adoption of the amendment. The policy
provides that the Corporation’s executive and non-executive officers and members of its Board of Directors are
prohibited from purchasing any financial instruments (including prepaid variable forward contracts, equity swaps, collars,
exchange funds) that hedge or offset, or are designed to hedge or offset, any decrease in the market value of the
Corporation’s securities, whether granted by the Corporation as part of the officer’s or director’s
compensation or held, directly or indirectly, by the officer or director. Corporation policy also prohibits executive
officers from entering into pledging transactions or positions regarding the Corporation’s securities. The Corporation
is not aware of any violation of these policies.
The
Thoroughbred Code of Ethics
The
Board has approved and adopted The Thoroughbred Code of Ethics, which applies to all directors, officers, and employees of Norfolk
Southern, and a Code of Ethical Conduct for Senior Financial Officers that applies to specified financial officers. These documents
and our Corporate Governance Guidelines are available on our website at www. norfolksouthern.com on the “Invest in NS”
page under “Corporate Governance Documents.” Any shareholder may request printed copies of our Corporate Governance
Guidelines, The Thoroughbred Code of Ethics, or Code of Ethical Conduct for Senior Financial Officers by contacting: Denise W.
Hutson, Corporate Secretary, Norfolk Southern Corporation, Three Commercial Place, Norfolk, Virginia 23510 (telephone 757-823-5567).
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Board
Composition and Attendance
On
September 23, 2019, the Board of Directors elected Mr. Mongeau. On February 21, 2020, the Board of Directors elected Mr. Huffard
and Mr. Jones. The Board met six times in 2019. Each director attended not less than 75% of the aggregate number of meetings of
the Board and meetings of all committees on which such director served.
The
Corporate Governance Guidelines also describe the Board’s policy with respect to director attendance at the Annual Meeting
of Shareholders, which provides that, to the extent possible, each director is expected to attend the Annual Meeting. We work
hard to coordinate schedules so that all our directors can attend, but occasionally events arise that we are unable to schedule
around. All directors attended our 2019 Annual Meeting of Shareholders.
Committees
of the Board
Our
Board committees and their responsibilities are described below. Each committee operates under a charter approved by the Board
of Directors that requires the committee to evaluate its performance at least annually. The committee’s evaluation includes
effectiveness, size and composition, the quality of information and presentations given to the committee by management, the suitability
of the committee’s duties and other issues that the committee deems appropriate. Copies of the committee charters are available
on our website on the “Invest in NS” page under “Corporate Governance Documents.” Any shareholder may
request a printed copy of one or more of the committee charters by contacting: Denise W. Hutson, Corporate Secretary, Norfolk
Southern Corporation, Three Commercial Place, Norfolk, Virginia 23510 (telephone 757-823-5567).
Executive
Committee
Current members: |
James A. Squires (Chair) |
|
Thomas D. Bell, Jr.
Daniel A. Carp
Steven F. Leer
Amy E. Miles |
Meetings
in 2019: Two
When
the Board is not in session, and except as otherwise provided by law, the Executive Committee has and may exercise all the authority
of the Board, including the authority to declare a quarterly dividend on our common stock at the rate of the quarterly dividend
most recently declared by the Board. All actions taken by the Executive Committee are reported to the Board at its next meeting
and are subject to revision or alteration by the Board.
Audit
Committee
Current members: |
Amy E. Miles (Chair) |
|
Marcela E. Donadio
Christopher T. Jones
Thomas C. Kelleher
Michael D. Lockhart
John R. Thompson |
Meetings
in 2019: Nine
All
members of the Audit Committee are independent (see information under “Director Independence” on page 15), satisfy
all additional requirements for service on an Audit Committee, as defined by the applicable New York Stock Exchange Listing Standards
and SEC rules, and qualify as “audit committee financial experts,” as that term is defined by SEC rules. No member
of the Committee serves on more than three public company audit committees.
During
2019 the Audit Committee:
| · | assisted
board oversight of the accuracy and integrity of our financial statements, financial
reporting process, and internal control systems; |
| · | engaged
an independent registered public accounting firm (subject to shareholder ratification)
based on an assessment of their qualifications and independence, and pre-approved all
services associated with their engagement; |
| · | evaluated
the efforts and effectiveness of our independent registered public accounting firm and
Audit and Compliance Department, including their independence and professionalism; |
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| · | facilitated
communication among the Board, the independent registered public accounting firm, our
financial and senior management, and our Audit and Compliance Department; |
| · | assisted
board oversight of our compliance with applicable legal and regulatory requirements; |
| · | reviewed
procedures established for the receipt, retention, and treatment of complaints received,
including confidential, anonymous submissions by employees, or others, of concerns regarding
questionable accounting or auditing matters, and significant cases of alleged employee
conflict of interest, ethical violations, misconduct, or fraud, the volume and nature
of calls to the “Ethics and Compliance Hotline” and other matters similar
in nature; |
| · | discussed
the Corporation’s guidelines and policies with respect to risk assessment and risk
management, including the Corporation’s major financial risk exposures, and the
steps management has taken to monitor and control such exposures; and |
| · | prepared
the “Audit Committee Report” that SEC rules require be included in our annual
proxy statement. |
Finance
and Risk Management Committee
Current members: |
Thomas D. Bell, Jr. (Chair) |
|
Marcela E. Donadio
John C. Huffard, Jr.
Thomas C. Kelleher
Michael D. Lockhart
Claude Mongeau
Jennifer F. Scanlon |
|
|
Meetings
in 2019: Five
All
members of the Finance and Risk Management Committee are independent (see information under “Director Independence”
on page 15).
During
2019 the Finance and Risk Management Committee:
| · | oversaw
implementation of policies concerning our capital structure, including evaluating the
appropriate structure of our long-term debt, mix of long-term debt and equity, and strategies
to manage our interest burden, and recommended to the Board the declaration of dividends,
share repurchases, and the issuance of debt securities; |
| · | reviewed
and evaluated tax and treasury matters and financial returns of our transactions, including
management of cash flows, tax planning activities, and evaluating financial returns of
proposed mergers, acquisitions, and divestitures; and |
| · | provided
oversight of our Enterprise Risk Management program, including recommending Enterprise
Risk Management procedures and processes to the Board, requesting reports from management
on its monitoring and mitigation of risks, and discussing with management the relationship
between Norfolk Southern’s risk appetite and business strategies. |
Governance
and Nominating Committee
Current members: |
Steven F. Leer (Chair) |
|
Daniel A. Carp
Mitchell E. Daniels, Jr.
Christopher T. Jones
Amy E. Miles |
|
John R. Thompson |
Meetings
in 2019: Five
All
members of the Governance and Nominating Committee are independent (see information under “Director Independence”
on page 15).
During
2019 the Governance and Nominating Committee:
| · | recommended
to the Board qualified individuals to be nominated as members of the Board; |
| · | recommended
to the Board qualified individuals to be elected as our officers; |
| · | evaluated
and considered whether to recommend the adoption of any amendments to our Corporate Governance
Guidelines; |
| · | monitored
legislative developments relevant to us and oversaw efforts to affect legislation and
other public policy; |
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| · | provided
oversight of our sustainability initiatives, political contributions, and charitable
giving; |
| · | oversaw
our relations with shareholders; and |
| · | monitored
corporate governance trends and practices and made recommendations to the Board of Directors
concerning corporate governance issues. |
Compensation
Committee
Current members: |
Daniel A. Carp (Chair) |
|
Thomas D. Bell, Jr.
Mitchell E. Daniels, Jr.
John C. Huffard,
Jr.
Steven F. Leer |
|
Claude Mongeau
Jennifer F. Scanlon |
Meetings
in 2019: Three
All
members of the Compensation Committee are independent (see information under “Director Independence” on page 15) and
satisfy all additional requirements for service on a Compensation Committee, as defined by the applicable New York Stock Exchange
Listing Standards and the SEC rules.
During
2019 the Compensation Committee:
| · | considered
and made recommendations to the Board concerning the compensation levels, plans, and
programs for the directors, chief executive officer, and executive officers; |
| · | reviewed
and approved corporate goals and objectives relevant to the chief executive officer’s
compensation and considered and recommended to the independent members of the Board the
compensation of the chief executive officer based on an evaluation of his performance
relative to those corporate goals and objectives; |
| · | considered
the results of the shareholder advisory vote on executive compensation in connection
with its review of Norfolk Southern’s executive compensation strategy, plans, and
programs; |
| · | provided
oversight of each management annual incentive plan, deferred compensation plan, long-term
incentive plan, and other executive compensation plan that the Board has adopted and
granted, and recommended or approved awards under the plans; |
| · | made
compensation decisions for which it was desirable to achieve the protections afforded
by Rule 16b-3, or by other laws or regulations relevant in this area and in which only
disinterested directors may participate; and |
| · |
oversaw
disclosures included in the Compensation Discussion and Analysis (“CD&A”)
and produced a Compensation Committee Report indicating that it has reviewed and discussed
the CD&A with management and approved its inclusion in the annual proxy statement. |
Compensation
Committee Interlocks and Insider Participation
During
2019, each of Daniel A. Carp, Chair, Thomas D. Bell, Jr., Wesley G. Bush (resigned February 5, 2019), Mitchell E.
Daniels, Jr., Steven F. Leer, Claude Mongeau (joined September 23, 2019), and Jennifer F. Scanlon served on our Compensation Committee.
None of these members have ever been employed by Norfolk Southern, and no members had any relationship with us during 2019 requiring
disclosure as a transaction with a related person, promoter, or control person under Item 404 of Regulation S-K or under the Compensation
Committee Interlocks disclosure requirements of Item 407(e)(4) of Regulation S-K.
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Compensation
of Directors
2019
Non-Employee Director Compensation Table1
Name |
Fees
Earned
or
Paid in
Cash3
($) |
Stock
Awards4
($) |
Change
in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings5
($) |
All
Other
Compensation6
($) |
Total
($) |
Thomas
D. Bell, Jr. |
120,000 |
159,507 |
0 |
7,265 |
286,772 |
Wesley
G. Bush2 |
25,000 |
159,507 |
0 |
2,265 |
186,772 |
Daniel
A. Carp |
123,750 |
159,507 |
0 |
7,265 |
290,522 |
Mitchell
E. Daniels, Jr. |
100,000 |
159,507 |
0 |
16,765 |
276,272 |
Marcela
E. Donadio |
100,000 |
159,507 |
0 |
10,015 |
269,522 |
Thomas
C. Kelleher |
100,000 |
159,507 |
0 |
0 |
259,507 |
Steven
F. Leer |
150,000 |
159,507 |
14,732 |
4,365 |
328,604 |
Michael
D. Lockhart |
105,000 |
159,507 |
0 |
7,265 |
271,772 |
Amy
E. Miles |
120,000 |
159,507 |
0 |
7,265 |
286,772 |
Claude
Mongeau2 |
53,750 |
44,222 |
0 |
0 |
97,972 |
Martin
H. Nesbitt2 |
50,000 |
159,507 |
0 |
2,265 |
211,772 |
Jennifer
F. Scanlon |
103,750 |
159,507 |
0 |
22,265 |
285,522 |
John
R. Thompson |
100,000 |
159,507 |
0 |
12,265 |
271,772 |
| 1 | Mr.
Squires received no compensation for Board or committee service in 2019, and Mr. Squires
will not receive compensation for Board or committee service in 2020. Therefore, neither
this table nor the narrative that follows contains compensation information for Mr. Squires.
For compensation information for Mr. Squires, see the Summary Compensation Table on page
47. Neither Mr. Huffard nor Mr. Jones was a director in 2019, and they are not included
in this table because neither received compensation for Board or Committee service in
2019. |
| 2 | Mr.
Bush served as a director through February 5, 2019, and Mr. Nesbitt served as a director
through May 9, 2019. Mr.
Mongeau began his service as a director on September 23, 2019. |
| 3 | Includes
amounts elected to be received on a deferred basis pursuant to the Directors’ Deferred
Fee Plan. For a discussion of this plan, as well as our other director compensation plans,
see the narrative discussion below. |
| 4 | For
all directors, represents the full grant date fair value computed in accordance with
FASB ASC Topic 718 of the restricted stock units granted pursuant to our Long-Term Incentive
Plan on January 28, 2019, or for Mr. Mongeau, on October 24, 2019. Mr. Bush declined
to accept his 2019 stock award in light of his decision to resign from the Board effective
February 5, 2019. All of the restricted stock units granted to our directors under the
Long-Term Incentive Plan are vested upon grant and acceptance of the award, but are subject
to a restriction period of one year and a retention period that ends upon the director’s
termination of service. Each director serving on the Board as of December 31, 2019, and
who was elected to the Board before 2015, also held 3,000 restricted shares granted pursuant
to the Directors’ Restricted Stock Plan. See below under “Non-Employee Director
Compensation - Long-Term Incentive Plan” and “Non-Employee Director Compensation
- Directors’ Restricted Stock Plan” for more information. |
| 5 | Represents
the amounts by which 2019 interest accrued on fees deferred prior to 2001 by Mr. Leer
under the Directors’ Deferred Fee Plan exceeded 120% of the applicable Federal
long-term rate provided in Section 1274(d) of the Internal Revenue Code. |
| 6 | Includes
(i) the dollar amounts we contributed to charitable organizations on behalf of directors
pursuant to our matching gifts programs as follows: Mr. Bell, $5,000; Mr. Carp, $5,000;
Mr. Daniels, $14,500; Ms. Donadio, $7,750; Mr. Leer, $2,100; Mr. Lockhart, $5,000; Ms.
Miles, $5,000; Ms. Scanlon, $20,000; and Mr. Thompson, $10,000, and (ii) each director’s
proportional cost of NS-owned life insurance policies used to partially fund the Directors’
Charitable Award Program. We do not regard these contributions as compensation; however,
this disclosure is required by SEC rules. For further discussion of the Directors’
Charitable Award Program, see the narrative discussion below. Because a director must
serve on our Board for one year prior to becoming eligible for the Directors’ Charitable
Award Program, no portion of this cost was allocated to Mr. Kelleher or Mr. Mongeau. |
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Narrative
to Non-Employee Director Compensation
Below
is a discussion of the material factors necessary to an understanding of the compensation disclosed in the above table.
How
We Set Director Compensation. The Compensation Committee and the Board of Directors determine the annual compensation of
non-employee directors each year. The Committee consults with its compensation consultant on the director compensation
program and reviews survey information to determine whether changes are advisable. The Committee reviews both a comparison to
the market amount of compensation paid to directors serving on boards of similar companies and reviews the allocation of this
compensation between cash retainer and equity grants. In general, the Compensation Committee and the Board seek to make any
changes to non-employee director compensation in a gradual and incremental fashion.
The
Corporation pays for or reimburses directors for expenses related to attending Board and committee meetings, director education
programs, and other company business meetings.
Fees.
In 2019, each member of the Board received a quarterly fee of $25,000 for service on the Board and its standing committees.
Directors who served as committee chairpersons received an additional quarterly fee of $5,000 for such service, and our Lead Independent
Director received an additional quarterly fee of $12,500. For the last quarter of 2019, members of a newly-formed special-purpose
safety committee received an additional quarterly fee of $3,750, and that committee’s chairperson received a quarterly fee
of $5,000.
Long-Term
Incentive Plan. Each of our then current non-employee directors was granted restricted stock units effective January
2019. Each restricted stock unit represents the economic equivalent of one share of our common stock, and will be settled in
shares of our stock. Restricted stock units are credited with dividend equivalents as dividends are paid on our common stock,
and the amount credited is converted into additional restricted stock units based on the fair market value of our stock on
the dividend payment date. Upon leaving the Board, a director will receive the value of the restricted stock units in shares
of our stock either in a lump sum distribution or in ten annual distributions, in accordance with an election made by each
director.
Under
the Long-Term Incentive Plan, if a new non-employee director is appointed after the date of the Plan awards for the year, the
new director will receive an award under the same terms as made to other non-employee directors for the year but with the amount
of the award prorated based on the number of days remaining in the year that the individual became a director.
Directors’
Deferred Fee Plan. A director may elect to defer receipt of all or a portion of the director’s compensation. Amounts
deferred are credited to a separate account maintained in the name of each participating director. Six directors elected to defer
compensation that would have been payable in 2019 into the Directors’ Deferred Fee Plan.
Amounts
deferred on or after January 1, 2001, are credited with variable earnings and/or losses based on the performance of
hypothetical investment options selected by the director. The hypothetical investment options include NS stock units and
various mutual funds as crediting indices. NS stock units are phantom units whose value is measured by the market value of
shares of our common stock, but the units will be settled in cash, not in shares of stock. These amounts will be distributed
in accordance with the director’s elected distribution option in one lump sum or a stream of annual cash payments over
5, 10, or 15 years.
Amounts
deferred before January 1, 2001, earn a fixed rate of interest, which is credited to the account at the beginning of each quarter.
The fixed interest rate under the plan is determined based on the director’s age at the time of the deferral, which rate
was 10% for deferrals made when a director was between ages 45-54. Amounts set forth in the table above represent the extent to
which this rate exceeds 120% of the applicable federal long-term rate. These amounts will be distributed in ten annual installments
beginning in the year following the year in which the participant ceases to be a director.
Our
commitment to accrue and pay interest and/or earnings on amounts deferred is facilitated by the purchase of corporate-owned life
insurance. If the Board of Directors determines at any time that changes in the law affect our ability to recover the cost of
providing the benefits payable under the Directors’ Deferred Fee Plan, the Board may reduce the interest and/or earnings
on deferrals to a rate not less than one half the rate otherwise provided for in the Directors’ Deferred Fee Plan.
Directors’
Charitable Award Program. Each director who has served for one year is entitled to nominate up to five tax- exempt institutions
to receive, in the aggregate, up to $500,000 from Norfolk Southern following the director’s death. Directors are entitled
to designate up to $100,000 per year of service until the $500,000 cap is reached. Following the director’s death, we will
distribute the donations in five equal annual installments.
The
Directors’ Charitable Award Program supports our long-standing commitment to contribute to educational, cultural and
other appropriate charitable institutions and to encourage others to do the same. We fund some of the charitable
contributions made under the program out of general corporate assets, and some of the charitable contributions with proceeds
from life insurance policies we have purchased on some of the directors’ lives. We are the owner and beneficiary of
these policies, and the directors have no rights to any policy benefits. Upon directors’ deaths, we receive these life
insurance death benefits free of income tax, which provide a source from which we can be reimbursed for
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donations
made under the program. Our cost of the life insurance premiums under the program is partially offset by tax deductions we
take from making the charitable contributions. We allocate a proportional share of the cost of maintaining these policies
during 2019 to each director eligible for the Directors’ Charitable Award Program in the above table under “All
Other Compensation,” regardless of whether we purchased a life insurance policy with respect to each particular
director.
Because
we make the charitable contributions (and are entitled to the related deduction) and are the owner and the beneficiary of the
life insurance policies, directors receive no direct financial benefit from this program. In the event the proceeds from any of
these policies exceed the donations we are required to make under the program, we contribute the excess proceeds to the Norfolk
Southern Foundation. Amounts the Norfolk Southern Foundation receives under this program may reduce what we otherwise would contribute
from general corporate resources to support the Foundation’s activities.
Directors’
Restricted Stock Plan. Before 2015, each non-employee director received a grant of 3,000 shares of restricted stock upon election
to the Board. Restricted stock was registered in the name of the director, who has the right to vote the shares and receive dividends,
but restricted stock may not be sold, pledged, or otherwise encumbered during the restriction period. The restriction period begins
when the restricted stock was granted and ends on the earlier of death or the director ceasing to serve on the Board because of
disability or retirement. Effective January 2015, the Board of Directors amended the Directors’ Restricted Stock Plan to
provide that no additional awards will be made under the plan, and alternate awards will be made to new directors under the Long-Term
Incentive Plan.
Share
Ownership Guidelines for Directors
Our
Board of Directors has established as part of our Corporate Governance Guidelines that each non-employee director should own
shares of Norfolk Southern stock equal to at least five times the annual amount of quarterly fees paid for service on the
Board and its standing committees. The Board of Directors believes this stock ownership guideline is reasonable and aligns
director and shareholder interests. Norfolk Southern common stock, restricted stock, and deferred and restricted stock units
held in Norfolk Southern’s Long-Term Incentive Plan or under the Directors’ Deferred Fee Plan count toward this
guideline. Directors may acquire such holdings over a five-year period. All directors currently meet this guideline or are
expected to meet the guideline within the five-year period.
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Audit
Committee Matters
ITEM
3 |
Ratification
of Appointment of Independent Registered Public Accounting Firm
ü The
Audit Committee unanimously recommends, and the Board of Directors concurs, that shareholders vote FOR the proposal to ratify
the appointment of KPMG LLP as our independent registered public accounting firm for the year ending December 31, 2020.
|
The
Audit Committee of the Board of Directors has appointed KPMG LLP, independent registered public accounting firm, to perform the
integrated audit of our consolidated financial statements and internal control over financial reporting for 2020. KPMG and its
predecessors have been the Corporation’s external auditor since 1982.
Selection
of KPMG. The Audit Committee is directly responsible for the appointment, compensation, retention, and oversight of the Corporation’s
independent registered public accounting firm and consequently is involved in the selection of the lead audit partner for the
engagement. In addition, the Audit Committee is responsible for negotiating and approving the fees paid to KPMG. In determining
whether to reappoint KPMG this year, the Committee reviewed KPMG’s performance and independence and considered a number
of factors, including:
· | the
quality of its interactions and discussion with KPMG; |
· | KPMG’s
performance in the audit engagement; |
· | the
qualifications of the lead audit partner and audit team; |
· | KPMG’s
independence program and processes for maintaining independence; |
· | KPMG’s
expertise and global reach; |
· | the
length of time KPMG has been engaged; and |
· | the
potential impact of changing our independent registered public accounting firm. |
Due
to KPMG’s high quality performance and strong independence, the Audit Committee and the Board of Directors believe that
the continued engagement of KPMG as the Corporation’s independent registered public accounting firm is in the best interests
of the Corporation and its shareholders.
KPMG
Fees. For the years ended December 31, 2019, and December 31, 2018, KPMG billed us for the following services:
|
2019 |
2018 |
Audit
Fees1 |
$ |
3,178,997 |
$ |
3,288,506 |
Audit-Related
Fees2 |
$ |
215,000 |
$ |
263,000 |
Tax
Fees3 |
$ |
39,349 |
$ |
92,544 |
All
Other Fees |
$ |
0 |
$ |
0 |
Total
Fees |
$ |
3,433,346 |
$ |
3,644,050 |
1 | Audit
Fees include fees for the audit of our consolidated financial statements and internal
control over financial reporting (integrated audit), the review of our consolidated financial
statements included in our 10-Q filings, and services that are normally provided in connection
with statutory and regulatory filings or engagements. |
2 | Audit-Related
Fees principally include fees for employee benefit plan audits and other attestation
services. |
3 | Tax
Fees consist of tax advice, tax planning, and tax compliance services. |
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Committee Matters | 2020 Annual Meeting and Proxy Statement
Pre-Approval
Policy. The Audit Committee requires that management obtain the Committee’s prior approval for all audit and permissible
non-audit services. The Committee considers and approves at each January meeting anticipated services to be provided during the
year, as well as the projected fees for those services. The Committee considers and pre-approves additional services and projected
fees as needed at each meeting. The Audit Committee has delegated authority to its Chair to pre-approve services between meetings,
provided that the Chair reports any such pre-approval to the Audit Committee at its next meeting. The Audit Committee will not
approve non-audit engagements that would violate SEC rules or impair the independence of our independent registered public accounting
firm. All services rendered to us by KPMG in 2019 and 2018 were pre-approved in accordance with these procedures.
Representatives
of KPMG are expected to attend the 2020 Annual Meeting. They will have the opportunity to make a statement, if they so desire,
and be available to respond to appropriate questions.
Audit
Committee Report
Before
our Annual Report on Form 10-K for the year ended December 31, 2019, was filed with the SEC, the Audit Committee of the Board
of Directors reviewed and discussed with management our audited financial statements for the year ended December 31, 2019.*
The
Audit Committee has discussed with KPMG LLP, our independent registered public accounting firm, the matters required to be discussed
by the applicable requirements of the Public Company Accounting Oversight Board (PCAOB) and the SEC.
The
Audit Committee also has received and reviewed the written disclosures and the letter from KPMG LLP required by applicable requirements
of the PCAOB regarding KPMG LLP’s communications with the Audit Committee concerning independence, and has discussed with
KPMG LLP their independence.
Based
on the review and discussions referred to above, the Audit Committee recommended to the Board of Directors that the financial
statements referred to above be included in our Annual Report on Form 10-K for the year ended December 31, 2019, filed with the
SEC.
MEMBERS
OF THE AUDIT COMMITTEE
Amy
E. Miles, Chair
Marcela E. Donadio
Thomas C. Kelleher
Michael D. Lockhart
John R. Thompson
* | Christopher
T. Jones was appointed to the Audit Committee on February 21, 2020, upon his election
to the Board, and he did not participate in the Committee's deliberations regarding the
audited financial statements for the year ended December 31, 2019. |
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Executive Compensation
ITEM
4 |
Approval
of Advisory Resolution on Executive Compensation
ü The
Board of Directors unanimously recommends that shareholders vote FOR the advisory resolution approving the compensation of our
Named Executive Officers.
|
We
are asking our shareholders to vote to support the compensation of Norfolk Southern’s Named Executive Officers, as disclosed
in this Proxy Statement. Our executive compensation program is described in detail in the “Compensation Discussion and Analysis”
beginning on page 33 and our “Executive Compensation Tables” beginning on page 47. This vote is not intended to address
any specific item of compensation, but rather the overall compensation of Norfolk Southern’s Named Executive Officers and
the philosophy, policies, and practices described in this Proxy Statement. While this “Say-on-Pay” vote is advisory,
and therefore not binding on the Board, the Compensation Committee will consider the results of the vote in evaluating our executive
compensation program in the future.
As
more fully described in our Compensation Discussion and Analysis, Norfolk Southern’s executive compensation program is designed
to align executives’ compensation with the Corporation’s overall business strategies, to attract and retain highly
qualified executives, and to provide incentives that drive shareholder value. Accordingly, the compensation program consists of
a mix of the following compensation components that the Committee believes best serve to achieve those objectives:
2019 CEO Target Total Compensation Mix |
2019 Other Continuing NEOs Target Total Compensation Mix* |
Long-Term
Incentive Awards |
Annual
Incentive |
Salary |
· Target longer-term achievement
of corporate objectives by aligning interest of executives with shareholders
· Include performance shares that are earned over a 3-year performance
cycle, stock options, and time-based restricted stock units
· See page 42 for further details
|
· Compensate executives based
on achievement of annual corporate goals
· Earn based on performance against financial and operating metrics
· See page 40 for further details
|
· Help attract and retain executives
· Provide a fixed level of compensation
· See page 40 for further details
|
* | Average
for Mr. Scheib, Mr. Shaw and Mr. Wheeler. Ms. Earhart is omitted from this table because
she retired effective November 1, 2019. Also omitted from this table is Mr. George, who
joined the Corporation on November 1, 2019. As described further in the Summary Compensation
Table and in the Form 8-K filed on August 28, 2019, Mr. George was granted a signing
bonus and inducement equity award effective upon his hire, which awards are distinct
from the annual compensation components the Compensation Committee granted to our Named
Executive Officers. |
Under
the direction of our Compensation Committee, our executive compensation program emphasizes performance- based compensation, including
compensation that is contingent upon performance conditions or subsequent stock price appreciation. The Committee considers the
annual cash incentive, long-term performance share units, and stock options to be performance-based awards. The annual cash incentive
and performance share units are at risk of having no value unless threshold goals are achieved, and the stock options are at risk
of having no value unless our stock price appreciates.
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The
Committee believes such performance-based compensation creates a strong alignment between the interests of our executive
officers and our shareholders. In 2019, our Chief Executive Officer’s target compensation was 71% performance-based,
and the other Named Executive Officers’ target compensation was on average 61% performance- based.
The
Committee establishes financial and operating metrics for the annual cash incentive, and financial and stock performance criteria
for our performance share unit (PSU) long-term stock incentive, and establishes challenging goals that must be met for threshold,
target, or maximum payouts to be awarded. For the annual and long-term incentives that ended in 2019, the results were as follows:
· | 2019
Annual Incentive: Our Named Executive Officers earned 48.5% of their annual cash
incentive opportunity based on achieving below-target performance levels for the operating
income and operating ratio metrics. |
· | 2017-2019
PSU Performance Cycle: An above-target payout of 87.5% was achieved for the three-year
cycle, based on performance against goals that were established in January 2017 for two
equally weighted metrics, after-tax return on average invested capital (ROAIC) and relative
total shareholder return (TSR). We achieved a 75% payout for TSR for the three-year cycle
and a 100% payout for ROAIC. |
The
Committee grants stock options with a ten-year term, providing incentives to our executives to promote long- term
shareholder interests. The value of stock options is inextricably linked to the creation of shareholder value, since options
generate value for executives when Norfolk Southern creates value for shareholders through price appreciation.
Shareholders
have repeatedly expressed strong support for Norfolk Southern’s executive compensation program. We regularly engage in
a shareholder outreach program to solicit feedback concerning our executive compensation program. This process allows
shareholders to provide input to the Compensation Committee on our executive compensation program and disclosure beyond the
annual advisory vote on compensation. In the meetings held during 2019, shareholders expressed satisfaction with Norfolk
Southern’s compensation program and with our disclosures related to the program in the proxy statement.
Shareholder
Support for Norfolk Southern’s Executive Compensation Program
The
Board of Directors and its Compensation Committee believe the compensation program for the Named Executive Officers is appropriately
designed to support Norfolk Southern’s goals. Since this advisory vote was first held in 2011, shareholders have agreed,
as they have strongly supported our executive compensation program with 94% or more of the votes cast in support each year, including
94% in 2019, in favor of our executive compensation program.
Historical
“Say-on-Pay” Voting Results (FOR)
We
therefore ask that you express your support by voting FOR the following advisory resolution:
RESOLVED,
that the shareholders of Norfolk Southern Corporation approve, on an advisory basis, the compensation of the individuals identified
in the Summary Compensation Table, as disclosed in the Proxy Statement for the 2020 Annual Meeting of Shareholders pursuant to
the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis,
the 2019 Summary Compensation Table, and the other related tables and disclosures.
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Compensation Committee Report
The
Compensation Committee of our Board of Directors oversees the executive compensation program on behalf of the Board. In fulfilling
its oversight responsibilities, we reviewed and discussed with management the “Compensation Discussion and Analysis”
set forth in this Proxy Statement.*
The
Compensation Discussion and Analysis discloses the material elements of Norfolk Southern’s executive compensation program.
We are committed to a compensation program that is designed to align executives’ compensation with Norfolk Southern’s
overall business strategies, attract and retain highly qualified executives, and provide incentives that drive shareholder value.
The Compensation Discussion and Analysis describes how our
decisions
regarding Norfolk Southern’s executive compensation program for 2019 implemented these design elements.
In
reliance on the review and discussions with management referred to above, we recommended to the Board that the Compensation Discussion
and Analysis be included in Norfolk Southern’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019, and
this Proxy Statement.
MEMBERS
OF THE COMPENSATION COMMITTEE
Daniel
A. Carp, Chair
Thomas D. Bell, Jr.
Mitchell E. Daniels, Jr.
Steven F. Leer
Claude
Mongeau
Jennifer F. Scanlon
* | John
C. Huffard, Jr. was appointed to the Compensation Committee on February 21, 2020, upon
his election to the Board, and he did not participate in the Committee’s deliberations
regarding the Compensation Discussion and Analysis. |
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Compensation
Discussion and Analysis
This
Compensation Discussion and Analysis describes the objectives, governance, and policies that guide our executive compensation
program, the compensation components that made up that program during 2019, and the performance goals and results.
Executive
Summary
Our
2019 Executive Compensation Program
The
following chart summarizes the key characteristics and performance metrics that apply to the compensation program for our Named
Executive Officers for 2019:
Element |
Form |
Key
Characteristics & Performance Metrics |
Base
Salary |
Fixed
Cash |
·
Reviewed annually and periodically adjusted
based on market data, individual performance and experience, changes in position or duties, or other circumstances |
Annual
Incentive |
Performance-
Based Cash |
·
Designed to compensate executives based
on achievement of annual corporate performance goals
·
Performance metrics chosen to encourage
employees to do all they can individually and as a team to increase revenue, reduce expenses, and improve operating performance
Performance
metrics for 2019:
|
Long-Term
Incentive Awards |
Performance
Share Units
(60%) |
·
Performance metric chosen to promote efficient
utilization of corporate assets and enhancement of shareholder value
·
The performance metric is return on average
invested capital, with total shareholder return versus publicly-traded North American Class I railroads as a modifier
that may reduce or increase payout (if any) by up to 25%
· Vest at the end of a 3-year period if performance
goal is achieved |
Restricted
Stock Units
(25% CEO,
30% Other
NEOs) |
·
Serve as a retention tool for valued members
of management
·
Vest ratably in 4 installments beginning
on the 1st anniversary of the date of grant |
Stock
Options
(15% CEO,
10% Other
NEOs) |
·
Provide the ability to retain key employees
and at the same time increase shareholder value
·
Vest on the 4th anniversary of the date
of grant |
2019
Compensation Alignment
At
Norfolk Southern, our Compensation Committee aligns compensation to performance by emphasizing performance- based compensation
components. These components include an annual cash incentive, long-term performance share units with a three-year cycle, and
stock options.
In
February 2019, Norfolk Southern announced its three-year strategic plan focused on increased productivity, efficiency, and
revenue growth. Under the strategic plan, Norfolk Southern’s goal is to achieve an operating ratio of 60 percent by
2021 (including a full year operating ratio improvement in 2019 of at least 100 basis points on our 2018 operating ratio of
65.4 percent), revenue growth at a compound annual rate of 5 percent through 2021, focused capital expenditures between 16
percent and 18 percent of revenues through 2021, and significant return of capital to shareholders through a dividend payout
ratio of 33 percent and continuance of share repurchases using free cash flow and borrowing capacity. Norfolk Southern is
intensely focused on executing these initiatives to drive long-term shareholder value.
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As
described in the “Business Highlights” beginning on page 6, implementation of Norfolk Southern’s three-year
strategic plan quickly produced results in 2019, including a record operating ratio of 64.7 percent for the year and diluted earnings
per share of $10.25 as compared with $9.51 for 2018. The 2019 operating ratio was a 70 basis point improvement over the prior
year’s record, and 2019 diluted earnings per share was an 8 percent improvement over 2018.
In
2019, we reinvested $2 billion in the Corporation through our capital spending and replacement program, while paying $949
million in dividends and repurchasing just over $2 billion of the Corporation’s stock. Annual revenues decreased by 1%
in 2019 due to a 5% decrease in total volume, which was partially mitigated by an increase in revenue per unit.
The Committee is committed to tying
executives’ annual and long-term incentive compensation to Norfolk Southern’s performance and strategic plan goals.
Annual
Incentive. Norfolk Southern did not meet the challenging 2019 target goals for operating income and operating ratio, resulting
in a payout of 48.5% of the annual incentive opportunity for the Named Executive Officers.
Performance
Share Units. Our Named Executive Officers earned 87.5% of performance share units for the three- year cycle ending in 2019,
based on equally weighted goals for total shareholder return (TSR) and after-tax return on average invested capital (ROAIC). We
achieved an above-target earnout based on a 75% payout for TSR for the three-year cycle, and a payout of 100% for the ROAIC portion
of the award.
Leading
Compensation Governance Practices
Embedded
in our overall executive compensation program are features that reflect leading governance principles and demonstrate our commitment
to best practices in executive compensation:
At
Norfolk Southern, We Do | |
At
Norfolk Southern, We Do Not Do |
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Key
2019 Compensation Decisions
As
the Compensation Committee continues its focus on aligning executives’ compensation with Norfolk Southern’s strategic
plan goals and overall business strategies, attracting and retaining highly qualified executives, and providing incentives that
drive shareholder value, the Committee made the following key decisions with respect to executive compensation for 2019:
· | Established
Challenging 2019 Annual Incentive Performance Targets Aligned to Our Strategic Plan Goals.
The Committee selected operating income and operating ratio as performance measures
for the 2019 annual incentive, as these measures reflect the Corporation’s financial
profitability and operational efficiency. The Committee chose not to include the composite
service measure, a railroad network performance measure, as a component in the annual
incentive for 2019; rather, the Committee decided that the primary focus of the executives
should be on operating income growth and operating ratio improvement, and that the railroad’s
operating performance would be incorporated in these two performance measures. |
In
January 2019, the Committee set challenging financial and operating targets consistent with the 2019 goals established under the
Corporation’s three-year strategic plan which, if met, would have produced a 67% annual incentive payout. In establishing
performance targets for operating income and operating ratio for 2019, the Committee considered:
| · | Norfolk
Southern’s forecasted business environment; |
| · | Norfolk
Southern’s continued focus on service; and |
| · | goals
of the three-year strategic plan. |
Given
Norfolk Southern’s strong financial results for operating income and operating ratio in 2018, the Committee’s expectations
of improving profitability, growth, productivity, service, and efficiency, and in consideration of the goals of the strategic
plan, the Committee in 2019:
| · | increased
the performance necessary to achieve the threshold, target, and maximum payout levels
for operating income and operating ratio; |
| · | established
Norfolk Southern’s 2018 results as the threshold to earn a minimum payout on either
the operating income or operating ratio measure; and |
| · | increased
the payout that would be made upon achievement of the threshold level for operating income.
Against these challenging performance measures, Norfolk Southern achieved a 48.5% payout
of its 2019 annual incentive, which was below the 67% target payout. |
· | Established
Compensation for CEO that is 71% Performance-Based. The Committee established
Mr. Squires’ 2019 compensation, which provided 74% of his targeted compensation
in the form of equity-based awards that are aligned with shareholder interests, and 71%
as performance-based compensation. |
· | Granted
Long-Term Incentive Awards that are Performance-Based. The Committee continued
to grant annual long- term incentive awards, the majority of which consist of performance
share units and of stock options whose ultimate value is based on shareholder return
and which may not have any value at the end of the vesting period. The value of these
long-term incentives is closely tied to delivery of results under the Corporation’s
three-year strategic plan, and the Committee increased the percentage of total compensation
granted as long-term incentive awards for each of the Named Executive Officers in 2019
as compared with 2018. |
· | Granted
Inducement Awards to CFO. The Committee determined it was in the best interest
of the Corporation to provide a new-hire equity grant to Mr. George to serve as an inducement
for him to join Norfolk Southern as the Corporation’s Chief Financial Officer in
2019. This equity award created immediate alignment with shareholder interests, and incentivized
Mr. George as part of our leadership team to drive long-term value creation. In addition,
the Committee provided Mr. George with a cash signing bonus, in part to replace compensation
opportunities he forfeited by leaving his former employer. The amounts and terms of these
compensation arrangements were deemed necessary by the Committee to recruit the best
executive in a competitive market for talent. |
Our
2019 Named Executive Officers
Name |
Position |
James A. Squires |
Chairman, President and Chief Executive Officer |
Mark R. George |
Executive Vice President Finance and Chief Financial Officer |
John M. Scheib |
Executive Vice President and Chief Strategy Officer |
Alan H. Shaw |
Executive Vice President and Chief Marketing Officer |
Michael J. Wheeler |
Executive Vice President and Chief Operating Officer |
Cynthia
C. Earhart |
Former Executive Vice President Finance and Chief Financial Officer |
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Objectives
of Compensation Program
Norfolk
Southern’s executive compensation program is primarily designed to:
· | Align
executives’ compensation with overall business strategies. |
· | Provide
incentives that drive shareholder value. |
· | Attract
and retain highly qualified executives. |
Compensation
Governance
The
Compensation Committee works closely with its independent compensation consultant throughout the year to develop the executive
compensation program and to align pay with performance and with pay at comparable companies. While the Compensation Committee
discusses current and proposed compensation structures with management, the Committee acts independently of management and has
the full authority to retain any advisors it deems appropriate to assist it in making these decisions.
Role
of Independent Compensation Consultant
The
Committee engaged an independent compensation consultant, Pay Governance LLC, to provide executive compensation consulting services
during 2019. Pay Governance does not provide services to Norfolk Southern other than those provided at the request of the Committee.
At
the Committee’s request, Pay Governance compiled compensation data for the peer group selected by the Committee. Pay Governance
also provided requested reports and information to the Committee, including at the Committee’s request, recommendations
regarding individual pay and compensation program design. Pay Governance attended Committee meetings as requested by the Committee.
The Committee used the information provided by Pay Governance, and considers Pay Governance’s analysis and recommendations,
as a starting point for its compensation decisions.
More
specifically, in 2019, Pay Governance:
· | conducted
a market pay assessment of Norfolk Southern’s compensation levels relative to both
the competitive market and Norfolk Southern’s compensation philosophy, including
identifying and reviewing available market benchmark positions and pay data; |
· | assisted
Norfolk Southern with the development of long-term incentive grant guidelines for the
officer and management groups, based on Pay Governance’s competitive pay assessment; |
· | reviewed
emerging trends and issues in executive compensation with the Committee and discussed
the implications for Norfolk Southern; and |
· | provided
an analysis of the difficulty of achieving the threshold, target, and maximum performance
goals for the annual incentive and the performance share units, and of the current plans’
effectiveness in driving achievement of threshold, target, and maximum payouts. |
For
2019 and 2020, following a review of its records and policies, Pay Governance provided the Compensation Committee with a report
regarding its conformance with independence factors under applicable SEC rules and the listing standards of the NYSE. The Committee
considered the independence factors and determined that Pay Governance is independent and free from potential conflicts of interest.
Performance
Reviews
The
Committee annually reviews the performance of the Chief Executive Officer and considers this performance when establishing his
compensation package. The Committee also reviews the performance of the other Named Executive Officers with the assistance of
the Chief Executive Officer, and considers both its own assessment of the executives’ performance and the assessment of
the CEO in establishing a compensation package for the other Named Executive Officers.
Committee
Consideration of Management Recommendations
Management
does not make recommendations on the compensation of the Chief Executive Officer. Pay Governance makes recommendations to the
Committee on any adjustments to compensation for the Chief Executive Officer, and the Chief Executive Officer is not present when
the Committee makes decisions on his compensation package.
The
Chief Executive Officer provided recommendations to the Compensation Committee on any adjustments to compensation for the Named
Executive Officers, other than the Chief Executive Officer. Such adjustments were based on each individual’s performance,
level of responsibility, time in position, and internal pay equity.
In
addition to individual adjustments, the Chief Executive Officer provided recommendations to the Committee on adjustments to compensation
to address retention needs, performance goals, market pay equity, overall corporate performance, and general economic conditions.
While the Committee considers the recommendations of management in these areas, it makes compensation decisions independently
after considering Pay Governance’s recommendations.
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Consideration
of Shareholder Advisory Vote on Compensation and Shareholder Engagement
At
Norfolk Southern’s 2019 Annual Meeting of Shareholders, approximately 94% of the votes cast supported the advisory
resolution on the compensation of our Named Executive Officers. The Committee compared the results of the advisory vote to
its peer group average results and the average results amongst the S&P 500 companies. The Committee viewed the results of
the advisory vote as demonstrating broad shareholder support for our current executive compensation program. Given the
results of the shareholder advisory vote and the Committee’s ongoing review of Norfolk Southern’s compensation
programs, the Committee believes that our existing compensation program effectively aligns the interests of the Named
Executive Officers with Norfolk Southern’s long-term goals. While the shareholder vote on compensation is advisory in
nature, the Board and Compensation Committee carefully consider the results of any such vote in future compensation
decisions.
Norfolk
Southern engages in a shareholder outreach program with our institutional investors to solicit feedback concerning our executive
compensation program, and this shareholder feedback is reported to the Committee and the Board for consideration. This process
allows shareholders to provide input to the Compensation Committee on our executive compensation program and disclosure beyond
the annual advisory vote on compensation. In response to specific concerns expressed by shareholders during these discussions,
the Committee has taken several actions over the past years to enhance the design of our executive compensation program.
Compensation
Policies
In
setting compensation for the Named Executive Officers, our Compensation Committee considers:
· | each
officer’s performance, experience, qualifications, responsibilities, and tenure; |
· | current
and historical salary levels, targeted annual incentive opportunities, and long-term
incentive awards; |
· | expected
corporate performance and general economic conditions; |
· | general
industry compensation survey data; and |
· | comparative
market data, provided by the independent compensation consultant, for other North American
Class I railroads, as a guideline. The Committee considers total direct compensation
(salary plus target annual incentive plus the expected value of long-term incentive awards)
relative to the 50th percentile for the Chief Executive Officer and the other Named Executive
Officers as compared to the peer group. |
The
Committee does not consider amounts realized from prior performance-based or stock-based compensation awards when setting the
current year’s target total direct compensation, regardless of whether such realized amounts may have resulted in a higher
or lower payout than targeted in prior years. Since the nature and purpose of performance-based and stock-based compensation is
to tie executives’ compensation to future performance, the Committee believes that considering amounts realized from prior
compensation awards in making current compensation decisions is inconsistent with this purpose.
Peer
Group
Our
Compensation Committee monitors the continuing appropriateness of its selection of the peer group companies. The Committee believes
its focus should be on ensuring the peer group includes the other North American Class I railroads or their holding companies
(“Class I railroads”) because Norfolk Southern is primarily in competition with those companies for key executive
talent. As a result, the Committee determined that reference to the pay levels at the other Class I railroads was the most relevant
comparator for the Named Executive Officers. The Class I railroads that make up the peer group companies for 2019 (“Peer
Group Companies”) are: BNSF Railway Company, Canadian National Railway Company, Canadian Pacific Railway Limited, CSX Corporation,
Kansas City Southern, and Union Pacific Corporation.
Our
Committee applies its executive compensation policies consistently to all Named Executive Officers, and the application of these
policies produces differing amounts of compensation for each officer based on his or her responsibilities and tenure as compared
to the compensation set for comparable positions by the Peer Group Companies. In setting the Chief Executive Officer’s compensation,
the Committee strives to balance comparative market data for chief executive officers of Peer Group Companies with its goal to
provide incentive opportunities that are significantly performance-based and thus designed to drive shareholder value. Because
the Chief Executive Officer’s job carries the highest level of responsibility and has the greatest ability to drive shareholder
value, his total compensation contains a higher performance-based component than that of the other Named Executive Officers.
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Compensation
Components
Overview
Our
Compensation Committee has designed a balanced compensation program that provides our Named Executive Officers with an appropriate
base salary along with competitive annual and long-term incentive compensation. The program directly links executives’ compensation
to Norfolk Southern’s strategic goals and financial performance, and thus aligns their interests with those of our shareholders.
Norfolk Southern’s total compensation for its Named Executive Officers is weighted heavily toward performance-based incentive
compensation, rather than base salary, so that a substantial portion of targeted executive compensation aligns with shareholder
interests.
2019
CEO Target Total Compensation Mix
2019
Average Target Total Compensation Mix for Other NEOs*
* | Average
for Mr. Scheib, Mr. Shaw and Mr. Wheeler. Ms. Earhart is omitted from this table because
she retired effective November 1, 2019. Also omitted from this table is Mr. George, who
joined the Corporation on November 1, 2019. As described further in the Summary Compensation
Table and in the Form 8-K filed on August 28, 2019, Mr. George was granted a signing
bonus and inducement equity award effective upon his hire, which awards are distinct
from the annual compensation components the Compensation Committee granted to our Named
Executive Officers. |
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In
setting executives’ total direct compensation and the compensation component mix, the Committee considers the advice
of its independent compensation consultant and then makes its own judgments to determine appropriate compensation levels and
mix. The Committee considers each executive’s performance, responsibilities, time in position, and internal pay equity.
In addition, the Committee uses market data of the Peer Group Companies when available as a reference point for determining
the appropriate compensation, considering where the expected total direct compensation for the upcoming year falls relative
to the 50th percentile for the Chief Executive Officer and the other Named Executive Officers. In making its final
determinations, the Committee generally considers comparable market data, tenure, and internal pay equity.
After
considering the available market data and other considerations, at the beginning of 2019, the Committee increased the total direct
compensation targets for each of the Named Executive Officers employed at that time, to position each officer’s compensation
at a competitive range around the median compensation as compared with comparable positions at the Peer Group Companies. In August
2019, the Committee established the total direct compensation target for Mr. George, which became effective upon his joining the
Corporation on November 1, 2019.
For
2019, the portion of total direct compensation awarded as total cash compensation versus long-term incentive compensation for
the continuing NEOs was approximately:*
* | Omitted
from this table is Ms. Earhart, who retired effective November 1, 2019, and Mr. George,
who joined the Corporation on that date. |
Our
Committee further considers the portion of total direct compensation to be awarded as long-term compensation and how the
long-term portion should be allocated among performance share units, restricted stock units, and stock options. This
allocation is based on general market practices, compensation trends, governance practices, and business issues facing
Norfolk Southern. In making this determination, the Committee takes into account the potential dilutive effect of stock-based
awards, including guidance on these measures from proxy advisory services, and further considers the purpose behind each
element of long-term compensation and how the allocation among these elements will support its overall compensation
objectives. For 2019, the Committee maintained the same percentage allocation of long-term incentive awards as granted in
2018.
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Salaries
The
Board establishes competitive base salaries for our executive officers to attract and retain key executive talent. Our Compensation
Committee reviews the Named Executive Officers’ base salaries annually and periodically makes recommendations to Norfolk
Southern’s Board of Directors to adjust salaries based on market data, individual performance and experience, changes in
position or responsibilities, or for other circumstances.
After
the Committee’s annual salary review in January 2019, the Committee recommended an increase in Mr. Scheib’s
salary, and the Board approved this increase. The Committee did not recommend any adjustments to Mr. Squires’, Ms.
Earhart’s, Mr. Shaw’s or Mr. Wheeler’s salaries for 2019, as the Committee determined that those salaries
were appropriate based on comparisons for total direct compensation among peers at the Peer Group Companies.
In
August 2019, the Committee recommended a salary to become effective upon the November 2019 hire of Mr. George as Executive Vice
President Finance and Chief Financial Officer, and the Board approved this salary.
Annual
Incentive
Each
of our Named Executive Officers participates in Norfolk Southern’s Executive Management Incentive Plan (“EMIP”),
which is designed to compensate executives based on achievement of annual corporate performance goals. Each year, the Compensation
Committee establishes a maximum opportunity for each Named Executive Officer at the level of Executive Vice President or above.
The opportunity is determined using relevant market data and internal pay equity, and is expressed as a percentage of base salary:
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|
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|
|
|
|
Corporate
Performance
Payout
Percentage
Earned |
|
= |
|
Individual Payout
($) |
|
Annual Base Salary
($) |
|
X |
|
|
Maximum
Opportunity |
|
– |
|
Committee’s Discretionary Adjustment |
|
|
X |
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For
2019, the Committee established annual incentive opportunities of 225% of base salary for the Chief Executive Officer and 135%
for the Executive Vice President level. The Committee then established performance levels, including at the threshold, target
and maximum performance levels as shown below. The Committee established goals to produce an overall 67% targeted corporate performance
payout which, if met, would result in annual incentive payouts equal to the following percentages of each officer’s salary:
Position |
Annual
Incentive
Opportunity |
|
Target
Performance
Level |
|
Percent
of Salary Paid
as Annual Incentive at
Target Performance |
Chief
Executive Officer |
225% |
x |
67% |
= |
151% |
Executive
Vice President |
135% |
x |
67% |
= |
90% |
The
Committee may reduce the annual incentive paid to any executive based on performance. For 2019, the Committee did not make any
adjustments to the annual incentive payout based on individual performance, and approved payouts to Mr. Squires based on a 225%
opportunity and to the Executive Vice Presidents based on a 135% opportunity. The annual incentive amounts paid for 2019 and reported
as “Non-Equity Incentive Plan Compensation” in the Summary Compensation Table apply these opportunities in the formula
described above.
Under
EMIP, each participant has an opportunity to earn an annual incentive that is determined by Norfolk Southern’s performance
relative to goals established by the Committee. In 2019, the Committee established goals for operating income and operating ratio,
weighted 60% and 40%, respectively. Approximately 20% of the Corporation’s non- union workforce had an opportunity to earn
an annual incentive in 2019 based on the achievement of the same annual corporate performance goals that the Committee established
under EMIP.
The
Committee selected operating income, consisting of operating revenue less the sum of operating expenses, as the metric for
the Corporation’s financial profitability. Operating ratio, or operating expenses as a percentage of revenue, is the
metric for operational efficiency. The Committee revised its practice from prior years and did not include the composite
service measure, a railroad network performance measure, as a component in the annual incentive for 2019. The new strategic
plan incorporated the principles of Precision Scheduled Railroading, or PSR, and the composite service measure was based on
the pre-PSR railroad operations. In particular, the composite service measure did not necessarily reflect whether the
Corporation was efficiently using its assets. As such, the Committee believes that the results of railroad’s operating
performance, including the railroad’s service, is best reflected in the two performance measures of operating income
and operating ratio, and that the primary focus of the executives should be on operating income growth and operating ratio
improvement. The portions of the annual incentive based on operating income and operating ratio each vest independently, so
it is possible to earn an annual incentive by achieving the threshold on only one of these metrics. The Committee selected
these metrics for 2019 because it believed that use of such metrics encourages employees to do all they can individually and
as a team to increase revenue, improve efficiency and reduce expenses.
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The
Committee sets performance levels required to achieve a target payout at the 67% corporate performance level at levels
considered challenging with a reasonable likelihood of being achieved and that represent strong levels of performance based
on Norfolk Southern’s overall business outlook, general economic conditions expected during the performance year, and
long-term strategic plan. The Committee established the maximum annual incentive opportunity at a level so that the full
amount would be earned only if actual performance far exceeded forecasted performance. Performance levels for the operating
ratio and operating income metrics are established based on the annual financial plan established at the beginning of the
year, and were tied to the Corporation’s 2019 goals under the three-year strategic plan announced in February
2019.
For
2019, the Committee set the following threshold, target, and maximum payouts for each of the corporate performance payout metrics
for the annual incentive:
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If Norfolk Southern achieved only one of each threshold performance measure listed below, then a threshold payout of: |
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If Norfolk Southern achieved the target or maximum performance measures listed below, then a payout of: |
|
Operating Income |
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|
Threshold |
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Target |
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Maximum |
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Outcome |
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$3.959 |
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|
$4.371 |
|
≥
$4.846 |
|
|
Corporate Performance Payout Percentage |
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12% |
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67% |
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150% |
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or |
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and |
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and |
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Operating Ratio |
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Threshold |
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Target |
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Maximum |
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|
Outcome |
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|
65.4% |
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|
63.4% |
|
≤ 61.8% |
|
|
Corporate Performance Payout Percentage |
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|
|
8% |
|
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67% |
|
150% |
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Overall,
the Committee established the following threshold, target, and maximum payouts for the annual incentive which would be multiplied
by the executive’s annual incentive opportunity shown on the previous page:
|
|
If Norfolk Southern achieved threshold performance for only the
operating ratio measure, then a threshold payout of: |
|
If Norfolk Southern achieved the target
for each of the performance measures listed above, then a payout of: |
|
If
Norfolk Southern achieved the maximum for each of the performance measures listed above, then a payout of: |
Overall Result |
|
|
Threshold |
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|
Target |
|
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|
Maximum |
|
Corporate Performance Payout Percentage |
|
|
8% |
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67% |
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150% |
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The
dollar amounts corresponding to the above-listed threshold, target, and maximum opportunities for each of the Named Executive
Officers can be found under Grants of Plan-Based Awards on page 49.
For
each of the performance metrics, the Committee sets performance levels and resulting payouts at intervals between the
threshold, target, and maximum. When the Committee met in January 2019 and established the performance metrics for the annual
incentive, the Committee considered Norfolk Southern’s forecasted business environment, Norfolk Southern’s
continued focus on service, and the goals of the three-year strategic plan. As a result, the Committee increased the
performance necessary to achieve the threshold, target, and maximum payout levels for operating income and operating ratio as
compared with 2018, and established a threshold level for these metrics equal to 2018 performance. The Committee increased
the payout that would be made upon achievement of the threshold for operating income as compared with 2018 in light of the
significant performance required to achieve a payout at the threshold level for operating income. The Committee maintained a
maximum payout for operating income and operating ratio at the 150% earnout level so as to incent achievement of the
strategic plan goals.
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The
final percentage for the annual incentive is calculated using a weighted average of the payouts for each
performance metric as illustrated below:
|
Operating Income (billions) 60% |
|
Operating Ratio 40% |
|
OI |
|
Payout |
|
OR |
|
Payout |
|
$ 4.846 |
|
150% |
|
61.8% |
|
150% |
|
$ 4.760 |
|
120% |
|
62.2% |
|
125% |
|
$ 4.651 |
|
100% |
|
62.6% |
|
100% |
|
$ 4.511 |
|
82% |
|
62.9% |
|
80% |
|
$ 4.371 |
|
67% |
|
63.4% |
|
67% |
|
$ 4.019 |
|
52% |
|
65.0% |
|
52% |
|
$ 3.959 |
|
20% |
|
65.4% |
|
20% |
|
<$ 3.959 |
|
0% |
|
>65.4% |
|
0% |
Actual
results for the year were applied to each schedule to determine the earned 2019 award, as detailed below:
Performance
Metric |
Performance |
%
of Award Earned |
Component
Weighting |
Subtotal |
Operating
Income (billions) |
$3.989 |
40.5% |
60% |
24.3% |
Operating
Ratio |
64.7% |
60.5% |
40% |
24.2% |
Total
(rounded) |
|
|
|
48.5% |
Annual
incentive award targets and payout ranges for 2019, as well as the actual annual incentive award payouts for each of the Named
Executive Officers for 2019, are:
Named
Executive Officer |
67%
Target Incentive |
Range
of Potential
Payouts |
Award
Actually
Earned |
James
A. Squires |
$ |
1,658,250 |
$ |
0 - $3,712,500 |
$ |
1,200,375 |
Mark
R. George |
$ |
90,450 |
$ |
0 - $ 202,500 |
$ |
65,475 |
Each
of Messrs. Scheib, Shaw, and Wheeler |
$ |
542,700 |
$ |
0 - $1,215,000 |
$ |
392,850 |
Cynthia
C. Earhart |
$ |
452,250 |
$ |
0 - $1,012,500 |
$ |
327,375 |
Under
the terms of the Executive Management Incentive Plan, the annual incentive paid to any individual executive under the plan will
not exceed the lesser of three-tenths of one percent of Norfolk Southern’s income from railway operations for the incentive
year or ten million dollars.
Long-Term
Incentive Awards
Norfolk
Southern believes the most effective means to achieve long-term corporate performance is to align the interests of our Named Executive
Officers with shareholders. The Committee achieves this alignment by granting equity-based awards that are earned based on continued
employment, and at least half of which vest on achievement of predetermined performance goals. The Compensation Committee believes
that the use of long-term incentive compensation for executives reinforces their focus on the importance of returns to shareholders,
promotes achievement of long-term performance goals, and encourages executive retention.
For
2019, the Committee allocated the annual long-term incentive award to the Chief Executive Officer 60% as performance share units,
15% as stock options, and 25% as restricted stock units, and to the other Named Executive Officers 60% as performance share units,
10% as stock options, and 30% as restricted stock units. Executives were required to enter into an agreement not to engage in
competing employment as a condition of receiving the 2019 award.
Performance
Share Units. Norfolk Southern uses performance share units to reward the achievement of performance goals over a three-year
period. Performance share units settle in shares of Norfolk Southern common stock after the Committee certifies the extent to
which the performance goals were attained. At the time of grant, Norfolk Southern uses the estimated grant date fair values of
the performance share unit awards for market comparison purposes.
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For
2019, the Committee established performance goals based directly on ROAIC, with TSR serving as a modifier rather than a stand-alone
metric. The Committee believes ROAIC is an important indicator to shareholders of a capital- intensive company such as Norfolk
Southern. No payout will be made unless the threshold is achieved for the three- year ROAIC metric. The Committee believes that
management has more influence and control over the ROAIC metric than TSR, and therefore increased emphasis on this financial metric.
For the 2019 awards, the Committee determined that if a threshold payout is met for the ROAIC measure, then the payout will be
modified based on Norfolk Southern’s TSR as compared with the shareholder return of the other publicly-traded North American
Class I railroads reflecting the return over the entire three-year period, as follows:
Modifier
for 2019–2021 Performance Share Units |
Ranking
NS 3-Year Total Shareholder Return vs. Class I Railroads |
Performance
Share Unit Multiplier |
1st |
1.250 |
2nd |
1.125 |
3rd
or 4th |
1.000 |
5th |
0.875 |
6th |
0.750 |
Using
TSR as a modifier, rather than a performance measure, reduces the impact of the performance rankings within Norfolk Southern’s
small group of Class I railroad peers on the determination of the units earned, while still ensuring that the final payout is
reflective of the Corporation’s performance relative to its peers. Overall, the Committee believes that the use of the ROAIC
measure, with the TSR modifier, promotes the enhancement of shareholder value and efficient utilization of corporate assets.
The
performance share units will be forfeited if the recipient terminates from employment with the Corporation before October 1 of
the year of grant, except in the case of death or disability.
To
allow shareholders to assess the link between corporate performance and compensation, the Committee is committed to disclosing
in this Compensation Discussion and Analysis the achievements for our performance share units at the end of each performance period.
The Committee believes, however, that disclosing our long-term targets for ROAIC would give substantial insight into the Corporation’s
confidential, forward-looking strategies, and could therefore place the Corporation and its shareholders at a competitive disadvantage.
Completed
2017-2019 Performance Share Unit Cycle: For the 2017-2019 performance cycle, the performance criteria were based on two equally
weighted criteria: ROAIC and TSR. Under the 2017-2019 grant, each half of the performance share units vested independently of
the other half and its respective performance measures. For the 2017-2019 performance cycle, the performance criteria were as
follows:
Performance
Metric |
|
%
of PSUs Earned |
NS
Three-Year Total Shareholder Return (“TSR”) vs. North American |
1st |
100% |
Class
I Railroads |
2nd |
75% |
|
3rd |
50% |
|
4th |
25%* |
|
5th |
0%* |
*Minimum
40% earnout if NS TSR > median S&P 500 TSR for three-year period |
6th |
0%* |
Three-Year
Average After-Tax Return on Average Invested Capital |
≥
11.0% |
100% |
|
10.4% |
75% |
|
9.05% |
25% |
|
<9.0% |
0% |
The
earned award for the 2017-2019 performance cycle was determined as follows:
Performance
Metric |
Performance |
%
of
Award
Earned |
Three-Year
Total Shareholder Return vs. North American Class I Railroads |
2nd |
75% |
Three-Year
Average After-Tax Return on Average Invested Capital |
11.2% |
100% |
Total
(sum of % of Award Earned divided by 2 for one-half weighting of each of the components) |
|
87.5% |
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Executive Compensation | 2020 Annual Meeting and Proxy Statement
Based
on the final earnout of 87.5% for the 2017-2019 performance share units, the Named Executive Officers who were employed in 2017
received the following number of shares of stock of Norfolk Southern Corporation in early 2020, with the earned award reduced
upon distribution as required for tax withholding:
Named
Executive Officer |
Award
Granted (#) |
Target
Award (#) |
Earned
Award (#) |
James
A. Squires |
56,370 |
28,185 |
49,324 |
John
M. Scheib |
2,150 |
1,075 |
1,881 |
Alan
H. Shaw |
12,360 |
6,180 |
10,815 |
Michael
J. Wheeler |
14,090 |
7,045 |
12,329 |
Cynthia
C. Earhart |
9,970 |
4,985 |
8,724 |
Stock
Options. Norfolk Southern believes that use of stock options provides us with the ability to retain key employees and at the
same time increase shareholder value since the value of the options is only realized if our stock price increases from the date
on which the options are granted. For 2019, the Committee maintained a four-year cliff-vesting period to encourage retention of
key employees and awarded dividend equivalent payments on options during the vesting period. The value of the option awarded is
adjusted to recognize the effect of the dividend equivalents.
The
Committee has never issued backdated option grants. Options are priced on the effective date of the grant at the higher of (i)
the closing price or (ii) the average of the high and low price on the effective date of the grant. In addition, the Long-Term
Incentive Plan prohibits repricing of outstanding stock options without the approval of shareholders.
The
Committee grants nonqualified stock options annually at the regularly scheduled January meeting of the Compensation
Committee. Under the terms of the Long-Term Incentive Plan, the effective date of a grant is the date on which the
Compensation Committee makes the grant or, if granted during a blackout period that precedes the release of the
Corporation’s financial information for the prior calendar quarter, the first day on which the Corporation’s
common stock is traded after a full trading day has elapsed following the release of the prior quarter’s financial
information. This establishes a prospective effective date to price the options.
Restricted
Stock Units. Norfolk Southern believes that the use of time-based restricted stock units serves as a retention tool for valued
members of management. For 2019, the Committee granted restricted stock units that vest ratably over four years beginning on the
first anniversary of the date of grant and which settle in shares of Norfolk Southern common stock. The restricted stock units
will be forfeited if the recipient terminates from employment with the Corporation before October 1 of the year of grant, except
in the case of death or disability.
Special
Inducement Grants
The
Committee made certain new hire inducement grants to Mr. George, our new Executive Vice President Finance and Chief
Financial Officer. These cash and equity awards were special one-time inducements, the amounts of which are distinct from the
salary, annual incentive, and regular annual long-term incentive awards described above. As we disclosed in the Form 8-K
filed on August 28, 2019, the Committee approved, and the Board granted Mr. George a $400,000 signing bonus, and the
Committee granted a $1,000,000 inducement equity award effective upon his hire. The equity award compensation mix made to Mr.
George in November 2019 was made in the same proportions of PSUs, RSUs and non-qualified stock options as the equity awards
made to the other Named Executive Awards in January 2019, as shown on page 39, and Mr. George was required to execute a
non-compete agreement to receive those awards. Additional information concerning these awards can be found in the Narrative
to Summary Compensation Table and Grants of Plan-Based Awards Table under the heading “Employment and Other
Agreements.”
Retirement
Plans and Programs
Norfolk
Southern believes that its Retirement Plan and Supplemental Benefit Plan provide it with the ability to retain key employees
over a longer period. Our officers, including our Named Executive Officers, participate in the Retirement Plan, a
tax-qualified defined benefit pension plan that is generally provided to all our employees who are not subject to a
collective bargaining agreement. The Retirement Plan provides a benefit based on age, service, and a percentage of final
average compensation. Norfolk Southern also sponsors the Supplemental Benefit Plan, a non-qualified plan that restores the
retirement benefit for amounts in excess of the Internal Revenue Code limitations for tax-qualified retirement plans, and
provides a retirement benefit for salary or annual incentive that is deferred under Norfolk Southern’s deferred
compensation plans. In addition to supporting the goal to retain key employees, the Committee believes the Supplemental
Benefit Plan maintains internal equity by ensuring that pension benefit levels are based on relative compensation levels of
each participant. Further information on the Retirement Plan and Supplemental Benefit Plan may be found in the Narrative to
Pension Benefits Table.
Norfolk
Southern maintains the Executives’ Deferred Compensation Plan (the “EDCP”) for the benefit of the Named Executive
Officers and certain other employees. The purpose of the EDCP is to provide executives with the opportunity to defer compensation,
as adjusted for earnings or losses, until retirement or another specified date or event. We do not make any company or matching
contributions to the EDCP. Further information on the EDCP may be found in the Narrative to Nonqualified Deferred Compensation
Table.
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Executive Compensation | 2020 Annual Meeting and Proxy Statement
Other
Benefits and Perquisites
Norfolk
Southern provides the Named Executive Officers with certain health and welfare benefits, relocation program benefits, and a tax-qualified
401(k) plan in the same manner that such benefits have been made available to other salaried employees of the Corporation. However,
an Executive Officer is not eligible for an equity advance against the value of his or her residence, which is a benefit that
is available to all other salaried employees of the Corporation under the Corporation’s relocation program.
The
Named Executive Officers receive limited perquisites that the Compensation Committee believes are necessary to retain Executive
Officers and to enhance their productivity. Our Board of Directors has directed and requires the Chief Executive Officer, and
his family and guests when appropriate, to use Norfolk Southern’s aircraft whenever reasonably possible for air travel.
The Board believes that such use of the corporate aircraft promotes the best interests of Norfolk Southern by generally ensuring
the immediate availability of the Chief Executive Officer and by providing a prompt, efficient means of travel in view of the
need for security in such travel. For the same reasons, our Board of Directors has determined that the Chief Executive Officer
may authorize employees and their guests to use the corporate aircraft for purposes that further the Corporation’s business
interests. Such non-business use by other employees and their guests is infrequent.
Other
perquisites may include executive physicals and certain approved spousal travel. Norfolk Southern does not make tax gross-up payments
on perquisites for the Named Executive Officers employed at the Executive Vice President level or above, except for tax gross-ups
on certain relocation expenses and benefits consistent with our relocation programs for all management employees.
The
Committee reviews perquisites periodically for both appropriateness and effectiveness. However, the value of any perquisites provided
to any of the Named Executive Officers is a limited portion of any officer’s compensation; as such, the Committee does not
consider perquisites in its analysis of the total compensation package granted to the Named Executive Officers.
Norfolk
Southern believes that the benefits and perquisites described above are appropriate to remain competitive compared to other companies
and to promote retention of these officers.
Impact
of the Tax Treatment of Awards on Norfolk Southern’s Compensation Policies
Our
executive compensation program has been carefully considered in light of the applicable tax rules. Section 162(m) of the
Internal Revenue Code generally provides that a publicly held company may not deduct compensation paid to certain of its
executive officers to the extent such compensation exceeds $1 million per executive officer in any year. The Committee
believes that tax-deductibility is but one factor to be considered in fashioning an appropriate compensation package for
executives, and that shareholder interests are best served if the Committee’s discretion and flexibility in awarding
compensation is not restricted to deductible compensation. Therefore, the Committee has approved compensation for executive
officers that was not fully deductible because of Section 162(m), and expects in the future to approve compensation that is
not deductible for income tax purposes. Norfolk Southern reserves and will continue to exercise its discretion in this area
so as to serve the best interests of Norfolk Southern and its shareholders.
Change-in-Control
Agreements
Norfolk
Southern has entered into change-in-control agreements with the Named Executive Officers to provide certain economic
protections to executives in the event of a termination of employment following a change in control of Norfolk Southern. The
change-in-control agreements are intended to keep management intact and focused on the best interests of Norfolk Southern and
its shareholders in pursuing a potential change-in-control transaction, while serving to eliminate potential management
distraction related to the uncertainty of possible job and income loss. The Compensation Committee believes that the
agreements are reasonable and appropriate. Benefits will not be paid under the agreements unless both a change in control
occurs and the executive’s employment is terminated or constructively terminated following the change in control. The
Committee believes this “double trigger” maximizes shareholder value because this structure would prevent an
unintended windfall to management in the event of a change in control that does not result in the termination (or
constructive termination) of employment of management.
A
detailed description of the benefits provided under the change-in-control agreements may be found in the Change-in-Control Agreements
section on page 61.
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Executive Compensation | 2020 Annual Meeting and Proxy Statement
Individual
Agreement for Payment in Connection with Termination
Norfolk
Southern entered into an offer letter with Mr. George that provides certain benefits if Mr. George is terminated without “Cause”
within sixty months following his November 1, 2019 hire date, as we disclosed in the Form 8-K filed on August 28, 2019. The Committee
determined that it was appropriate to include this term in the offer letter to attract Mr. George to join the Corporation as its
Executive Vice President Finance and Chief Financial Officer and leave his prior employment. For a summary of the material terms
of this offer letter, see the discussion in the Narrative to the Summary Compensation Table and the Grants of Plan-Based Awards
Table section of this Proxy Statement, under the heading “Employment and Other Agreements.”
Share
Ownership Guidelines for Officers
Our
Board of Directors has established as part of its Corporate Governance Guidelines the following ownership guidelines for shares
of Norfolk Southern stock for its officers:
Position |
Minimum
Value |
Chairman,
President and Chief Executive Officer |
5
times annual salary |
Executive
Vice Presidents |
3
times annual salary |
Senior
Vice Presidents, Vice Presidents |
1
times annual salary |
Norfolk
Southern common stock, stock equivalents held in Norfolk Southern’s 401(k) plan, and restricted stock units held in our
Long-Term Incentive Plan are counted toward these holdings, but unexercised stock options or unvested performance share units
are not counted. Officers may acquire such holdings over a five-year period. All officers currently meet this guideline or are
expected to meet the guideline within the five-year period.
Please
refer to the Beneficial Ownership of Stock table on page 69 for a summary of the number of common shares owned by our directors
and Named Executive Officers as of March 1, 2020.
All
Executive Officers of Norfolk Southern are required to clear any transaction involving its common stock with Norfolk Southern’s
Corporate Secretary prior to engaging in the transaction, and pledging or hedging transactions will not be approved.
Anti-Pledging/Anti-Hedging
Policy. All of our Executive Officers are prohibited from entering into pledging transactions or positions regarding the Corporation’s
securities.
All
of our officers (including Executive Officers) and directors are prohibited from purchasing any financial instruments (including
prepaid variable forward contracts, equity swaps, collars, exchange funds) that hedge or offset, or are designed to hedge or offset,
any decrease in the market value of the Corporation’s securities, whether granted as part of the officer’s or director’s
compensation or held, directly or indirectly, by the officer or director.
Policies
and Decisions Regarding the Adjustment or Recovery of Awards
While
we do not anticipate there would ever be circumstances where a restatement of earnings upon which incentive plan award
decisions were based would occur, should such an unlikely event take place, the Committee has the discretion to take all
actions necessary to protect the interests of shareholders up to and including actions to recover such incentive awards. The
performance share awards include a clawback provision to permit the recovery of performance share awards following a material
restatement of Norfolk Southern’s financial results. Similarly, the Executive Management Incentive Plan includes a
clawback provision to permit recovery of annual incentives as a result of any material noncompliance with any financial
reporting requirement under the securities laws. The long-term incentive award agreements further provide for forfeiture of
awards, including after retirement, if the recipient engages in certain competing employment, or if it is determined that the
recipient has committed fraud or theft in the course of the recipient’s employment with Norfolk Southern, or if the
recipient discloses certain confidential information. Both the Long-Term Incentive Plan and the Executive Management
Incentive Plan further allow for the reduction, forfeiture, or recoupment of any award as may be required by law.
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Executive
Compensation Tables
Summary
Compensation Table
The following
table shows the total compensation awarded to, earned by, or paid to each Named Executive Officer
during 2019 for service in all capacities to Norfolk Southern and our subsidiaries for the fiscal year ended December 31, 2019.
The table also sets forth information regarding fiscal 2018 and 2017 compensation.
Name
and
Principal Position
(a) |
Year
(b) |
Salary
($)
(c) |
Bonus
($)
(d) |
Stock
Awards
($)
(e) |
Option
Awards
($)
(f) |
Non-Equity
Incentive
Plan
Compensation
($)
(g) |
Change
in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
($)
(h) |
All
Other
Compensation
($)
(i) |
Total
($)
(j) |
James
A. Squires
Chairman, President and
Chief Executive Officer |
2019 |
1,100,000 |
0 |
6,671,681 |
1,177,650 |
1,200,375 |
6,184,152 |
302,816 |
16,636,674 |
2018 |
1,100,000 |
0 |
6,162,974 |
1,087,536 |
2,833,875 |
2,957,616 |
129,984 |
14,271,985 |
2017 |
1,000,000 |
0 |
4,225,099 |
2,275,119 |
2,603,250 |
1,710,708 |
122,961 |
11,937,137 |
Mark
R. George1
Executive Vice President
Finance and Chief Financial
Officer |
2019 |
100,000 |
400,000 |
900,298 |
100,170 |
65,475 |
10,296 |
8,222 |
1,584,461 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John
M. Scheib
Executive Vice President and
Chief Strategy Officer |
2019 |
600,000 |
0 |
1,395,560 |
155,074 |
392,850 |
806,787 |
9,800 |
3,360,071 |
2018 |
475,000 |
0 |
1,125,559 |
125,100 |
724,212 |
200,864 |
7,517 |
2,658,252 |
|
|
|
|
|
|
|
|
|
Alan
H. Shaw
Executive Vice President and
Chief Marketing Officer |
2019 |
600,000 |
0 |
1,395,560 |
155,074 |
392,850 |
2,182,500 |
18,694 |
4,744,678 |
2018 |
600,000 |
0 |
1,304,995 |
145,116 |
927,450 |
929,508 |
19,114 |
3,926,183 |
2017 |
600,000 |
0 |
926,630 |
498,791 |
937,170 |
689,472 |
17,461 |
3,669,524 |
Michael
J. Wheeler
Executive Vice President and
Chief Operating Officer |
2019 |
600,000 |
0 |
1,756,114 |
195,212 |
392,850 |
2,969,436 |
185,015 |
6,098,627 |
2018 |
600,000 |
0 |
1,665,345 |
185,148 |
927,450 |
1,458,696 |
19,527 |
4,856,166 |
2017 |
600,000 |
0 |
1,056,432 |
568,591 |
937,170 |
948,447 |
22,036 |
4,132,676 |
Cynthia
C. Earhart2
Former Executive Vice
President Finance and Chief
Financial Officer |
2019 |
500,000 |
0 |
1,574,219 |
175,142 |
327,375 |
3,543,651 |
88,242 |
6,208,629 |
2018 |
600,000 |
0 |
1,484,432 |
165,132 |
927,450 |
1,310,124 |
20,390 |
4,507,528 |
2017 |
600,000 |
0 |
746,753 |
402,579 |
937,170 |
1,033,920 |
22,103 |
3,742,525 |
1 | Mark
George joined the Corporation on November 1, 2019. |
2 | Cynthia
Earhart retired from the Corporation effective November 1, 2019. |
Salary
(Column (c))
Reflects
salary payable before reduction for elective deferrals to our 401(k) plan, non-qualified deferred compensation plan, or our other
plans.
Bonus
(Column (d))
Reflects
a signing bonus paid to Mr. George upon his hire, as described in the Form 8-K filed on August
28, 2019.
Stock
Awards (Column (e))
The
amounts reported for Stock Awards are the full grant date fair values of the awards computed in accordance with FASB ASC Topic
718 “Compensation - Stock Compensation.” This column includes Performance Share Units and Restricted Stock Units.
For
Performance Share Units, the full grant date fair value is determined consistent with the estimated full accounting cost to be
recognized over the three-year performance period, determined as of the end of the month following the grant date under FASB ASC
Topic 718. For discussions of the relevant assumptions made in calculating these amounts, see note 12 to our consolidated financial
statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019. For the grant date fair value
of only those awards granted to the Named Executive Officers in 2019, see the Grants of Plan-Based Awards Table.
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The
value of the Stock Awards reported in column (e), calculated in accordance with FASB ASC Topic 718 but assuming the highest level
of performance would be achieved is as follows:
Year |
J.
A. Squires |
M.
R. George |
J.
M. Scheib |
A.
H. Shaw |
M.
J. Wheeler |
C.
C. Earhart |
2019 |
$
13,736,544 |
$1,800,446 |
$2,790,853 |
$ 2,790,853 |
$
3,512,176 |
$ 3,148,702 |
2018 |
$ 12,688,069 |
|
$2,250,728 |
$ 2,609,572 |
$ 3,330,950 |
$ 2,968,415 |
2017 |
$
5,818,538 |
|
|
$
1,276,016 |
$
1,454,721 |
$ 1,028,580 |
Option
Awards (Column (f))
The
amounts reported for Option Awards are the full grant date fair values of the awards computed in accordance with FASB ASC Topic
718. For discussions of the relevant assumptions made in calculating these amounts, see note 13 to our consolidated financial
statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019.
Non-Equity
Incentive Plan Compensation (Column (g))
The amounts reported as Non-Equity Incentive Plan Compensation were paid under the
Executive Management Incentive Plan, as more fully described in the Compensation Discussion and Analysis. Amounts reported in
this column were earned in the indicated year, and may have been received on a current basis or deferred in accordance with
our deferred compensation plans.
Change
in Pension Value and Nonqualified Deferred Compensation Earnings (Column (h))
For
all the Named Executive Officers other than Ms. Earhart, the amounts shown in this column solely represent the aggregate increase
in the actuarial present value of the Named Executive Officers’ accumulated benefits under the Retirement Plan and the Supplemental
Benefit Plan for 2019. In accordance with SEC rules, any increase or decrease in the present value of the benefits under our Retirement
Plan is aggregated with any increase or decrease in the present value of the benefits under our Supplemental Benefit Plan.
Pension
values may fluctuate significantly from year to year depending on a number of factors, including age, years of service,
average annual compensation, and the assumptions used to determine the present value, such as the discount rate and mortality
assumptions. For 2019, each of the Named Executive Officers had an increase in the present value of his or her Retirement
Plan and Supplemental Plan benefit as a result from increases in each individual’s years of service, final average
compensation calculation, and age, and from a decrease in the discount rate assumption, that together more than offset
changes in mortality assumptions.
For
Ms. Earhart, in addition to the aggregate increase in the actual present value of her pension benefits, $3,795 shown in this column
is the amount by which 2019 interest accrued on amounts she deferred under the Officers’ Deferred Compensation Plan before
2001 exceeded 120% of the applicable Federal long-term rate provided in Section 1274(d) of the Internal Revenue Code.
All
Other Compensation (Column (i))
The
amounts reported as All Other Compensation for 2019 include: (i) matching contributions to our Thrift and Investment Plan of
$9,800 for each of the Named Executive Officers other than Mr. George, and (ii) premiums paid on individually owned executive
life insurance policies under our Executive Life Insurance Plan as follows: Mr. Squires, $18,516; Mr. Shaw, $8,894; Mr.
Wheeler, $9,183; and Ms. Earhart, $10,022.
Norfolk
Southern has different relocation programs that offer benefits on a uniform basis to similarly situated nonagreement employees
who are required to relocate for their employment. Several of our Named Executive Officers received benefits under these programs
in 2019, and these amounts are further included in the amounts reported as All Other Compensation for 2019:
· | In
connection with Norfolk Southern’s relocation of its corporate headquarters from
Norfolk, Virginia, to Atlanta, Georgia, Mr. Squires and Mr. Wheeler each relocated to
Atlanta in 2019, and each received benefits under the Corporation’s Corporate Consolidation
Relocation Program. Mr. Squires and Mr. Wheeler were each subject to the same relocation
policy as all other employees who relocated in connection with the corporate headquarters
move. The value of allowances, reimbursements, and benefits provided in connection with
relocation was $123,040 for Mr. Squires, and $151,958 for Mr. Wheeler. |
· | Ms.
Earhart elected to receive Norfolk Southern’s Nonagreement Allowance in Lieu of
Relocation Benefits, which the Corporation offers to all similarly situated employees
as an alternative to the Corporate Consolidation Relocation Program. The program provides
certain allowances for up to one year following the date of the employee’s relocation.
The value of allowances and reimbursements provided to Ms. Earhart in connection with
her position transfer from Norfolk to Atlanta was $10,728. |
· | In
connection with his start of employment on November 1, 2019, Mr. George was provided
$6,500 in allowances under Norfolk Southern’s Relocation Program for Experienced
New Hire Employees. |
The
relocation programs provide tax gross-ups that are designed to partially offset the taxes an employee incurs on certain relocation
benefits that are considered ordinary income under federal and state laws, and the amounts reported as All Other Compensation
for 2019 include such tax gross-ups as follows: Mr. Squires, $11,264; Mr. Wheeler, $14,074; and Mr. George, $1,722.
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For
Ms. Earhart, the amount further includes a payment of $57,692 made upon her retirement for unused vacation in accordance with
the Corporation’s Vacation Pay Program.
For
Mr. Squires, the amount further includes his proportional cost of NS-owned life insurance policies used to fund the
Directors’ Charitable Award Program, and perquisites during 2019 of $138,020, consisting of use of corporate aircraft
totaling $134,131, and an executive physical. All perquisites are valued on the basis of aggregate incremental cost to us.
All the Named Executive Officers also participated in the Executive Accident Plan, for which there was no aggregate
incremental cost.
With
regard to personal use of corporate aircraft, aggregate incremental cost is calculated as the weighted-average cost of fuel, aircraft
maintenance, parts and supplies, landing fees, ground services, catering, and crew expenses associated with such use, including
those associated with “deadhead” flights related to such use. Use of corporate aircraft includes use by the Named
Executive Officers as permitted by resolution of the Board of Directors. The aggregate incremental cost for personal use of corporate
aircraft by our Named Executive Officers is allocated entirely to the highest-ranking Named Executive Officer on the flight. Because
corporate aircraft are used primarily for business travel, this calculation excludes fixed costs that do not change based on usage.
Fixed costs include pilot salaries, the purchase or lease costs of the airplane, and the cost of maintenance not related to such
personal travel.
2019
Grants of Plan-Based Awards
Name
(a) |
Grant
Date
(b) |
Committee
Action
Date2 |
Estimated
Future Payouts
Under Non-Equity Incentive
Plan Awards1 |
|
Estimated
Future Payouts
Under Equity Incentive Plan
Awards |
All
Other
Stock
Awards:
Number
of Shares
of Stock
or Units
(#)
(i) |
All
Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)
(j) |
Exercise
or Base
Price of
Option
Awards
($/Sh)
(k) |
Grant
Date Fair
Value of
Stock
and
Option
Awards
($)
(l) |
Threshold
($)
(c) |
Target
($)
(d) |
Maximum
($)
(e) |
|
Threshold
(#)
(f) |
Target
(#)
(g) |
Maximum
(#)
(h) |
James
A. Squires |
1/28/2019 |
1/22/2019 |
198,000 |
1,658,250 |
3,712,500 |
|
|
|
|
|
|
|
|
1/28/2019 |
1/22/2019 |
|
|
|
|
6,653 |
29,570 |
73,925 |
|
|
|
4,709,911 |
1/28/2019 |
1/22/2019 |
|
|
|
|
|
|
|
11,930 |
|
|
1,961,770 |
1/28/2019 |
1/22/2019 |
|
|
|
|
|
|
|
|
25,820 |
165.79 |
1,177,650 |
Mark
R. George |
11/1/2019 |
8/27/2019 |
10,800 |
90,450 |
202,500 |
|
|
|
|
|
|
|
|
11/1/2019 |
8/27/2019 |
|
|
|
|
763 |
3,390 |
8,475 |
|
|
|
600,097 |
11/1/2019 |
8/27/2019 |
|
|
|
|
|
|
|
1,610 |
|
|
300,201 |
11/1/2019 |
8/27/2019 |
|
|
|
|
|
|
|
|
2,250 |
189.92 |
100,170 |
John
M. Scheib |
1/28/2019 |
1/22/2019 |
64,800 |
542,700 |
1,215,000 |
|
|
|
|
|
|
|
|
1/28/2019 |
1/22/2019 |
|
|
|
|
1,314 |
5,840 |
14,600 |
|
|
|
930,195 |
1/28/2019 |
1/22/2019 |
|
|
|
|
|
|
|
2,830 |
|
|
465,365 |
1/28/2019 |
1/22/2019 |
|
|
|
|
|
|
|
|
3,400 |
165.79 |
155,074 |
Alan
H. Shaw |
1/28/2019 |
1/22/2019 |
64,800 |
542,700 |
1,215,000 |
|
|
|
|
|
|
|
|
1/28/2019 |
1/22/2019 |
|
|
|
|
1,314 |
5,840 |
14,600 |
|
|
|
930,195 |
1/28/2019 |
1/22/2019 |
|
|
|
|
|
|
|
2,830 |
|
|
465,365 |
1/28/2019 |
1/22/2019 |
|
|
|
|
|
|
|
|
3,400 |
165.79 |
155,074 |
Michael
J. Wheeler |
1/28/2019 |
1/22/2019 |
64,800 |
542,700 |
1,215,000 |
|
|
|
|
|
|
|
|
1/28/2019 |
1/22/2019 |
|
|
|
|
1,654 |
7,350 |
18,375 |
|
|
|
1,170,708 |
1/28/2019 |
1/22/2019 |
|
|
|
|
|
|
|
3,560 |
|
|
585,406 |
1/28/2019 |
1/22/2019 |
|
|
|
|
|
|
|
|
4,280 |
165.79 |
195,212 |
Cynthia
C. Earhart |
1/28/2019 |
1/22/2019 |
64,800 |
542,700 |
1,215,000 |
|
|
|
|
|
|
|
|
1/28/2019 |
1/22/2019 |
|
|
|
|
1,483 |
6,590 |
16,475 |
|
|
|
1,049,655 |
1/28/2019 |
1/22/2019 |
|
|
|
|
|
|
|
3,190 |
|
|
524,564 |
1/28/2019 |
1/22/2019 |
|
|
|
|
|
|
|
|
3,840 |
165.79 |
175,142 |
1 | The
amounts shown represent the full-year threshold, target, and maximum opportunity payable
for the annual incentive under the EMIP, as determined at the time that the Compensation
Committee made the awards. Because Ms. Earhart retired during the year, she was eligible
only for a prorated award. As a result of Ms. Earhart’s retirement effective November
1, 2019,
her threshold, target and maximum prorated awards were $54,000, $452,250, and $1,012,500, respectively. The amount actually paid
as an annual incentive under the EMIP is reported in the Non-Equity Incentive Plan Compensation (column (g)) of the Summary Compensation
Table. |
2 | Consistent
with past practice and the terms of LTIP, the Committee made all January 2019 equity
awards to directors and executive officers effective on the day after a full trading
day had elapsed following the release of our fiscal year financial results. Because the
Committee meetings at which these awards were made occurred prior to the effective date
of the awards, we have provided both dates in accordance with SEC rules. See our “Compensation
Discussion and Analysis” section for further discussion of our equity award grant
practices. |
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Estimated
Future Payouts Under Non-Equity Incentive Plan Awards (EMIP) (Columns (c), (d), and (e))
These awards were made pursuant to
our Executive Management Incentive Plan (“EMIP”) and had the potential to be earned upon the achievement of
certain performance goals established by the Committee for the fiscal year ended December 31, 2019. For a discussion of the
performance goals established by the Committee, see page 41 of our “Compensation Discussion and Analysis”
section. The Committee targeted a payout of 67% in 2019 in setting the annual performance goals for EMIP incentive awards,
and using an annual incentive opportunity equal to 225% of salary for the Chief Executive Officer and 135% of salary for an
Executive Vice President. Consequently, the target amounts in column (d) assume that the Named Executive Officers earned 67%
of the potential EMIP awards that they could have earned using these annual incentive opportunities. The threshold amounts in
column (c) assume that the Named Executive Officers earned the minimum EMIP awards based on performance required to trigger
any level of payment; if performance fell below performance goals required to earn the threshold amount, they would not have
been entitled to any EMIP awards. The Named Executive Officers earned 48.5% of these EMIP awards based on our performance
during 2019. These annual incentive amounts are also included under “Non-Equity Incentive Compensation” in the
Summary Compensation Table.
Estimated
Future Payouts Under Equity Incentive Plan Awards (PSUs) (Columns (f), (g), and (h))
These amounts represent grants of
performance share units made pursuant to our Long-Term Incentive Plan (“LTIP”). These performance share units
will be earned over the performance cycle ending December 31, 2021. For a discussion of the other material terms of these
awards, see the narrative discussion which follows this table. LTIP does not provide a performance target for earning
performance share units under this feature of the plan; however, the Committee targeted a payout of 100% in setting the
performance goals for performance share unit awards. Consequently, the target amounts in column (g) assume that the Named
Executive Officers will earn 100% of the maximum potential number of performance share units that can be earned under the
awards. The threshold amounts in column (f) assume that the Named Executive Officers will earn the minimum number of
performance share units based on performance required to trigger any level of payment; if the Corporation’s performance
fell below performance goals required to earn the threshold amount, they would not receive any performance share
units.
All
Other Stock Awards (RSUs) (Column (i))
These amounts represent grants of restricted stock units made under LTIP. For a
discussion of the material terms of these restricted stock unit awards, see the narrative discussion which follows this
table.
All
Other Option Awards (Stock Options) (Columns (j) and (k))
These non-qualified stock options are exercisable as of January 28,
2023. The Committee granted these options at an exercise price equal to the higher of the closing market price or the average
of the high and low prices of our common stock on the effective date of the grant. The closing price for both the January 28,
2019 grant of stock options for the Named Executive Officers other than Mr. George, and for the November 1, 2019 grant of
stock options for Mr. George was higher than the average price on each date of grant, so the exercise price shown is the
closing price on the date of grant. The exercise price may be paid in cash or in shares of our common stock (previously owned
by the participant for at least six months preceding the date of exercise) valued on the date of exercise. For a discussion
of the other material terms of these option awards, see the narrative discussion which follows this table.
Grant
Date Fair Value of Stock and Option Awards (Column (l))
The amounts reported in Column (l) represent the full grant date fair
value of each equity award computed in accordance with FASB ASC Topic 718. For awards that entitle the Named Executive
Officers to dividends or dividend equivalents, those amounts are also computed in accordance with FASB ASC Topic
718.
Narrative
to Summary Compensation Table and Grants of Plan-Based Awards Table
Awards
Our
Long-Term Incentive Plan (“LTIP”), as last approved by shareholders in 2015, allows for the award of
equity-based awards, including nonqualified stock options, restricted stock units, and performance share units to
non-employee directors, officers, and other employees of the Corporation.
Performance share units entitle a recipient to
receive performance-based compensation at the end of a three-year performance cycle based on our performance during that
three-year period. For awards made in 2019, the award cycle began on January 1, 2019, and ends December 31, 2021. Under the
2019 performance share unit awards, corporate performance is measured using three-year after-tax return on average invested
capital (“ROAIC”). ROAIC for this purpose is calculated by dividing Norfolk Southern’s net operating profit
after-tax (defined as net income excluding interest expense, and adjusted for the effect of capitalizing Norfolk
Southern’s operating lease obligations) by the average invested capital (defined as the average of the current and
prior year-end shareholders’ equity and total debt balances, which is then adjusted for the effect of capitalizing
Norfolk Southern’s operating lease obligations). Target performance for the ROAIC measure translates into a 100% payout
factor, while threshold performance for ROAIC results in a 30% payout factor and the maximum performance for ROAIC results in
a 200% payout factor; however, if at least the threshold is achieved for the ROAIC measure, the number of units earned will
be multiplied by a modifier between 0.75 and 1.25 based on the ranking of the three-year total return to the
Corporation’s shareholders as compared with the total shareholder return on the publicly traded stocks of the other
North American Class I railroads, with the shareholder return measurement reflecting the return over the entire three-year
period and using a 20-day average to measure performance at the beginning and the end of the period. Additional discussion of
the performance
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share
units can be found beginning on page 42 of our “Compensation Discussion and Analysis” section. Performance share units
that are earned are distributed in shares of our common stock.
The
Compensation Committee met on January 22, 2019, to approve the option grants to be awarded in January 2019. In order to
permit thorough dissemination of our financial results for the fiscal year ended December 31, 2018, the Committee made these
grants effective January 28, 2019. On August 27, 2019, the Committee approved an equity award, including an option grant,
that would be effective on Mr. George’s first day of employment on November 1, 2019. See our “Compensation
Discussion and Analysis” section for further discussion of our equity award grant practices. These options become
exercisable January 28, 2023, or if the Named Executive Officer retires or dies before that date, the later of one year after
the grant date or the participant’s retirement or death. Dividend equivalent payments are paid in cash to active
employees on unvested options until the option vesting date in an amount equal to, and commensurate with, regular quarterly
dividends paid on our common stock. The exercise price may be paid in cash or in shares of our common stock valued at fair
market value on the date of exercise. Except for capital adjustments such as stock splits, the exercise price of a stock
option granted under LTIP may not be decreased after the option is granted, nor may any outstanding option be modified or
replaced through cancellation if the effect would be to reduce the price of the option, unless the repricing, modification,
or replacement is approved by our shareholders.
The
restricted stock units awarded in January 2019 are distributable ratably over a four-year period beginning on the first anniversary
of the grant date, and are settled in shares of our common stock. The restricted stock units awarded to Mr. George effective on
his first day of employment, November 1, 2019, are distributable ratably in three installments beginning in January 2021. Dividend
equivalent payments are paid in cash on restricted stock units in an amount equal to, and commensurate with, regular quarterly
dividends paid on our common stock. During the restriction period, the holder of restricted stock units has no voting or investment
power over the underlying common stock.
Receipt
of an award under LTIP in 2019 was made contingent upon the participant’s execution of a non-competition agreement, and
all awards are subject to forfeiture in the event the participant “engages in competing employment” within two years
following retirement.
For
2019, awards to our Named Executive Officers under the Executive Management Incentive Plan (“EMIP”) were payable based
on our performance relative to pre-determined performance measures for operating income and operating ratio. The performance metrics
relative to these performance measures were established by the Committee in January 2019. A more detailed discussion of these
performance measures can be found on page 40 of our “Compensation Discussion and Analysis” section.
The
Committee set Mr. Squires’ 2019 incentive opportunity at 225% of his 2019 base salary and the Executive Vice Presidents
at 135% of their 2019 base salaries. These amounts are reported as “Non-Equity Incentive Plan Compensation” in the
Summary Compensation Table.
For
further discussion of our plans and how these LTIP and EMIP awards fit into our executive compensation program, see the “Compensation
Discussion and Analysis” section.
Employment
and Other Agreements
Mr.
George’s compensation reflected in the 2019 Summary Compensation Table was provided pursuant to an offer letter agreement
dated August 26, 2019, which was filed in a Form 8-K on August 28, 2019, and which set forth his compensation and certain other
benefits effective upon his appointment as Executive Vice President Finance and Chief Financial Officer on November 1, 2019
(“George Offer Letter”). The George Offer Letter provides: (1) a signing bonus of $400,000, payable within 30 days
following the commencement of active employment; (2) an inducement equity grant under the LTIP with a target value of $1,000,000,
comprised of (a) 60% of the award as performance share units based on specified corporate performance goals for the three-year
period from 2019-2021, (b) 30% of the award as restricted stock units distributable in three installments in 2021, 2022 and 2023,
and (c) 10% of the award as non- qualified stock options that expire on January 27, 2029; (3) annual salary of $600,000; and (4)
participation in the EMIP at the level established for executive vice presidents, which for 2019 was 135% of base salary.
The
George Offer Letter provides that although Mr. George’s employment is “at will,” if the Corporation terminates
his employment without “Cause” (as defined below) within the first sixty months of his employment, he will receive
the following, subject to his execution of a general release of claims against the Corporation:
· | All
compensation due as of his termination date, including any applicable annual incentive
awards, which awards would be pro-rated based on his actual employment during the year
of termination (payable prior to March 1 of the year following termination); |
· | Additional
compensation in an amount equal to twelve months of Mr. George’s then current salary,
payable in a lump sum; and |
· | A
waiver of the LTIP provision for termination of awards such that his outstanding LTIP
awards would be treated as if he retired, with continued vesting of all unvested shares
of LTIP previously granted as of his termination date. |
For
purposes of the George Offer Letter, “Cause” is defined to mean George’s (a) indictment, conviction or plea
of nolo contendere to any felony, (b) theft, fraud or embezzlement resulting in his gain or personal enrichment, or (c) his failure
or refusal to substantially perform his duties for the Corporation.
We
have no employment agreements or other employment arrangement with our Named Executive Officers.
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Executive Compensation | 2020 Annual Meeting and Proxy Statement
Outstanding Equity
Awards at Fiscal Year-End 2019
Name |
Option
Awards |
|
Stock
Awards |
Number
of
Securities
Underlying
Unexercised
Options (#)
Exercisable |
Number
of
Securities
Underlying
Unexercised
Options (#)
Unexercisable |
Option
Exercise
Price
($) |
Option
Expiration
Date6 |
|
Number
of Shares
or Units of
Stock That
Have Not
Vested
(#)7 |
Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
($)8 |
Equity
Incentive
Plan Awards:
Number of
Unearned
Shares, Units,
or Other
Rights That
Have Not
Vested
(#)7,9 |
Equity
Incentive
Plan Awards:
Market or
Payout Value
of Unearned
Shares, Units,
or Other
Rights That
Have Not
Vested
($)8 |
James
A. Squires |
22,568 |
|
69.830 |
1/23/2023 |
|
45,530 |
8,838,739 |
76,706 |
14,890,936 |
|
29,290 |
|
94.170 |
1/22/2024 |
|
|
|
|
|
|
28,830 |
|
104.230 |
1/26/2025 |
|
|
|
|
|
|
132,880 |
|
92.760 |
5/31/2025 |
|
|
|
|
|
|
|
105,4201 |
70.320 |
1/27/2026 |
|
|
|
|
|
|
|
60,3002 |
120.250 |
1/25/2027 |
|
|
|
|
|
|
|
26,0803 |
149.580 |
1/24/2028 |
|
|
|
|
|
|
|
25,8204 |
165.790 |
1/27/2029 |
|
|
|
|
|
Mark
R. George |
|
2,2504 |
189.920 |
1/27/2029 |
|
1,610 |
312,549 |
3,390 |
658,101 |
John
M. Scheib |
1,640 |
|
94.170 |
1/22/2024 |
|
6,543 |
1,270,193 |
13,968 |
2,711,608 |
|
1,610 |
|
104.230 |
1/26/2025 |
|
|
|
|
|
|
|
2,4601 |
70.320 |
1/27/2026 |
|
|
|
|
|
|
|
2,1902 |
120.250 |
1/25/2027 |
|
|
|
|
|
|
|
3,0003 |
149.580 |
1/24/2028 |
|
|
|
|
|
|
|
3,4004 |
165.790 |
1/27/2029 |
|
|
|
|
|
Alan
H. Shaw |
2,000 |
|
62.745 |
1/26/2021 |
|
9,903 |
1,922,469 |
15,264 |
2,963,200 |
|
1,900 |
|
75.140 |
1/25/2022 |
|
|
|
|
|
|
2,550 |
|
69.830 |
1/23/2023 |
|
|
|
|
|
|
2,760 |
|
94.170 |
1/22/2024 |
|
|
|
|
|
|
2,720 |
|
104.230 |
1/26/2025 |
|
|
|
|
|
|
|
20,2101 |
70.320 |
1/27/2026 |
|
|
|
|
|
|
|
13,2202 |
120.250 |
1/25/2027 |
|
|
|
|
|
|
|
3,4803 |
149.580 |
1/24/2028 |
|
|
|
|
|
|
|
3,4004 |
165.790 |
1/27/2029 |
|
|
|
|
|
Michael
J. Wheeler |
|
21,0801 |
70.320 |
1/27/2026 |
|
11,593 |
2,250,549 |
19,382 |
3,762,628 |
|
|
15,0702 |
120.250 |
1/25/2027 |
|
|
|
|
|
|
|
4,4403 |
149.580 |
1/24/2028 |
|
|
|
|
|
|
|
4,2804 |
165.790 |
1/27/2029 |
|
|
|
|
|
Cynthia
C. Earhart |
11,829 |
|
94.170 |
1/22/2024 |
|
11,203 |
2,174,838 |
17,310 |
3,360,390 |
|
20,210 |
|
70.320 |
11/1/2024 |
|
|
|
|
|
|
10,670 |
|
120.250 |
11/1/2024 |
|
|
|
|
|
|
3,960 |
|
149.580 |
11/1/2024 |
|
|
|
|
|
|
|
3,8405 |
165.790 |
11/1/2024 |
|
|
|
|
|
|
12,301 |
|
104.230 |
1/26/2025 |
|
|
|
|
|
1 | These
options vested on January 28, 2020. |
2 | These
options vest on January 26, 2021, or, if the Named Executive Officer retires or dies
before that date, the date of retirement or death. |
3 | These
options vest on January 25, 2022, or, if the Named Executive Officer retires or dies
before that date, the date of retirement or death. |
4 | These
options vest on January 28, 2023, or, if the Named Executive Officer retires or dies
before that date, the date of retirement or death. |
5 | These
options vested on January 27, 2020, following Ms. Earhart’s retirement on November
1, 2019. |
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6 | For
each option award, an expiration date listed for 2026 or after expires on the earlier
of the date listed or, if the Named Executive Officer retires before that date, five
years after the Named Executive Officer retires. |
7 | The
following table provides information with respect to the vesting of each Named Executive
Officer’s restricted stock units as shown in the Number of Shares or Units of Stock
That Have Not Vested column and unearned performance units as shown in the Equity Incentive
Plan Awards: Number of Unearned Shares, Units, or Other Rights That Have Not Vested column
in the above table. |
Name |
Unvested
Restricted
Stock Units |
Unearned
Performance
Share Units |
Unit
Vest Date |
J. A. Squires |
3,600 |
|
1/27/2020 |
|
|
47,136 |
12/31/2020 |
|
12,800 |
|
1/28/2021 |
|
|
29,570 |
12/31/2021 |
|
8,110 |
|
1/26/2022 |
|
9,090 |
|
33% in Jan. 2020,
2021, and 2022 |
|
11,930 |
|
25% in Jan. 2020,
2021, 2022, and 2023 |
M. R. George |
1,610 |
|
33% in Jan. 2021,
2022, and 2023 |
|
|
3,390 |
12/31/2021 |
J. M. Scheib |
340 |
|
1/27/2020 |
|
|
8,128 |
12/31/2020 |
|
920 |
|
1/28/2021 |
|
|
5,840 |
12/31/2021 |
|
570 |
|
1/26/2022 |
|
1,883 |
|
33% in Jan. 2020,
2021, and 2022 |
|
2,830 |
|
25% in Jan. 2020,
2021, 2022, and 2023 |
A. H. Shaw |
660 |
|
1/27/2020 |
|
|
9,424 |
12/31/2020 |
|
2,450 |
|
1/28/2021 |
|
|
5,840 |
12/31/2021 |
|
1,780 |
|
1/26/2022 |
|
2,183 |
|
33% in Jan. 2020,
2021, and 2022 |
|
2,830 |
|
25% in Jan. 2020,
2021, 2022, and 2023 |
M. J. Wheeler |
660 |
|
1/27/2020 |
|
|
12,032 |
12/31/2020 |
|
2,560 |
|
1/28/2021 |
|
|
7,350 |
12/31/2021 |
|
2,030 |
|
1/26/2022 |
|
2,783 |
|
33% in Jan. 2020,
2021, and 2022 |
|
3,560 |
|
25% in Jan. 2020,
2021, 2022, and 2023 |
C. C. Earhart |
1,650 |
|
1/27/2020 |
|
|
10,720 |
12/31/2020 |
|
2,450 |
|
1/28/2021 |
|
|
6,590 |
12/31/2021 |
|
1,430 |
|
1/26/2022 |
|
2,483 |
|
33% in Jan. 2020,
2021, and 2022 |
|
3,190 |
|
25% in Jan. 2020,
2021, 2022, and 2023 |
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Executive Compensation | 2020 Annual Meeting and Proxy Statement
8 | These
values are based on the $194.13 closing market price of our common stock as of December
31, 2019. |
9 | These
amounts represent (i) grants of performance share units made in 2018 pursuant to the
Long-Term Incentive Plan (“LTIP”) that may be earned out over the three-year
period ending December 31, 2020, and (ii) grants of performance share units made in 2019
pursuant to LTIP that may be earned out over the three-year period ending December 31,
2021. Because the number of performance share units earned is determined based on a three-year
performance period for each cycle, in
accordance with the SEC requirements for this table, the number of performance share units disclosed is determined by
reporting performance based on achieving threshold performance goals, except that if performance during the last completed
fiscal years over which performance is measured has exceeded the threshold, then the disclosure is based on the next highest
performance measure (target or maximum) that exceeds the last completed fiscal years over which performance is measured. In
accordance with this rule, the number of performance share units shown by each Named Executive Officer for these grants is
160% for the annual grant of performance share units made in 2018, and 100% for the annual grant of performance share units
made in 2019, which represents (a) the actual percentage for the ROAIC for each completed year in the performance periods,
(b) the maximum percentage for ROAIC for the uncompleted year in the 2018- 2020 performance period, and for the uncompleted
years in the 2019-2021 performance period. |
Option
Exercises and Stock Vested in 2019
|
Option
Awards |
|
Stock
Awards |
|
Number
of |
|
|
Number
of |
|
Shares |
Value |
|
Shares |
Value |
Acquired |
Realized |
|
Acquired |
Realized |
on
Exercise |
on
Exercise |
|
on
Vesting |
on
Vesting |
Name |
(#) |
($)1 |
|
(#)2 |
($)2 |
James
A. Squires |
1,432 |
192,414 |
|
56,333 |
10,705,122 |
Mark
R. George |
0 |
0 |
|
0 |
0 |
John
M. Scheib |
0 |
0 |
|
2,878 |
528,100 |
Alan
H. Shaw |
0 |
0 |
|
12,272 |
2,334,050 |
Michael
J. Wheeler |
2,720 |
224,833 |
|
13,985 |
2,660,035 |
Cynthia
C. Earhart |
9,943 |
1,117,986 |
|
11,300 |
2,113,320 |
1 | Represents
the difference between the price of the underlying common stock on the day of exercise
and the exercise price of the option(s). |
2 | Represents
the aggregate number of (1) restricted stock units that vested and were distributed during
fiscal year 2019, multiplied by the average of the high and low of the market price of
the underlying shares on the vesting date, and (2) performance share units that vested
during fiscal year 2019, which shares were distributed on January 30, 2020, multiplied
by the average of the high and low of the market price of the underlying shares on the
vesting date of December 31, 2019. |
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Executive Compensation | 2020 Annual Meeting and Proxy Statement
Retirement
Benefits
2019
Pension Benefits Table
The
following table shows, as of December 31, 2019, each Named Executive Officer’s years of credited service, present value
of accumulated benefit, and benefits received, if any, under each of (i) the tax-qualified Retirement Plan of Norfolk Southern
Corporation and Participating Subsidiary Companies (the “Retirement Plan”) and (ii) the nonqualified Supplemental
Benefit Plan of Norfolk Southern Corporation and Participating Subsidiary Companies (the “SERP”).
Name
(a) |
Plan
Name
(b) |
Number
of Years
Credited Service
(#)
(c) |
Present
Value
of Accumulated
Benefit
($)
(d) |
Payments
During
Last Fiscal Year
($)
(e) |
James
A. Squires |
Retirement
Plan |
28.25 |
1,481,544 |
0 |
|
SERP |
28.25 |
15,707,556 |
0 |
Mark
R. George |
Retirement
Plan |
0.17 |
840 |
0 |
|
SERP |
0.17 |
9,456 |
0 |
John
M. Scheib |
Retirement
Plan |
14.42 |
510,012 |
0 |
|
SERP |
14.42 |
964,368 |
0 |
Alan
H. Shaw |
Retirement
Plan |
26.00 |
1,143,720 |
0 |
|
SERP |
26.00 |
3,987,636 |
0 |
Michael
J. Wheeler |
Retirement
Plan |
35.00 |
1,680,408 |
0 |
|
SERP |
35.00 |
6,660,096 |
0 |
Cynthia
C. Earhart |
Retirement
Plan |
34.00 |
1,734,576 |
21,261 |
|
SERP |
34.00 |
8,031,504 |
6,125 |
Narrative
to Pension Benefits Table
The
above table shows the number of years of credited service and the actuarial present value of each Named Executive Officer’s
accumulated benefits under our defined benefit plans as of December 31, 2019, which is the pension plan measurement date we use
for financial reporting purposes. We assume a retirement age of 60 for purposes of the table for each of the Named Executive Officers
who was employed on December 31, 2019, since that is the earliest age at which a participant may retire under the plans without
an age-based benefit reduction, and none of those officers had reached that age as of December 31, 2019. For a discussion of the
other material assumptions applied in quantifying the present values of the above accrued benefits, see note 12 to our financial
statements included with our Annual Report on Form 10-K for the fiscal year ended December 31, 2019.
Under
the Retirement Plan and the SERP, except as noted above or in the event of a change in control (see below), each Named Executive
Officer can expect to receive an annual retirement benefit equal to average annual compensation for the five most highly compensated
years out of the last ten years of creditable service multiplied by a percentage equal to 1.5% times total years of creditable
service, but not in excess of 40 years of creditable service (which would be equivalent to a maximum of 60% of such average compensation),
less an offset for the annual Railroad Retirement Act annuity. Average compensation includes salary, awards under the Executive
Management Incentive Plan, and unused vacation amounts paid upon severance from employment. Under the Retirement Plan and the
SERP, annual retirement benefits will be payable to each Named Executive Officer upon retirement (although there may be a six-month
delay in payment of benefits that accrued under the SERP after January 1, 2005, if required by Section 409A of the Internal Revenue
Code) and, upon the Named Executive Officer’s death, to his or her spouse on a joint-and-survivor-annuity basis.
Mr.
Squires and Mr. Wheeler are eligible for early retirement under the Retirement Plan and the SERP since each has reached age 55
and has 10 years of creditable service. If Mr. Squires or Mr. Wheeler chooses to retire prior to age 60, their benefits will be
reduced by 1/360th for each month he is under age 60 at the time of retirement. Ms. Earhart retired on November 1, 2019, and her
benefits were reduced by 1/360th for each month she was under age 60 at the time of her retirement.
We
have no policy with regard to granting extra years of credited service. However, as described below, our change-in- control agreement
for Mr. Squires provides for additional years of credited service in limited circumstances.
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Executive Compensation | 2020 Annual Meeting and Proxy Statement
Deferred
Compensation
Our
Named Executive Officers may have deferred the receipt of portions of their compensation under two separate deferred compensation
plans: the Executives’ Deferred Compensation Plan (“EDCP”), and the Officers’ Deferred Compensation Plan
(“ODCP”). The table and narrative below describe the material elements of these plans.
2019
Nonqualified Deferred Compensation Table
Name |
Plan |
Executive
Contributions
in Last FY
($)1 |
Registrant
Contributions
in Last FY
($) |
Aggregate
Earnings
in Last FY
($) |
Aggregate
Withdrawals/
Distributions
($) |
Aggregate
Balance
at Last FYE
($)2 |
James
A. Squires |
EDCP |
0 |
0 |
367,140 |
0 |
3,641,645 |
Mark
R. George |
EDCP |
0 |
0 |
0 |
0 |
0 |
John
M. Scheib |
EDCP |
238,990 |
0 |
134,734 |
0 |
665,369 |
Alan
H. Shaw |
EDCP |
0 |
0 |
4,652 |
0 |
19,569 |
Michael
J. Wheeler |
EDCP |
0 |
0 |
157,356 |
0 |
959,901 |
Cynthia
C. Earhart |
EDCP |
231,863 |
0 |
339,211 |
0 |
2,379,687 |
|
ODCP |
0 |
0 |
47,441 |
0 |
757,171 |
1 | Amounts
in this column are included in the “Salary” and/or “Non-Equity Incentive
Plan Compensation” column(s) of the Summary Compensation Table. |
2 | Of
these amounts, the following has previously been reported as compensation to the Named
Executive Officer in our Summary Compensation Tables ending with the fiscal year ended
December 31, 2018: Mr. Squires, $2,127,866; Mr. Scheib, $238,990, and Ms. Earhart, $553,150. |
Narrative
to Nonqualified Deferred Compensation Table
The
2019 Nonqualified Deferred Compensation table presents amounts deferred under (i) the EDCP, and (ii) the ODCP. Amounts deferred
are credited to a separate memorandum account maintained in the name of each participant. We do not make contributions to participants’
accounts.
Amounts
deferred on or after January 1, 2001, have been deferred under the EDCP. Participants may defer up to 50% of base salary and 100%
of annual incentive payments and are credited with variable earnings and/or losses based on the performance of hypothetical investment
options selected by the participant. The hypothetical investment options include various mutual funds as crediting indices. With
respect to each deferral, participants may choose to receive a distribution at the earliest of separation from service, disability,
or a date that is at least five years but not more than 15 years after the deferral year has ended. The total amount credited
to a participant will be distributed, in accordance with the participant’s elected distribution option, in one lump sum
or a stream of annual cash payments.
For
Ms. Earhart, amounts deferred before January 1, 2001, were deferred under the ODCP and earn a fixed rate of interest, which is
credited to her account at the beginning of each quarter. In general, the fixed interest rate under ODCP is determined on the
basis of the participant’s age at the time of the deferral. The total amount so credited for amounts deferred before January
1, 2001 (including interest earned thereon) is distributed in five installments beginning in the year following the year in which
the participant retires.
Our
commitment to accrue and pay interest and/or earnings on amounts deferred is facilitated by the purchase of corporate-owned
life insurance with executive officers as insureds under the policies. If the Board of Directors determines at any time that
changes in the law affect our ability to recover the cost of providing the benefits payable under the EDCP and the ODCP, the
Board, in its discretion, may reduce the interest and/or earnings on deferrals. With respect to the ODCP, the adjusted rate
of interest may not be less than one-half the rate otherwise provided for in the plan. For the EDCP, the adjusted rate may
not be less than the lesser of (a) one-half the rate of earnings otherwise provided for in the EDCP or (b) 7%.
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Executive Compensation | 2020 Annual Meeting and Proxy Statement
Potential
Payments Upon a Change in Control or Other Termination of Employment
We
have entered into certain agreements and maintain certain plans that will require us to provide compensation to our Named Executive
Officers in the event of a termination of their employment with the Corporation.
Post
Employment Benefits*
The
benefits to be provided to our Named Executive Officers in the event of a termination due to retirement, involuntary
separation, death, disability, or a change in control are quantified in the table below. As of December 31, 2019, Mr. George,
Mr. Scheib and Mr. Shaw were not eligible to retire under our retirement plans, so figures listed for each of them under
Retirement assume a voluntary separation as of that date. Ms. Earhart retired effective November 1, 2019, and this table thus
only reflects the amounts payable as a result of her retirement. Except as provided in this paragraph, this analysis assumes
that on December 31, 2019,
· | for
a Retirement, the executive retired as of that date; |
· | for
an Involuntary Separation, the executive’s employment was terminated as of that
date due to the executive’s position being abolished in connection with a downsizing
or internal restructuring (and the executive elected to retire if he or she is retirement
eligible); |
· | for
a Death, the executive dies on that date; |
· | for
a Disability, the executive became disabled on that date; and |
· | for
a Change in Control, (i) a change in control of the Corporation occurred, as defined
in the applicable change- in-control agreements, and (ii) each of the above Named Executive
Officer’s employment with us was terminated without cause. |
|
Retirement
$ |
Involuntary
Separation
$ |
Death
$ |
Disability
$ |
Change
in
Control
$ |
James
A. Squires |
|
|
|
|
|
Severance
Pay |
|
1,142,308 |
|
|
14,437,500 |
Performance
Share Units |
10,801,481 |
10,801,481 |
10,801,481 |
10,801,481 |
23,025,507 |
Unvested
Stock Options |
19,400,617 |
19,400,617 |
19,400,617 |
19,400,617 |
|
Accelerated
Dividends |
|
|
|
|
924,678 |
Restricted
Stock Units |
8,838,739 |
8,838,739 |
8,838,739 |
8,838,739 |
|
Deferred
Compensation Equivalent |
|
|
|
|
1,830,943 |
Pension
Enhancement |
|
|
|
|
25,160,405 |
Health
Benefits |
137,298 |
137,393 |
51,307 |
137,298 |
48,946 |
Life
Insurance Proceeds |
|
|
3,300,000 |
|
|
Vacation
Pay |
105,769 |
105,769 |
|
|
105,769 |
TOTAL |
39,283,903 |
40,426,309 |
42,392,143 |
39,178,134 |
65,533,748 |
Mark
R. George |
|
|
|
|
|
Severance
Pay |
|
600,000 |
|
|
299,000 |
Performance
Share Units |
|
307,861 |
307,861 |
307,861 |
|
Unvested
Stock Options |
|
9,473 |
9,473 |
9,473 |
|
Restricted
Stock Units |
|
312,549 |
312,549 |
312,549 |
|
Health
Benefits |
|
1,674 |
1,674 |
|
|
Life
Insurance Proceeds |
|
|
600,000 |
|
|
TOTAL |
|
1,231,557 |
1,231,557 |
629,838 |
299,000 |
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|
Retirement
$ |
Involuntary
Separation
$ |
Death
$ |
Disability
$ |
Change
in
Control
$ |
John
M. Scheib |
|
|
|
|
|
Severance Pay |
|
323,077 |
|
|
3,009,000 |
Performance Share
Units |
|
|
2,004,276 |
2,004,276 |
|
Unvested Stock Options |
|
|
696,376 |
696,376 |
|
Restricted Stock Units |
|
|
1,270,193 |
1,270,193 |
|
Health Benefits |
|
1,409 |
1,409 |
|
|
Life Insurance Proceeds |
|
|
1,000,000 |
|
|
TOTAL |
|
324,572 |
4,972,339 |
3,970,844 |
3,009,000 |
Alan
H. Shaw |
|
|
|
|
|
Severance Pay |
|
567,923 |
|
|
3,009,000 |
Performance Share
Units |
|
|
2,145,797 |
2,145,797 |
|
Unvested Stock Options |
|
|
3,730,284 |
3,730,284 |
|
Restricted Stock Units |
|
|
1,922,469 |
1,922,469 |
|
Health Benefits |
|
1,360 |
340,621 |
469,042 |
|
Life Insurance Proceeds |
|
|
1,800,000 |
|
|
TOTAL |
|
569,283 |
9,939,171 |
8,267,592 |
3,009,000 |
Michael
J. Wheeler |
|
|
|
|
|
Severance Pay |
|
784,615 |
|
|
3,009,000 |
Performance Share
Units |
2,719,325 |
2,719,325 |
2,719,325 |
2,719,325 |
|
Unvested Stock Options |
4,042,384 |
4,042,384 |
4,042,384 |
4,042,384 |
|
Restricted Stock Units |
2,250,549 |
2,250,549 |
2,250,549 |
2,250,549 |
|
Health Benefits |
211,013 |
211,141 |
126,949 |
211,013 |
|
Life Insurance Proceeds |
|
|
1,800,000 |
|
|
Vacation Pay |
57,692 |
57,692 |
|
|
|
TOTAL |
9,280,962 |
10,065,706 |
10,939,206 |
9,223,270 |
3,009,000 |
Cynthia
C. Earhart |
|
|
|
|
|
Performance Share
Units |
2,430,731 |
|
|
|
|
Unvested Stock Options |
108,826 |
|
|
|
|
Restricted Stock Units |
2,174,838 |
|
|
|
|
Health Benefits |
79,299 |
|
|
|
|
Vacation Pay |
57,692 |
|
|
|
|
TOTAL |
4,851,386 |
|
|
|
|
* | This
table does not include the pension benefits reflected in the Pension Benefits Table,
or the deferred compensation amounts disclosed in the Nonqualified Deferred Compensation
Table. In addition, this table does not quantify the benefits that would be payable under
the Corporation’s Long-Term Disability Plan to any of our Named Executive Officers
who terminated employment as a result of total disability. |
Severance Pay
For
an Involuntary Separation resulting in the Named Executive Officer’s position being abolished in connection with a downsizing
or internal restructuring, for each officer other than Mr. George, these amounts represent two weeks of the executive’s
annual base salary for each calendar year of service up to a maximum of 80 weeks. These amounts would be payable under our Severance
Pay Plan that is generally applicable to all of our management employees. For an Involuntary Separation for Mr. George, reflects
12 months of his current salary determined as of December 31, as provided in his August 2019 offer letter. For a description of
the severance payable if the Named Executive Officer was involuntarily separated for a reason other than downsizing or internal
restructuring, see the section captioned “Termination for Any Other Reason.”
For
a Change in Control, these amounts represent the sum of each Named Executive Officer’s base salary (limited to the
amount paid during the 12-month period before December 31, 2019) plus annual incentive pay times 2.99 for Mr. George, Mr.
Scheib, Mr. Shaw, and Mr. Wheeler, and times three for Mr. Squires. If the Named Executive Officer had
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elected
to defer either a portion of salary or annual incentive under the Executives’ Deferred Compensation Plan, then a corresponding
portion of this amount would have been deferred and subsequently paid in accordance with the Named Executive Officer’s original
deferral election rather than distributed in a lump sum.
Performance
Share Units
For
Retirement, Death, or Disability, these amounts represent the estimated dollar value of the annual grants of performance
share units to be earned during the performance cycles ending December 31, 2020, and December 31, 2021, assuming an earnout
of 90.0% for the grants of performance share units made in 2018 and 98.5% for the grants of performance share units made in
2019, and in each case multiplied by $194.13, the closing stock price on December 31, 2019, the last trading day of the
Corporation’s fiscal year. Because the number of performance share units earned is determined based on a three-year
performance period for each cycle, these percentages represent the actual percentage achieved for each completed year in the
performance cycle for the ROAIC measure and the 100% target percentage achievement for each uncompleted year in the
performance period. Estimated amounts for the performance cycles ending December 31, 2020, and December 31, 2021, are also
included in the Outstanding Equity Awards at Fiscal Year-End Table. However, because the Named Executive Officers would
forfeit these awards but for retirement or death benefit provisions under LTIP, we have included these awards here as well.
If a participant retires, dies, or becomes disabled before the end of the performance period, the awards are calculated and
earned at the end of the performance period as if the participant had not retired or died; however, these awards are subject
to forfeiture in certain situations following retirement or disability including if the participant engages in competing
employment or violates a confidentiality agreement.
For
Involuntary Separation, Mr. Squires and Mr. Wheeler were eligible to retire as of December 31, 2019; accordingly, had their employment
been terminated by us on that date, each would have been entitled to the retirement benefits described above. For an Involuntary
Separation for Mr. George, reflects that his performance share units would be treated as if he retired as provided in his August
2019 offer letter.
For
a Change in Control, this amount represents a cash payment to which Mr. Squires would not otherwise be entitled absent a change
in control. Values based on (i) the $194.13 closing stock price on December 31, 2019, the last trading day of the Corporation’s
fiscal year, and (ii) the average earnout for performance share units for the two most recently completed cycles of 69.5%, which
is the assumed earnout required under his change-in-control agreement. Mr. Squires was fully vested in his performance share unit
awards for the performance cycle ended December 31, 2019, and this award is excluded from the above amounts.
Unvested
Stock Options
For
Retirement and Death, these amounts represent the value of the 2016, 2017, and 2018 unvested stock options for the Named Executive
Officer for which vesting is accelerated to the date of retirement or death. The amounts further represent the value of the unvested
stock options for the Named Executive Officers for which vesting is not accelerated as a result of Retirement, Disability, or
Death; however, because the Named Executive Officers would forfeit these awards but for the retirement, disability, or death provisions
of LTIP and their LTIP award agreements, we have included the value of these unvested stock options as well. Amounts in these
columns do not include the value of vested, unexercised stock options. See the Outstanding Equity Awards at Fiscal Year-End Table
for a complete list of each Named Executive Officer’s vested, unexercised options.
For
Involuntary Separation, Mr. Squires and Mr. Wheeler were eligible to retire as of December 31, 2019; accordingly, had their employment
been terminated by us or them on that date, each would have been entitled to the retirement benefit provisions under LTIP for
their unvested stock options. For an Involuntary Separation for Mr. George, reflects that his unvested stock options would be
treated as if he retired as provided in his August 26, 2019 offer letter.
For
a Change in Control, this table does not report the value of vested options held by each Named Executive Officer as of
December 31, 2019. Under the change-in-control agreement for Mr. Squires, in the event his employment with us is terminated
in connection with a change in control, we are required to pay him the then current spread value of his vested options rather
than require him to exercise them and sell the underlying shares. Based on the $194.13 closing stock price on December 31,
2019, the last trading day of the Corporation’s fiscal year, the values of those options were $21,794,893. See the
Outstanding Equity Awards at Fiscal Year-End Table for more information regarding these options. Mr. Squires’ unvested
options do not provide for accelerated vesting at the time of a change in control and would be forfeited if his employment is
terminated for any reason other than retirement, disability, or death. Accordingly, options which were unvested as of
December 31, 2019, are excluded from this amount.
Restricted
Stock Units
For
Retirement, Death, and Disability, these amounts represent the dollar value of restricted stock units based on the $194.13
closing stock price on December 31, 2019, the last trading day of the Corporation’s fiscal year. These amounts are also
included in the Outstanding Equity Awards at Fiscal Year-End Table. However, because the Named Executive Officers would
forfeit these awards but for retirement, death, or disability benefit provisions of LTIP and their LTIP award agreements, we
have included these amounts here as well. If a participant retires, dies, or becomes disabled before the end of the
restriction period, the awards are delivered at the end of the restriction period as if the participant had not retired,
died, or become disabled; however, these awards are subject to forfeiture in the event the participant “engages in
competing employment” following retirement and before the end of the restriction period.
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For
Involuntary Separation, Mr. Squires and Mr. Wheeler were eligible to retire as of December 31, 2019; accordingly, had their employment
been terminated by us or them on that date, each would have been entitled to the retirement benefit provisions under LTIP for
their restricted stock units. For an Involuntary Separation for Mr. George, reflects that his restricted stock units would be
treated as if he retired as provided in his August 26, 2019 offer letter.
For
a Change in Control, the change-in-control agreements do not provide for the acceleration of any unvested restricted stock units
held by Named Executive Officers at the time their employment with us is terminated or upon a change in control. Under the terms
of the LTIP, they will forfeit any unvested restricted stock units if their employment is terminated for any reason other than
retirement, disability, or death. The Committee has the authority under LTIP to waive any restrictions on restricted stock units.
Deferred
Compensation Equivalent
For
a Change in Control, this amount represents the cash payment that would have been payable when Mr. Squires reached age 65, as
provided in his change-in-control agreement. This amount does not include the aggregate balance of Mr. Squires’ deferred
compensation account as of December 31, 2019, in which he is vested.
Pension
Enhancement
For
a Change in Control, this amount represents the amount by which Mr. Squires’ pension benefit, as enhanced by his change-in-control
agreement, exceeds the actuarial present value of his accumulated pension benefit as of December 31, 2019. The amount does not
include the actuarial present value of his accumulated pension benefit as of December 31, 2019. See the Pension Benefits Table
for a description of the pension benefits to which the Named Executive Officers are entitled upon their retirement.
Health
Benefits
For
Retirement, Disability, or a Change in Control, these amounts represent estimated medical benefits for the Named Executive Officers
and their eligible dependents.
For
Involuntary Separation, as each of Mr. Squires and Mr. Wheeler were eligible to retire as of December 31, 2019, each of them
could have elected to retire and receive the same benefits as shown under the “Retirement” column plus thirty
days of continued dental and vision coverage for the executive and his eligible dependents to be provided by the Corporation
in accordance with the Corporation’s Severance Pay Plan. Accordingly, the amounts in this column represent the cost of
their post-retirement medical coverage plus the cost of continued dental and vision coverage. For Mr. George, Mr. Scheib, and
Mr. Shaw, these amounts represent the cost of thirty days of medical, dental, and vision coverage for the executive and his
eligible dependents to be paid by the Corporation in accordance with the Corporation’s Severance Pay Plan that is
generally applicable to all our management employees.
For
Death, these amounts represent estimated medical benefits for the eligible dependents of the Named Executive Officer. For a Change
in Control, this amount represents medical and dental benefits for a fixed period of time specified in Mr. Squires’ change-in-control
agreement.
Life
Insurance Proceeds
These
amounts represent the life insurance proceeds payable upon the death of the executive officer while employed. In addition to the
amounts listed in the table, if a Named Executive Officer died or was totally and permanently disabled for at least 12 months,
in either case as a result of an accident that was covered under the insurance policy that provides benefits under the Executive
Accident Plan, then the Named Executive Officer (in the case of disability) or his or her beneficiary (in the case of death) would
receive a $400,000 lump-sum payment from the insurance company.
Post-Retirement
Life Insurance
Under
our frozen Executive Life Insurance Plan, upon retirement, the remaining premiums on a participant’s life insurance
policy must be paid in the minimum number of level annual premiums allowable. This amount represents the remaining premiums
required to be paid to fully fund Ms. Earhart’s life insurance policy. No premiums would have been required at the end
of 2019 to fully fund any of our other Named Executive Officer’s life insurance policies as a result of retirement. The
life insurance policy amounts are as follows: Mr. Squires, $345,000; Ms. Earhart, $300,000; Mr. Shaw, $87,000; and Mr.
Wheeler, $54,100. Neither Mr. George nor Mr. Scheib are covered by the Corporation’s Executive Life Insurance
Plan.
In
addition, Ms. Earhart and Mr. Wheeler would each be eligible for $50,000 retiree life insurance coverage under the Corporation’s
group life insurance program. Messrs. Squires, George, Scheib, and Shaw would not be eligible for any retiree group life insurance
coverage.
Vacation
Pay
Under
the Corporation’s Nonagreement Vacation Program, an employee who separates from employment on December 31 will not be paid
for the following year’s vacation except in the case of retirement.
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Change-in-Control
Agreements
Generally
We
have entered into change-in-control agreements with a number of key executives, including our Named Executive Officers. A Named
Executive Officer will only receive the benefits provided under these agreements if:
· | a
change in control of Norfolk Southern occurs, and |
· | within
two years of the change in control, we terminate the Named Executive Officer’s
employment for any reason other than for “cause,” death, total disability,
or mandatory retirement, or the Named Executive Officer terminates his or her employment
with us for “good reason.” |
Definition
of Change in Control
Generally,
under these agreements, a change in control is defined as:
· | a
merger, sale of all or substantially all of our assets, or similar fundamental transaction
which results in our shareholders holding less than 80% of the voting power of the combined
company; |
· | a
shareholder-approved consolidation or dissolution pursuant to a recommendation of our
Board of Directors; |
· | a
change in the composition of the Board of Directors that results in less than a majority
of Board members having either (i) served on the Board for at least two years or (ii)
been nominated or elected to be a director by at least two- thirds of directors who had
at least two years of service at the time of the director’s nomination or election; |
· | any
person or organization acquires more than 20% of our voting stock; or |
· | a
determination by the Board that an event similar to those listed above has occurred or
is imminent. |
As
noted below, the Named Executive Officers are entitled to accelerated payouts of amounts deferred under the Officers’ Deferred
Compensation Plan and the Executives’ Deferred Compensation Plan (“EDCP”) upon a change in control. For amounts
deferred after 2004 under the EDCP, only events described above that also constitute a change in control as defined in the regulations
to Section 409A of the Internal Revenue Code will result in accelerated distribution of those amounts.
Benefits
Payable upon Termination Following a Change in Control
The
Compensation Committee approved a form of change-in-control agreement in 2016 which limits new severance agreements with senior
executives to 2.99 times the sum of the executives’ base salary plus annual incentive. Norfolk Southern has entered into
the new change-in-control agreement with each of Mr. George, Mr. Scheib, Mr. Shaw, and Mr. Wheeler.
Mr.
Squires entered into a change in control agreement before 2016, and is generally entitled to receive the following benefits under
his change-in-control agreement:
· | three
times annual base salary plus incentive pay; |
· | accrued
but unpaid compensation; |
· | a
cash payment for unearned performance share units awarded and as to which the performance
cycle has not been completed; |
· | all
dividend equivalents to which he would have been entitled had his employment not
been terminated; |
· | early
payout of compensation that was deferred under our nonqualified deferred compensation
plans and a cash payment equal to the present value of the deferred compensation that
would have been payable if the participant retired at age 65, as provided by the change-in-control
agreements; |
· | accrued
pension benefits, as modified by years of service and average final compensation enhancements
provided by the change-in-control agreements; |
· | unused
vacation for the year of termination, plus vacation for the following year; |
· | continued
payment of premiums on his life insurance policy under
our Executive Life Insurance Plan as if he terminated due to
retirement under the Executive Life Insurance Plan; and |
· | continued
medical and dental benefits, and $50,000 in group-term life insurance coverage, for a
specified number of years but subject to termination if he receives
substantially similar benefits from another employer after the termination of employment. |
If
we had terminated the Named Executive Officer’s employment for reasons described below under “Events Triggering Change-in-Control
Payments,” these benefits would generally have been payable in a lump sum within ten business days of termination. However,
if section 409A of the Internal Revenue Code required delaying payment of any of these amounts for six months, the delayed payment
would have been credited with interest during the period from the termination date until the benefit was distributed at 120% of
the short term Applicable Federal Rate determined under section 1274(d) of the Internal Revenue Code that was in effect on the
Named Executive Officer’s termination date.
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Events
Triggering Change-in-Control Payments
If
we terminate a Named Executive Officer’s employment with us for “cause,” we will not be required to pay the
benefits provided under his change-in-control agreement. “Cause” is defined as any of the following if the result
of the same is materially harmful to us:
· | an
intentional act of fraud, embezzlement, or theft in connection with the executive’s
duties or in the course of his or her employment with us; |
· | intentional
wrongful damage to our property; |
· | intentional
wrongful disclosure of secret processes or of our confidential information; or |
· | intentional
violation of The Thoroughbred Code of Ethics or, as applicable, our Code of Ethical Conduct
for Senior Financial Officers. |
In
addition, if a Named Executive Officer terminates employment with us within two years of a change in control for any of the following
“good reasons,” we are required to pay the Named Executive Officer the benefits provided under the change-in-control
agreement:
· | the
Named Executive Officer is not elected or reelected to the office held immediately prior
to the change in control, or if serving as a director he is removed as a director; |
· | the
Named Executive Officer’s salary or annual incentive opportunity is materially
reduced below the amounts in effect prior to the change in control; |
· | we
terminate or materially reduce the value or scope of the Named Executive Officer’s
perquisites, benefits, and service credit for benefits provided under any employee retirement
income or welfare benefit policies, plans, programs, or arrangements in which he is participating
immediately prior to the change in control and which have substantial value; |
· | the
Named Executive Officer determines in good faith that following the change in control,
he has been rendered substantially unable to carry out or has suffered a substantial
reduction in any of the substantial authorities, powers, functions, responsibilities,
or duties attached to the position he or she held immediately prior to the change in
control; |
· | the
successor to the change in control does not assume all of our duties and obligations
under the change-in-control agreement; |
· | we
require that the Named Executive Officer relocate his principal location of work in excess
of 50 miles from his employment location immediately prior to the change in control,
or that the Named Executive Officer travel away from his office significantly more than
was required immediately prior to the change in control; or |
· | there
is any material breach of the change-in-control agreement by us or our successor. |
Requirement
Not to Compete Following a Change in Control
In
exchange for the benefits provided under the change-in-control agreements, the Named Executive Officers agreed that if they accept
benefits payable or provided under the agreements, they may not engage in specified competing employment for a period of one year
from the date they are terminated following the change in control.
Retirement
As
of December 31, 2019, Mr. Squires and Mr. Wheeler were of retirement age under our retirement plans. See “Termination
for Any Other Reason” below for a discussion of the benefits to which Mr. George, Mr. Scheib, or Mr. Shaw would have
been entitled had any of them been terminated as of December 31, 2019. Mr. Squires and Mr. Wheeler were each eligible to
retire and choose to receive either (i) a temporary retirement benefit not to exceed $500 per month until reaching age 60,
and thereafter the full amount of the accrued pension benefits disclosed in the Pension Benefits Table, or (ii) a reduced
amount of the pension benefits disclosed in the Pension Benefits Table. In addition to these pension benefits, each Named
Executive Officer would have been entitled to receive the deferred compensation amounts disclosed in the Nonqualified
Deferred Compensation Table. Ms. Earhart retired as of November 1, 2019, and she elected to receive reduced pension benefits
under our retirement plans.
Death
or Disability
Death
If
any of the Named Executive Officers had died on December 31, 2019, that Named Executive Officer’s spouse would have been
eligible for the pension benefits disclosed in the Pension Benefit Table (reduced on account of the Named Executive Officer’s
death) and the Named Executive Officer’s designated beneficiaries would have been eligible for the deferred compensation
benefits disclosed in the Nonqualified Deferred Compensation Table.
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Disability
If
Mr. Squires or Mr. Wheeler had become disabled on December 31, 2019, either of them could elect to retire and receive the benefits
set forth above under “Retirement.” For Messrs. George, Scheib, and Shaw and any other Named Executive Officer electing
not to retire, each would be entitled to disability benefits under the Corporation’s Long-Term Disability Plan equal to
one-half of the Named Executive Officer’s base salary reduced by disability, retirement, or sickness benefits paid from
the Railroad Retirement Board and further reduced by other qualifying benefits as provided in the Long-Term Disability Plan.
Termination
for Any Other Reason
As
noted above, Mr. Squires and Mr. Wheeler were eligible to retire as of December 31, 2019; accordingly, had their employment been
terminated by us or by them as of that date, each would have been entitled to the benefits set forth above under “Retirement.”
If Mr. Scheib or Mr. Shaw had terminated employment as of December 31, 2019, he would have been eligible for the full amount of
his accrued pension benefit disclosed in the Pension Benefits Table beginning at age 60. Mr. George would not have been eligible
for the benefits shown in the Pension Benefits Table as he did not have five years of service as of December 31, 2019.
In
addition to these pension benefits, each Named Executive Officer would have been entitled to receive the deferred compensation
benefits disclosed in the Nonqualified Deferred Compensation Table.
We
also have a Severance Pay Plan that is generally applicable to all of our management employees. Under the Severance Pay Plan,
if a Named Executive Officer’s employment had been terminated as of December 31, 2019, due to the executive’s position
being abolished in connection with downsizing or internal restructuring, the Named Executive Officer would have been entitled
to the following benefits:
· | two
weeks of the executive’s annual base salary for each year of service up to a maximum
of 80 weeks (but not in excess of twice the annual amount of the executive’s salary
payable in the 12-month period preceding the executive’s severance date); |
· | continued
health care benefits for the executive and the executive’s eligible dependents
until the earlier of (a) 30 days from the severance date, or (b) until those health care
benefits would otherwise terminate under the continuation of coverage provisions of the
Consolidated Omnibus Budget Reconciliation Act of 1986, as amended (COBRA); and |
· | outplacement
assistance for up to 90 days. |
If
the Named Executive Officer’s employment had been terminated by us for a reason other than as described above, then
under the Severance Pay Plan, the Named Executive Officer would have been entitled to one week of the executive’s
annual base salary for each year of service up to a maximum of 26 weeks, with the amount capped at two times the
executive’s salary paid in the 12-month period preceding the executive’s severance date. The Named Executive
Officer would not have been entitled to Severance Pay Plan benefits if terminated for reasons including, without limitation,
the following: indictment, conviction of, or entering a plea of nolo contendere to any felony; commission of theft, fraud, or
embezzlement, resulting in gain or personal enrichment; failure or refusal to substantially perform his or her duties for
Norfolk Southern; conduct deemed so detrimental to the interests of Norfolk Southern that, in the judgment of the Plan
Administrator, it should result in the termination not being deemed a severance; being unable to substantially perform his or
her duties because of a physical or mental condition, including a condition that entitles him or her to benefits under any
sick pay or disability income policy or program; refusing to transfer to another nonagreement position in the same
department; or refusing to transfer to another nonagreement position in a different department assigned to a pay band with
the same or higher bonus opportunity.
In
lieu of the benefits payable under the Severance Pay Plan, if Mr. George’s employment had been terminated by us for a reason
other than for “Cause” as of December 31, 2019, then as provided in his August 2019 offer letter, he would have been
eligible for 12 months of his current salary, payable in a lump sum, and his outstanding awards under the Long- Term Incentive
Plan would have been treated as if he had been retirement-eligible.
Directors’
Charitable Award Program Benefit
In
addition to the benefits described above, Mr. Squires is entitled to nominate one or more tax-exempt institutions to receive up
to $500,000 from Norfolk Southern following his death. We continue to pay the life insurance premiums we use to partly fund this
program. See “Non-Employee Director Compensation Table-Directors’ Charitable Award Program” above for more information
regarding this program.
Requirement
Not to Compete
In
addition to restrictions imposed under our change-in-control agreements, awards under LTIP were, beginning in 2006, made subject
to forfeiture in the event the Named Executive Officer “engages in competing employment” for a period of time following
termination. For these purposes, “engages in competing employment” means working for or providing services to any
of our competitors in North American markets in which we compete. See section captioned “Requirement Not to Compete Following
a Change in Control” for a description of additional non-compete restrictions on our Named Executive Officers.
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Executive Compensation | 2020 Annual Meeting and Proxy Statement
Future
Severance Benefits Policy
In
2002, our Board of Directors agreed to abide by a shareholder-approved proposal that future severance agreements with senior executives
that exceed 2.99 times the sum of the executive’s base salary plus bonus require shareholder approval.
Compensation
Policy Risk Assessment
The
Compensation Committee has assessed the risks arising from Norfolk Southern’s compensation policies and practices for all
employees to determine whether such policies or practices are reasonably likely to have a material adverse effect on the Corporation.
As part of this assessment, in 2020, the Committee engaged Pay Governance to conduct a compensation risk analysis and report its
findings to the Committee. Based on the observations and findings of Pay Governance’s assessment, as well as its own considerations,
the Committee determined that Norfolk Southern’s compensation policies and practices are not reasonably likely to have a
material adverse effect on the Corporation.
Pay
Ratio Disclosure
The
ratio of the annual compensation of James A. Squires, our Chairman, President and Chief Executive Officer (our “CEO”)
to the median annual compensation of our other employees in 2019 is 154 to 1. We used the same median employee that we had identified
in our 2018 Proxy Statement for purposes of this disclosure. There has been no significant change in our employee population or
employee compensation arrangements that we believe would significantly impact the pay ratio disclosure for 2020. A complete description
of the methodology we used to identify the estimated median employee can be found in our 2018 Proxy Statement.
The
determination of the median employee is an estimate, and other companies may use different methodologies and assumptions in determining
the median employee. The pay ratio for other companies may not be comparable to the ratio we present due to different methodologies
and assumptions, different employee populations, and different compensation structures.
As
in the prior two years, we used the following methodology to determine the median employee’s annual compensation, and to
determine annual compensation for our CEO:
· | We
calculated each element of the median employee’s compensation for 2019 in accordance
with the SEC rules for reporting compensation in the Summary Compensation Table of the
proxy. Under this calculation, the median of the annual total compensation of all employees
of the Corporation, other than our CEO, was $108,348. We included in this calculation
the value of the employer-provided health and welfare benefits provided under the Railroad
Employees National Health and Welfare Plan, a collectively bargained multiemployer plan. |
· | The
terms and conditions of the median employee’s employment, including the rate of
the employee’s pay and benefits, were established under a collective bargaining
agreement negotiated between Norfolk Southern Corporation and a labor union. Approximately
80% of our employees are covered by collective bargaining agreements with various labor
unions. |
· | For
the annual total compensation of Mr. Squires, we used the amount reported in the “total”
column (column (j)) of our Summary Compensation Table included in our Proxy Statement,
but increased that total by $19,112 to include the value of Mr. Squires’ employer-provided
health and welfare benefits so as to maintain consistency between the
annual total compensation of our CEO and the median employee. This resulted in annual compensation of $16,655,786 for Mr.
Squires for purposes of determining the pay ratio. Information about the objectives of our executive compensation program and
the process that the Compensation Committee of our Board of Directors used to establish Mr. Squires’ compensation for
2019, including the Committee’s engagement of an independent compensation consultant to assist in determining the
appropriate level of pay, can be found in our “Compensation Discussion and Analysis” section which begins on page
33. |
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Shareholder Proposals
ITEM
5 |
Shareholder
Proposal Regarding Right to Act by Written Consent
û The
Board of Directors opposes the proposal for the reasons set forth in the “Board of Directors’ Statement in Opposition,”
which appears directly after Mr. Chevedden’s supporting statement.
|
John
Chevedden, whose address is 2215 Nelson Avenue, Redondo Beach, California, has notified the Corporation of his intention to present
the proposal printed below for shareholder consideration at the Annual Meeting. Mr. Chevedden has furnished evidence of his ownership
of 50 shares of the Corporation’s Common Stock, which he has owned for at least one year prior to the date he submitted
his proposal.
We
have printed verbatim the text of Mr. Chevedden’s proposal and his supporting statement. His proposal will be voted on at
the Annual Meeting only if it is properly presented by or on behalf of Mr. Chevedden.
Text
of Mr. Chevedden’s proposal and supporting statement:
Proposal
5 - Right to Act by Written Consent
Shareholders
request that our board of directors undertake such steps as may be necessary to permit written consent by shareholders entitled
to cast the minimum number of votes that would be necessary to authorize the action at a meeting at which all shareholders entitled
to vote thereon were present and voting. This written consent is to give shareholders the fullest power to act by written consent
consistent with applicable law. This includes shareholder ability to initiate any appropriate topic for written consent.
Our
company requires 20% of shares to combine their holdings to call a special meeting – a higher level than the 10% of shares
permitted by many states of incorporation. Dozens of Fortune 500 companies provide for both shareholder rights – to act
by written consent and to call a special meeting.
Our
higher 20% threshold for shareholders to call a special meeting is one more reason that we should have the right to act by written
consent. Plus our higher 20% threshold has bureaucratic pitfalls that trigger minor shareholder errors that could mean that 40%
of shares would need to ask for a special meeting in order to be sure of obtaining the threshold of 20% of requests without errors.
One can be sure that management will have an eagle eye to spot any errors.
Taking
action by written consent in place of a meeting is a means shareholders can use to raise important matters outside the normal
annual meeting cycle like the election of a new director.
This
is important to consider after our combined Chairman/CEO, James Squires. received the highest negative votes of any director in
2019. Plus our Lead Director received the second highest negative votes. With long-tenure of 20-years our Lead Director, Steven
Leer, can hardly be considered independent.
The
right for shareholders to act by written consent is gaining acceptance as a more important right than the right to call a special
meeting. This seems to be the conclusion of the Intel Corporation (INTC) shareholder vote at the 2019 Intel annual meeting.
The
directors at Intel apparently thought they could divert shareholder attention away from written consent by making it less difficult
for shareholders to call a special meeting. However Intel shareholders responded with greater support for written consent in 2019
compared to 2018.
Plus
a proxy advisor has set certain minimum requirements for a company adopting written consent in case management is tempted to adopt
a “fig leaf” version of written consent.
This
proposal topic would have received majority support at our 2018 annual meeting if our management had simply allowed shareholders
to make up their own minds. This is a proposal topic that can gain increased shareholder support even if management opposes it.
For instance Flowserve Corporation opposed this proposal topic and support increased from 43% to 51% in one-year.
Please
vote yes:
Right
to Act by Written Consent- Proposal 5
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Shareholder Proposals | 2020 Annual Meeting and Proxy Statement
Board
of Directors’ Statement in Opposition
Your
board has carefully considered this proposal on the right to act by written consent and believes it would not enhance shareholder
value and is not in the best interests of the Corporation and all of its shareholders. We recommend that you vote against this
proposal for the reasons discussed below.
Our
shareholders presently have the right to engage with us and take action in various ways, including having the right to call a
special meeting at any time and to submit shareholder proposals for consideration at the annual shareholders’ meeting. Implementing
a written consent right, if approved, would diminish those rights.
Norfolk
Southern values engagement with its shareholders, and our existing governance framework provides all shareholders with the ability
to take action in a variety of ways. For example, Norfolk Southern’s shareholders currently have the right “to raise
important matters outside the normal annual meeting cycle.” Under the Corporation’s Bylaws, holders of 20% of the
outstanding shares of our common stock can call a special meeting of shareholders. A special meeting allows you, your Board, and
management to discuss proposed actions and allows you to make an informed vote. It is also important to note that Norfolk Southern
shareholders have the right to submit shareholder proposals in accordance with the Corporation’s Bylaws and Rule 14a-8 under
the Securities Exchange Act of 1934, as amended, for consideration at our annual shareholder meetings.
Notably,
and contrary to Mr. Chevedden’s stated belief, Norfolk Southern’s 20% threshold for calling a special meeting is lower
than the threshold at many S&P 500 companies. In fact, a majority of public companies that have adopted provisions giving
shareholders the ability to call special meetings have adopted the same or higher thresholds.
In
addition, a recent change in Virginia corporate law would affect our ability to implement this proposal, if approved. Under the
new statute, Norfolk Southern can only provide shareholders with the ability to act by less than unanimous written consent if
the Board also raises the threshold of outstanding shares required to call a special meeting from 20% to above 30%. The Board
does not believe that increasing the current 20% special meeting threshold in order to provide a less transparent, disenfranchising
written consent right, as described below, would be in the best interests of the Corporation and its shareholders. When we engaged
with your fellow shareholders on this topic, they indicated a preference for not raising the special meeting threshold to permit
shareholders to act by less than unanimous written consent.
Action
by written consent does not ensure all shareholders have the opportunity to express their views.
Unlike
at a special or annual meeting of shareholders, Mr. Chevedden’s proposal would enable a group of shareholders to take action
without their fellow shareholders being protected by processes associated with a shareholder meeting. As proposed, action by written
consent could be taken:
· | without
a known place and time for the proposal to be voted on that is publicly announced to
all shareholders in advance, and without giving all shareholders a chance to review the
arguments and to express their views and cast their votes at a meeting; and, |
· | without
a forum for open discussion and consideration of the proposed shareholder action by written
consent. |
In
other words, action by written consent is less democratic and less transparent because action may be taken without you and all
of your fellow shareholders being provided with an opportunity for full discussion of the issues and consequences that are the
subject of the written consent. This includes action that is significant in nature, such as replacing some (or even all) of your
directors or acting on a proposal to sell the Corporation.
In
addition, you may not be provided with an opportunity to raise an objection or to vote on the proposed action if the group advocating
for the proposed action has “the minimum number of votes that would be necessary to authorize the action” by written
consent. In other words, you may not be contacted to discuss or vote on a proposal advocated by a small group of larger shareholders
because they do not need your support. A group of shareholders acting by written consent are under no obligation to consider the
rights or interests of their fellow shareholders. Accordingly, shareholder action by written consent could be used by a group
of shareholders to pursue individualized concerns or significant corporate actions that are not in the best interests of the Corporation
and all of its shareholders. Additionally, members of the group acting by written consent only need to own their Norfolk Southern
shares on the day they deliver their consent. These members could borrow shares for that day without making a longer-term economic
investment in Norfolk Southern.
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Shareholder Proposals | 2020 Annual Meeting and Proxy Statement
Your
Board has demonstrated a commitment to corporate governance best practices.
Your
Board carefully considers the appropriateness of evolving corporate governance practices and has adopted policies that ensure
shareholders have significant rights and protections. Among our best practice governance policies are the following:
· | Annual
election of each member of the Board and a director majority voting policy; |
· | A
director resignation policy that requires any director who does not receive a majority
of the votes cast for election to tender his or her resignation; |
· | A
clear mechanism that enables shareholders to communicate directly with the Board and
an active shareholder outreach and engagement program; |
· | A
proxy access bylaw provision; |
· | Ongoing
review and refreshment of Board membership; |
· | Robust
lead independent director duties; |
· | A
special meeting bylaw provision; and |
· | An
annual say-on-pay vote. |
We
believe shareholders agree that the Board has implemented appropriate corporate governance practices because each of our directors
received more than 95% votes cast “FOR” their election at the 2019 Annual Meeting.
More
information about our governance practices is provided in this Proxy Statement beginning on page 17. We firmly believe that
our existing corporate governance practices strike the right balance and ensure shareholders have appropriate means to
express their views to the Board and fellow shareholders.
After
careful consideration, we believe this proposal on written consent would not enhance shareholder value and is not in the best
interests of the Corporation and all of its shareholders.
It
is for these reasons that the Board recommends that you vote AGAINST this proposal.
Shareholder
Proposal Deadlines
Shareholders
are entitled to submit proposals on matters appropriate for shareholder action consistent with SEC regulations and with our Bylaws.
Any such proposal for the 2021 Annual Meeting of Shareholders must comply with applicable regulations and be received by
the Corporate Secretary, Norfolk Southern Corporation, Three Commercial Place, Norfolk, Virginia 23510, as follows:
To
be eligible for inclusion in our proxy statement and form of proxy, shareholder proposals must be received no later than November
27, 2020. To be eligible to be presented from the floor for vote at the meeting, shareholder proposals must be received during
the period that begins October 28, 2020, and ends November 27, 2020.
Shareholder
Recommendations and Nominations
The
Governance and Nominating Committee will consider director candidates recommended by shareholders. Any such recommendation should
include:
· | biographical
information on the candidate, including all positions held as an employee, officer, partner,
director, or ten percent owner of all organizations, whether for profit or not-for-profit,
and other relevant experience; |
· | a
description of any relationship between the candidate and the recommending shareholder; |
· | a
statement requesting that the Board consider nominating the individual for election as
a director; |
· | written
consent of the proposed candidate to being named as a nominee; and |
· | proof
of the recommending shareholder’s stock ownership. |
Recommendations
by shareholders must be in writing and addressed to the Chair of the Governance and Nominating Committee, c/o Corporate Secretary,
Norfolk Southern Corporation, Three Commercial Place, Norfolk, Virginia 23510. To ensure that the Governance and Nominating Committee
will have adequate time to consider all candidates, shareholder recommendations must be received no later than November 27,
2020, in order to be considered for nomination for election at the 2021 Annual Meeting of Shareholders.
A
shareholder may directly nominate an individual for election as director instead of (or in addition to) recommending a
candidate for the Governance and Nominating Committee’s consideration. Unless allowed under our “Proxy Access for
Director Nominations” bylaw provision, which was adopted by our Board in 2016, or required by SEC regulations,
shareholder nominees will not appear in our proxy statement or on the proxy card for the annual meeting. Our proxy access
bylaw provision permits a group of shareholders holding 3% of our outstanding shares for at least 3 years, and who otherwise
comply with the Corporation’s Bylaws, to nominate up to 20% of the Board of Directors (with a minimum of 2 nominees),
with up to 20 shareholders permitted to aggregate their holdings to reach the 3% threshold.
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Shareholder Proposals | 2020 Annual Meeting and Proxy Statement
Shareholders
wishing to nominate an individual for election as a director at an annual meeting must comply with our “Nominations of Directors”
Bylaw provision. A copy of our Bylaws is available on our website, www.norfolksouthern.com, on the “Invest in NS”
page under “Corporate Governance Documents.” For such nominations to be eligible for inclusion on the ballot at the
2021 Annual Meeting of Shareholders, the nominations must comply with the “Nomination of Directors” Bylaw provision
and must be received during the period that begins October 28, 2020, and ends November 27, 2020.
As
described in the Corporate Governance Guidelines, the Governance and Nominating Committee considers potential candidates to be
nominated for election as directors, whether recommended by a shareholder, director, member of management, or consultant retained
to identify, evaluate, and recommend potential candidates for election to the Board. The Governance and Nominating Committee reviews
the current biography of the potential candidate and additional information provided by the individual or group that recommended
the candidate for consideration. The Governance and Nominating Committee fully considers the qualifications of all candidates
including how the nominee will contribute to the diversity of the Board, and recommends the nomination of individuals who, in
the Governance and Nominating Committee’s judgment, will best serve the long-term interests of all shareholders. In the
judgment of the Governance and Nominating Committee and the Board, all director nominees recommended by the Governance and Nominating
Committee should, at a minimum:
· | be
of high ethical character and have personal and professional reputations consistent with
our image and reputation; |
· | have
experience as senior executives of public companies or leaders of large organizations,
including charitable and governmental organizations, or have other experience at a strategy
or policy setting level that would be beneficial to us; |
· | be
able to represent all of our shareholders in an objective and impartial manner; and |
· | have
time available to devote to board activities. |
It
is the intent of the Governance and Nominating Committee and the Board that at least one director on the Board will qualify as
an “audit committee financial expert,” as that term is defined in regulations of the SEC.
Other
Matters
The
Board of Directors does not know of any other matters to be presented at the 2020 Annual Meeting, other than as noted
elsewhere in this Proxy Statement. If other matters are properly brought for a vote before the 2020 Annual Meeting or at any
postponement or adjournment thereof, your proxy gives authority to the persons named as proxies on the proxy card or voting
instruction form to vote on these matters in accordance with their best judgment. The Chairman may refuse to allow the
presentation of a proposal or a nomination for the Board at the Annual Meeting if it is not properly submitted.
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Stock Ownership Information
Applicable
SEC rules require that we furnish you the following information relating to the oversight and management of Norfolk Southern and
to certain matters concerning our Board of Directors and officers who are designated by our Board of Directors as executive officers
for purposes of the Securities Exchange Act of 1934 (“Executive Officers”).
Beneficial
Ownership of Stock
Based
solely on our records and our review of the most recent Schedule 13G filings with the SEC, the following tables show information
concerning the persons or groups known to Norfolk Southern to be beneficial owners of more than five percent of our common stock,
our only class of voting securities:
Title
of Class |
Name
and Address of Beneficial Owner |
Amount
and
Nature of
Beneficial
Ownership |
Percent
of
Class |
Common
Stock |
The
Vanguard Group1
100 Vanguard Blvd., Malvern, PA 19355 |
19,733,7021 |
7.56%1 |
Common
Stock |
BlackRock,
Inc.2
55 East 52nd Street, New York, NY 10055 |
16,352,3972 |
6.3%2 |
Common
Stock |
JPMorgan
Chase & Co.3
383 Madison Ave., New York, NY 10179 |
14,004,6933 |
5.3%3 |
1 | The
Vanguard Group reported in its Schedule 13G filing that it beneficially owned 7.56% of
our common stock as of December 31, 2019, and that as of that date, it had sole voting
power with respect to 456,765 of these shares, shared voting power with respect to 98,313
of these shares, and sole investment power with respect to 19,267,837 of these shares,
and shared investment power with respect to 465,865 of these shares. |
2 | BlackRock,
Inc. reported in its Schedule 13G filing that it beneficially owned 6.3% of our common
stock as of December 31, 2019, and that as of that date, it had sole voting power with
respect to 13,840,554 of these shares, shared voting power with respect to none of these
shares, and sole investment power with respect to all of these shares. |
3 | JPMorgan
Chase & Co. reported in its Schedule 13G filing that it beneficially owned 5.3% of
our common stock as of December 31, 2019, and that as of that date it had sole voting
power with respect to 12,796,396 of these shares, shared voting power with respect to
32,775 of these shares, sole investment power with respect to 13,793,370 of these shares,
and shared investment power with respect to 189,984 of these shares. |
The
following table shows, as of March 1, 2020, the beneficial ownership of our common stock for:
(1) | each
director and each nominee; |
(2) | our
principal executive officer, our principal financial officer, our former principal financial
officer, and each of the other three most highly compensated Executive Officers based
on total compensation for 2019 (collectively, the “Named Executive Officers”);
and |
(3) | all
directors and Executive Officers as a group. |
Unless
otherwise indicated by footnote to the table, all such shares are held with sole voting and investment power, and no director
or Executive Officer beneficially owns any Norfolk Southern equity securities other than our common stock. Each individual director
and each Executive Officer, as well as all the directors and Executive Officers together as a group, beneficially own less than
1% of the shares of our common stock outstanding as of March 1, 2020.
Name |
Shares
of
Common Stock1 |
|
Name |
Shares
of
Common
Stock1 |
|
Thomas
D. Bell, Jr. |
24,141 |
2 |
Claude
Mongeau |
12,001 |
2 |
Daniel
A. Carp |
42,567 |
2 |
Jennifer
F. Scanlon |
2,553 |
2 |
Mitchell
E. Daniels, Jr. |
3,490 |
2 |
James
A. Squires |
456,762 |
3 |
Marcela
E. Donadio |
3,517 |
2 |
John
R. Thompson |
12,245 |
2 |
John
C. Huffard, Jr. |
68 |
2 |
Mark
R. George |
0 |
|
Christopher
T. Jones |
0 |
|
John
M. Scheib |
9,941 |
4 |
Thomas
C. Kelleher |
989 |
2 |
Alan
H. Shaw |
54,961 |
5 |
Steven
F. Leer |
78,291 |
2 |
Michael
J. Wheeler |
31,874 |
6 |
Michael
D. Lockhart |
3,732 |
2 |
Cynthia
C. Earhart |
119,440 |
7 |
Amy
E. Miles |
12,093 |
2 |
|
|
|
22
Directors and Executive Officers as a group (including the persons named above) |
883,336 |
8 |
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1 | Each
director and each Executive Officer has sole voting and investment power with respect
to his or her shares, except with respect to 27 shares over which Ms. Donadio has shared
voting and investment power through other accounts and 68 shares held in two trusts in
which Mr. Huffard had disclaimed beneficial ownership. The amounts include 7,274 shares
held in two irrevocable trusts for the benefit of Mr. Squires’ children over which
Mr. Squires has disclaimed beneficial ownership, and 327 shares held by a person whose
ownership may be attributable to Ms. Earhart but over which Ms. Earhart has disclaimed
beneficial ownership. |
2 | For
directors elected to the Board before January 2015, includes a one-time grant of 3,000 restricted shares to each non-employee
director when that director was first elected to the Board. These grants were made pursuant to the Directors’ Restricted
Stock Plan; the director may vote these shares, but has no investment power over them until they are distributed. The amounts
reported also include restricted stock units which are vested and would be distributable within 60 days of a director leaving
the Board: Mr. Bell, 21,141; Mr. Carp, 38,629; Mr. Daniels, 3,490; Ms. Donadio, 3,490; Mr. Kelleher, 989; Mr. Leer, 75,291; Mr.
Lockhart, 26,378; Ms. Miles, 9,093; Ms. Scanlon, 2,028; and Mr. Thompson, 9,093. These restricted stock units will be settled
in stock. While the directors have neither voting power nor investment power over the shares underlying these restricted stock
units, the directors are entitled to receive the shares immediately upon leaving the Board. See “Non-Employee Director Compensation
Table - Long-Term Incentive Plan” for more information regarding these restricted stock units. The amounts reported also
include shares credited to certain directors’ accounts in a Dividend Reinvestment Plan. The amounts reported do not include
810 restricted stock units awarded pursuant to the Long-Term Incentive Plan to directors who were serving on the Board on January
30, 2020, which will ultimately be settled in shares of common stock upon the satisfaction of applicable vesting requirements
but which do not vest within 60 days of March 1, 2020. The amounts reported also do not include 240 restricted stock units awarded
to Mr. Mongeau pursuant to the Long-Term Incentive Plan upon his election to the Board on September 23, 2019, which will ultimately
be settled in shares of common stock upon the satisfaction of applicable vesting requirements but which do not vest within 60
days of March 1, 2020. The amounts reported also do not include 710 restricted stock units awarded to Mr. Huffard and Mr. Jones
pursuant to the Long-Term Incentive Plan upon their election to the Board on February 21, 2020, which will ultimately be settled
in shares of common stock upon the satisfaction of applicable vesting requirements but which do not vest within 60 days of March
1, 2020. In addition, the amounts reported do not include restricted stock units awarded under the Long-Term Incentive Plan for
Mr. Lockhart, which units will ultimately be settled in shares of common stock; because Mr. Lockhart has elected to have those
awards distributed in ten annual installments beginning in the January after he ceases to be a director, the stock would not be
issuable within 60 days of March 1, 2020, and thus is not considered common stock that is beneficially owned for SEC disclosure
purposes. |
3 | Includes
162 shares credited to Mr. Squires’ account in our Thrift and Investment Plan;
318,988 shares subject to stock options granted pursuant to our Long-Term Incentive Plan
with respect to which Mr. Squires has the right to acquire beneficial ownership within
60 days of March 1, 2020; 45,007 shares owned by Mr. Squires’ spouse and attributable
to Mr. Squires; and 7,274 shares held in irrevocable trusts for the benefit of Mr. Squires’
children and for which Mr. Squires has disclaimed beneficial ownership. |
4 | Includes
67 shares credited to Mr. Scheib’s account in our Thrift and Investment Plan. |
5 | Includes
1,744 shares credited to Mr. Shaw’s account in our Thrift and Investment Plan;
and 32,140 shares subject to stock options granted pursuant to our Long-Term Incentive
Plan with respect to which Mr. Shaw has the right to acquire beneficial ownership within
60 days of March 1, 2020. |
6 | Includes
30 shares credited to Mr. Wheeler’s account in our Thrift and Investment Plan;
and 10,080 shares subject to stock options granted pursuant to our Long-Term Incentive
Plan with respect to which Mr. Wheeler has the right to acquire beneficial ownership
within 60 days of March 1, 2020. |
7 | Includes
50,981 shares subject to stock options granted pursuant to our Long-Term Incentive Plan
with respect to which Ms. Earhart has the right to acquire beneficial ownership within
60 days of March 1, 2020; and 327 shares owned by a person whose ownership may be attributable
to Ms. Earhart and for which Ms. Earhart has disclaimed beneficial ownership. |
8 | Includes
2,003 shares credited to Executive Officers’ individual accounts under our Thrift
and Investment Plan. Also includes: 419,499 shares subject to stock options granted to
Executive Officers pursuant to our Long-Term Incentive Plan with respect to which the
participant has the right to acquire beneficial ownership within 60 days of March 1,
2020; and the shares attributable to Mr. Squires and Ms. Earhart described above. For
officers, this amount does not include restricted
stock units which will ultimately be settled in shares of common stock upon the satisfaction of applicable vesting requirements
but which do not vest within 60 days of March 1, 2020. |
Additional
Ownership
Our
directors hold additional instruments that are not reported in the Beneficial Ownership of Stock table above but that represent
additional financial interests in the Corporation that are subject to the same market risk as ownership of our common stock. The
following table shows, as of March 1, 2020:
· | the
shares of common stock (and restricted stock units to be settled in shares of common
stock) beneficially owned; |
· | the
restricted stock units which will be settled in shares of common stock but which are
not considered common stock that is beneficially owned for SEC disclosure purposes; and |
· | the
number of NS stock units credited to those non-employee directors who have made elections
under the Directors’ Deferred Fee Plan to defer all or a portion of compensation
and have elected to invest such amounts in phantom units of our common stock. |
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Stock Ownership Information | 2020 Annual Meeting and Proxy Statement
A
more detailed discussion of director compensation can be found in Non-Employee Director Compensation. A stock unit represents
the economic equivalent of a share of our common stock and serves to align the directors’ individual financial interests
with the interests of our shareholders because the value of the directors’ holdings fluctuates with the price of our common
stock. These stock units ultimately are settled in cash.
Name |
Shares
of Common
Stock Beneficially
Owned1 |
Number
of RSUs not
counted
toward Beneficial
Ownership2 |
Number
of NS
Stock Units3 |
Total |
Thomas
D. Bell, Jr. |
24,141 |
810 |
|
24,951 |
Daniel
A. Carp |
42,567 |
810 |
6,921 |
50,298 |
Mitchell
E. Daniels, Jr. |
3,490 |
810 |
|
4,300 |
Marcela
E. Donadio |
3,517 |
810 |
|
4,327 |
John
C. Huffard, Jr. |
68 |
710 |
|
778 |
Christopher
T. Jones |
0 |
710 |
|
710 |
Thomas
C. Kelleher |
989 |
810 |
531 |
2,330 |
Steven
F. Leer |
78,291 |
810 |
39,836 |
118,937 |
Michael
D. Lockhart |
3,732 |
27,188 |
14,221 |
45,141 |
Amy
E. Miles |
12,093 |
810 |
|
12,903 |
Claude
Mongeau |
12,001 |
1,050 |
|
13,051 |
Jennifer
F. Scanlon |
2,553 |
810 |
|
3,363 |
John
R. Thompson |
12,245 |
810 |
|
13,055 |
1 | Figures
in this column are based on the beneficial ownership that appears on page 69. |
2 | Restricted
Stock Units (RSUs) are bookkeeping units, the value of each of which corresponds to one share of our common stock. RSUs are granted
to non-employee directors on an annual basis, and dividends paid on our common stock are added to the director’s RSU balance.
Upon termination of the individual’s service as a director, the RSUs will be settled in shares of our common stock in a
lump sum or ten annual installments, in accordance with the director’s election. For each of the directors other than Mr.
Huffard and Mr. Jones, the amount in this column includes the 810 RSUs awarded to directors serving on the Board on January 30,
2020, which will ultimately be settled in shares of common stock upon the satisfaction of applicable vesting requirements but
which do not vest within 60 days of March 1, 2020. For Mr. Huffard and Mr. Jones, the amount in this column includes the 710 RSUs
awarded upon their election to the Board on February 21, 2020, which will ultimately be settled in shares of common stock upon
the satisfaction of applicable vesting requirements but which do not vest within 60 days of March 1, 2020. For Mr. Mongeau, the
amount in this column also includes 240 RSUs awarded upon his election to the Board on September 23, 2019, which will ultimately
be settled in shares of common stock upon the satisfaction of applicable vesting requirements but which do not vest within 60
days of March 1, 2020. For Mr. Lockhart, the amount in this column also includes RSUs which will ultimately be settled in shares
of common stock but which would not be issuable within 60 days of March 1, 2020, as he has elected to have the awards distributed
in annual installments beginning in the January after he ceases to be a director. |
3 | Represents
NS stock units credited to the accounts of non-employee directors who have elected under
the Directors’ Deferred Fee Plan to defer all or a portion of compensation and
have elected to invest such amounts in “phantom” units whose value is measured
by the market value of shares of our common stock, but which ultimately will be settled
in cash, not in shares of common stock. |
Delinquent
Section 16(a) Reports
Section
16 of the Securities Exchange Act of 1934 requires our directors and Executive Officers (and any persons beneficially owning
more than 10 percent of a class of our stock) to file reports of beneficial ownership and changes in beneficial ownership on
Forms 3, 4, and 5, as appropriate, with the SEC. Based solely on our review of copies of Forms 3, 4, and 5 available to us,
or written representations that no Forms 5 were required, we believe that all required Forms concerning 2019 beneficial
ownership were filed on time by all directors and Executive Officers with the exception of one Form 4 that was not timely
filed for Ms. Ann Adams or Ms. Vanessa Allen Sutherland in connection with two transactions each, one Form 4 for Ms. Allen
Sutherland in connection with one transaction, and one Form 4 for Ms. Cynthia Earhart in connection with three transactions.
These transactions were not timely reported due to administrative errors, but were reported promptly on a Form 4 after the
oversights were discovered.
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Voting and Proxies
This
Proxy Statement and the proxy card relate to the Board of Directors’ solicitation of your proxy for use at our Annual Meeting
of Shareholders to be held on May 14, 2020. The following questions and answers provide guidance on how to vote your shares.
We
Want to Hear From You - Vote Today.
Who
can vote?
Shareholders
who are record owners of our common stock as of the close of business on March 6, 2020, are entitled to notice of and to vote
at the 2020 Annual Meeting.
As
of the close of business on the Friday, March 6, 2020, record date, 277,425,350 shares of our common stock were issued and outstanding.
Of those shares, 257,104,573 shares were owned by shareholders entitled to one vote per share. The remaining 20,320,777 shares
were held by our wholly owned subsidiaries, which are not entitled to vote those shares under Virginia law.
What
will I be voting on?
Shareholders
will be voting (i) to elect directors of Norfolk Southern (Item 1); (ii) approval of proposed amendments to the Corporation’s
Amended and Restated Articles of Incorporation (“Articles”) (Items 2a, 2b, and 2c); (iii) to ratify the appointment
of KPMG LLP as our independent registered public accounting firm (Item 3); (iv) on an advisory basis, on executive compensation
as disclosed in the Compensation Discussion and Analysis, the Summary Compensation Table, and other related tables and disclosures
in this Proxy Statement (Item 4); and (v) a shareholder proposal regarding the right to act by written consent, if properly presented
at the meeting (Item 5). Item 4 is being provided as required by Section 14A of the Securities Exchange Act of 1934.
Our
Board of Directors is recommending that shareholders vote FOR Items 1, 2, 3 and 4, and AGAINST Item 5.
How
will these matters be decided at the Annual Meeting?
Voting
Item |
Voting
Standard |
Treatment
of Abstentions and Broker
Non-Votes |
Board
Recommendation |
1. Election
of the 13 directors named in the proxy statement for a one-year term |
Majority
of votes cast |
Not
counted as votes cast and therefore no effect. |
FOR
EACH NOMINEE |
2. Approval of proposed amendments to the Corporation’s
Amended and Restated Articles of Incorporation (“Articles”): |
|
2a. Amendment of voting standard to amend the Articles |
Majority
of all votes entitled to be cast |
Not
counted as votes cast and therefore no effect. |
FOR |
2b. Approval of simple majority voting standard to approve a merger, share exchange, conversion, sale, or dissolution of the Corporation |
Majority
of all votes entitled to be cast |
Not
counted as votes cast and therefore no effect. |
FOR |
2c. Approval of majority voting standard to approve re-domestication of the Corporation and affiliated transactions |
Majority
of all votes entitled to be cast |
Not
counted as votes cast and therefore no effect. |
FOR |
3. Ratification
of appointment of independent registered public accounting firm |
Majority
of votes cast |
Abstentions
are not counted as votes cast and therefore no effect.
Brokers
have discretionary authority to vote without direction from the beneficial owner. If cast, the votes count. |
FOR |
4. Approval of advisory resolution on executive compensation |
Majority
of votes cast |
Not
counted as votes cast and therefore no effect. |
FOR |
5. Shareholder proposal regarding right to act by written consent |
Majority
of votes cast |
Not
counted as votes cast and therefore no effect. |
AGAINST |
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Voting and Proxies | 2020 Annual Meeting and Proxy Statement
If
you sign and return the proxy card without specifying your vote on a particular voting item, your shares will be voted in accordance
with the Board Recommendation unless you revoke your proxy before the shares are voted.
We
have a majority voting standard for election of directors. Each director nominee who receives a majority of the votes cast
will be elected. Any current director who does not meet this standard must, pursuant to our Bylaws, promptly tender resignation
to the Board of Directors for consideration by our Governance and Nominating Committee.
How
many shares are needed at the Annual Meeting to constitute a quorum?
The
presence of the holders of a majority of the outstanding shares of our common stock entitled to
vote at the 2020 Annual Meeting is necessary to constitute a quorum. If a share is represented for any purpose at the Annual Meeting, it is deemed to be present for the transaction of all business. Abstentions and broker non-votes are counted as present and
entitled to vote for purposes of determining a quorum.
Who
is soliciting my proxy?
The
Board of Directors is soliciting your proxy to vote your shares at the 2020 Annual Meeting. If you give the Board of Directors
your proxy, your shares will be voted in accordance with the selections you indicate on the proxy card.
Who
is paying for this solicitation?
Norfolk
Southern pays the cost of preparing proxy materials and soliciting proxies, including the reimbursement, upon request, of trustees,
brokerage firms, banks, and other nominee record holders for the reasonable expenses they incur to forward proxy materials to
beneficial owners. Our officers and other employees may solicit proxies by telephone, facsimile, electronic mail, or personal
interview; they receive no additional compensation for doing so. We have retained Innisfree M&A Incorporated to assist in
the solicitation of proxies at an anticipated cost of $17,500, plus reasonable out- of-pocket expenses.
What
is the difference between holding shares as a “shareholder of record” and as a “beneficial owner”?
If
your shares are registered directly in your name with our transfer agent, American Stock Transfer and Trust Company LLC, you are
considered a “shareholder of record” with respect to those shares. If your shares are held in a brokerage account
or bank, broker, or other nominee, you are considered the “beneficial owner” of such shares.
How
do I vote if I am a shareholder of record?
If
you are the record owner of any shares of our common stock (the shares are registered in your name) and received your materials
by mail, you may vote your shares by completing, signing, and dating the proxy card and mailing it to: Vote Processing, c/o Broadridge,
51 Mercedes Way, Edgewood, New York 11717.
You
also may vote by telephone or the Internet in the manner described on the proxy card or the Notice of Internet Availability.
Finally,
you may attend the Annual Meeting via the Internet and vote during the Annual Meeting. The Annual Meeting can be accessed by visiting
http://www.virtualshareholdermeeting.com/NSC2020 and entering the 16-digit number that is printed in the box marked by an arrow
included in the proxy card or voting instruction card mailed to you. Please have your notice in hand when you access the website
and then follow the instructions. Even if you plan to participate in the Annual Meeting, we recommend that you vote by proxy
prior to the Annual Meeting so that your vote will be counted if you later decide not to participate in the Annual Meeting.
How
do I vote if I am a beneficial owner of the shares?
If
you are the beneficial owner of any shares (the shares are held in street name by a broker, bank, or other nominee), which is
therefore the record holder of your shares), you may submit your voting instructions to the record holder using the voting
instruction card if you requested these materials by mail or in the manner described on the Notice of Internet Availability.
The record holder will then vote your shares in accordance with your voting instructions. You can only vote online during the
virtual Annual Meeting if you have a legal proxy
from the record holder (the broker, bank, or other nominee that holds your shares) assigning its voting authority to you.
Please promptly contact the record holder that holds your shares for instructions on how to obtain a legal proxy if you
intend to vote online during at the virtual Annual Meeting.
Shares
held in street name by a broker may be voted on certain matters even if the beneficial owner does not provide the broker with
voting instructions; brokers have the authority under New York Stock Exchange Listing Standards to vote shares for which their
customers - the beneficial owners - do not provide voting instructions on certain “routine” matters. The ratification
of the appointment of KPMG LLP as our independent registered public accounting firm (Item 3) is considered a routine matter for
which brokers may vote shares they hold in street name, even in the absence of voting instructions from the beneficial owner.
The election of directors (Item 1), approval of the proposed amendments to the Corporation’s Amended and Restated Articles
of Incorporation (“Articles”) (Items 2a, 2b, and 2c), approval of advisory resolution on executive compensation (Item
4), and the shareholder proposal regarding right to act by written consent (Item 5) are not considered routine matters, and a
broker cannot vote shares it holds in street name on these items if it has not received voting instructions from the beneficial
owner of the shares with respect to these items.
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Voting and Proxies | 2020 Annual Meeting and Proxy Statement
How
do I vote if I own common stock through an employee plan?
If
shares are credited to your account in the Norfolk Southern Corporation Thoroughbred Retirement Investment Plan or the
Thrift and Investment Plan, you will receive a voting instruction form from the trustee of that plan. Your instructions
submitted by mail, over the telephone, or by Internet serve as voting instructions for the trustee of the plans, Vanguard
Fiduciary Trust Company. If your instructions are not received by the trustee by 11:59 P.M. Eastern Daylight Time on May 11,
2020, the trustee will vote your shares for each item on the proxy card in the same proportion as the shares that are voted
for that item pursuant to the voting instructions received by the trustee from the other participants in the respective plan.
While employee plan participants may instruct the trustee how to vote their plan shares, employee plan participants cannot
vote their plan shares during the Annual Meeting.
What
if I change my mind after I vote?
Any
shareholder of record may revoke a previously submitted proxy at any time before the shares are voted by: (a) giving
written notice of revocation to our Corporate Secretary; (b) submitting new voting instructions over the telephone or the
Internet; (c) delivering a new, validly completed, later-dated proxy card; or (d) joining the 2020 virtual Annual Meeting
and voting during the meeting. For shares you hold beneficially in street name, you may change your vote by submitting new voting
instructions to your broker, bank, or other nominee, or, if you have obtained a legal proxy from your broker, bank, or other
nominee giving you the right to vote your shares, by joining the Annual Meeting via the Internet and voting during the Annual Meeting. Employee plan
participants may change their voting instructions by submitting new voting instructions to Vanguard Fiduciary Trust Company
prior to 11:59 P.M. Eastern Daylight Time on May 11, 2020.
How
do I attend the Annual Meeting?
The
Annual Meeting will be a virtual shareholder meeting through which you can listen to the meeting, submit questions and vote online.
Only shareholders or their legal proxies may attend the Annual Meeting. The Annual Meeting can
be
accessed by visiting http://www.virtualshareholdermeeting.com/NSC2020 and entering the 16-digit number that is printed in the
box marked by an arrow included in the proxy card or voting instruction card mailed to you. We recommend that you log in a few
minutes before the Annual Meeting to ensure you are logged in when the meeting starts. Online access will begin at 8:15 A.M. Eastern
Daylight Time.
The
virtual meeting is supported across different online browsers and devices (desktops, laptops, tablets and cell phones). Please
be certain you have the most updated version of the applicable software and plugins. Also, you should ensure that you have a strong
internet connection from wherever you intend to participate in the Annual Meeting.
Although
the Board of Directors is mindful of the public health circumstances that led us to move to a virtual meeting format for 2020,
we are excited to host a virtual annual meeting for the first time. The virtual meeting format will provide an opportunity for
participation by all of our shareholders from around the globe, and the virtual meeting format aligns with our broader sustainability
goals. The Board will consider the results of this year’s virtual Annual Meeting in deciding whether to hold in-person annual shareholder meetings in future years.
What
if I need technical assistance accessing or participating in the virtual Annual Meeting?
If
you encounter any difficulties accessing the virtual Annual Meeting during the check-in or meeting time, please call the technical
support number that will be posted on the virtual shareholder meeting log-in page. Technical support will be available starting
at 8:00 A.M. Eastern Daylight Time on May 14, 2020.
Can
I ask questions at the Annual Meeting?
If
you would like to submit a question, you may do so by joining the virtual Annual Meeting at http://www. virtualshareholdermeeting.com/NSC2020,
entering the 16-digit number printed in the box marked by an arrow included in the proxy card or voting instruction card mailed
to you, typing your question in the “Ask a Question” box in the Annual Meeting portal, and clicking submit.
We
ask that you limit your remarks to a brief question that is relevant to the Annual Meeting or our business. Questions may be ruled
as out of order if they are, among other things, profane, irrelevant to our business, related to pending or threatened litigation,
disorderly, or repetitious of statements already made. In addition, questions may be grouped by topic by our management with a
representative question read aloud and answered. Shareholders will be limited to one question each unless time otherwise permits.
Questions will be addressed in the Q&A portion of the Annual Meeting.
What
is householding?
As
permitted by the Securities Exchange Act of 1934, we may deliver a single copy of the Annual Report and Proxy Statement, or the
Notice of Internet Availability, to multiple record shareholders sharing an address. This is known as householding. Upon request,
we will promptly deliver a separate copy of the Annual Report or Proxy Statement to a shareholder at a shared address to which
a single copy of the document was delivered. If you would like a separate copy of this Proxy Statement or the 2019 Annual Report
now or in the future, or if you are receiving multiple copies and would like to receive only one copy for your household, you
may contact: Denise W. Hutson, Corporate Secretary, Norfolk Southern Corporation, Three Commercial Place, Norfolk, Virginia 23510
(telephone 757-823-5567).
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Are
votes confidential? Who counts the votes?
We
have policies in place to safeguard the confidentiality of proxies and ballots. Broadridge Financial Solutions, Inc., Edgewood,
NY, which we have retained to tabulate all proxies and ballots cast at the 2020 Annual Meeting, is bound contractually to maintain
the confidentiality of the voting process. In addition, each Inspector of Election will have taken the oath required by Virginia
law to execute duties faithfully and impartially.
None
of our employees or members of our Board of Directors have access to completed proxies or ballots and, therefore, do not know
how individual shareholders vote on any matter. However, when a shareholder writes a question or comment on a proxy or ballot,
or when there is a need to determine the validity of a proxy or ballot, our management and/or their representatives may be involved
in providing the answer to the question or in determining such validity.
Who
can I call with questions?
You
may contact:
Denise
W. Hutson, Corporate Secretary
Norfolk Southern Corporation
Three
Commercial Place
Norfolk, Virginia 23510
Telephone
757-823-5567
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EXHIBIT
A
Articles
of Incorporation Amendments Submitted for Shareholder Approval
Set
forth below is the text of the provisions of the Corporation’s Amended and Restated Articles of Incorporation (the “Articles”)
proposed to be amended by each of Items 2(a), 2(b), and 2(c). Proposed additions are indicated by underlining and proposed deletions
are indicated by strike-outs.
Item
2(a): Amendment of voting standard to amend the Articles Proposed Amendment to Article VII
The
shareholder vote required, of each voting group entitled to vote thereon, to approve an amendment to the Corporation’s Articles
of Incorporation is a majority of all votes entitled to be cast by that voting group, unless the Board of
Directors Virginia Stock Corporation Act (the “VSCA”) conditions approval of such an amendment upon
a greater vote.
Item
2(b): Approval of simple majority voting standard to approve a merger, share exchange, conversion, sale, or dissolution of the
Corporation
Proposed
Amendment - New Article VIII
Any
action on a matter involving:
(a)
a plan of merger or acquisition for which the VSCA requires shareholder approval;
(b) a
share exchange for which the VSCA requires shareholder approval;
(c)
the conversion of the Corporation;
(d)
a sale of all or substantially all the Corporation’s property for which the VSCA requires shareholder
approval; or
(e)
the dissolution of the Corporation
shall require the approval, by the affirmative vote, of a majority
of the votes cast thereon.
Item
2(c): Approval of majority voting standard to approve re-domestication of the Corporation and affiliated transactions
Proposed
Amendment - Additional Section for New Article VIII
Any
action on a matter involving:
(a)
the re-domestication of the Corporation; or
(b)
an affiliated transaction for which the VSCA requires shareholder approval
shall require the
approval, by the affirmative vote, of a majority of the votes entitled to be cast thereon.
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NORFOLK SOUTHERN CORPORATION
ATTN: JOSEPH C. WOLFE
THREE
COMMERCIAL PLACE
NORFOLK, VA 23510
VOTE BY INTERNET
Before The
Meeting - Go to www.proxyvote.com
Use the Internet to transmit your voting
instructions until 11:59 p.m. Eastern Daylight Time on Monday, May 13, 2020. Have this form in hand when you access the website
and follow the instructions to obtain your records and to create an electronic voting instruction form. Then follow the instructions.
During The Meeting - Go to www.virtualshareholdermeeting.com/NSC2020
You may attend the meeting via the Internet and vote during the meeting. Have the information that is printed in the box marked by the arrow available and follow the instructions.
VOTE BY PHONE - 1-800-690-6903
Use
any touch-tone telephone to transmit your voting instructions until 11:59 p.m. Eastern Daylight Time on Monday, May 13, 2020.
Have this form in hand when you call and then follow the instructions.
VOTE BY MAIL
Complete, sign,
and date this form and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51
Mercedes Way, Edgewood, NY 11717.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: |
|
D02325-P36324-Z76584 |
KEEP THIS PORTION FOR YOUR RECORDS |
|
DETACH AND RETURN THIS PORTION ONLY |
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. |
NORFOLK SOUTHERN CORPORATION |
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The Board of Directors recommends you vote
FOR items 1-4: |
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1. |
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Election of Directors |
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Nominees: |
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For |
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Against |
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Abstain |
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1a. |
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Thomas D. Bell, Jr. |
|
o |
|
o |
|
o |
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1b. |
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Mitchell E. Daniels, Jr. |
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o |
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o |
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o |
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1c. |
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Marcela E. Donadio |
|
o |
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o |
|
o |
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1d. |
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John C. Huffard, Jr. |
|
o |
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o |
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o |
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1e. |
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Christopher T. Jones |
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o |
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o |
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o |
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1f. |
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Thomas C. Kelleher |
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o |
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o |
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o |
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1g. |
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Steven F. Leer |
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o |
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o |
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o |
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1h. |
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Michael D. Lockhart |
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o |
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o |
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o |
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1i. |
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Amy E. Miles |
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o |
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o |
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o |
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1j. |
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Claude Mongeau |
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o |
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o |
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o |
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1k. |
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Jennifer F. Scanlon |
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o |
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o |
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o |
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1l. |
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James A. Squires |
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o |
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o |
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o |
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1m. |
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John R. Thompson |
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o |
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o |
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o |
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The Board of Directors recommends you vote FOR items 1-4: |
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2. |
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Approval
of proposed amendments to the Corporation’s Amended and Restated Articles of Incorporation
(“Articles”): |
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For |
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Against |
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Abstain |
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2a. |
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Amendment of voting standard
to amend the Articles |
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o |
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o |
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o |
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2b. |
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Approval of simple majority voting
standard to approve a merger, share exchange, conversion, sale, or dissolution of the Corporation |
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o |
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o |
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o |
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2c. |
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Approval of majority voting standard
to approve re-domestication of the Corporation and affiliated transactions |
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o |
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o |
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o |
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3. |
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Ratification of the appointment of
KPMG LLP, independent registered public accounting firm, as Norfolk Southern’s independent auditors for the year ending December
31, 2020 |
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o |
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o |
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o |
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4. |
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Approval
of the advisory resolution on executive compensation, as disclosed
in the proxy statement for the 2020 Annual Meeting of Shareholders |
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o |
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o |
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o |
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The Board of Directors recommends you vote AGAINST item 5: |
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For |
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Against |
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Abstain |
5. |
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A shareholder
proposal regarding the right to act by written consent, if properly presented at the meeting |
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o |
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o |
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o |
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NOTE: In addition, in their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting. |
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For
address changes and/or comments, please mark this box and write them on the
back where indicated. |
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o |
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Please
sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give
full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign
in full corporate or partnership name by authorized officer. |
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Signature [PLEASE SIGN WITHIN BOX] |
Date |
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Signature
(Joint
Owners) |
Date |
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Table of Contents
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The Notice and Proxy Statement and Annual Report are available at www.proxyvote.com.
PROXY
NORFOLK
SOUTHERN CORPORATION
THREE COMMERCIAL PLACE, NORFOLK, VIRGINIA 23510
PROXY
FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD MAY 14, 2020
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints and authorizes
Vanessa Allen Sutherland, Denise W. Hutson, and Virginia K. Fogg, and each or any of them, proxy for the undersigned, with full
power of substitution, to represent and vote all shares of Norfolk Southern Corporation common stock held by the undersigned with
the same force and effect as the undersigned at the Annual Meeting of Shareholders of Norfolk Southern Corporation to be held
virtually at www.virtualshareholdermeeting.com/NSC2020 on Thursday, May 14, 2020, at 8:30 a.m., Eastern
Daylight Time, and at any adjournments, postponements, or rescheduling thereof, upon the matters more fully set forth in the Proxy
Statement dated March 27, 2020, and to transact such other business as properly may come before the meeting.
The undersigned acknowledges receipt of the
Notice and Proxy Statement dated in each case March 27, 2020. All other proxies heretofore given by the undersigned to vote shares
of Norfolk Southern Corporation common stock are expressly revoked hereby.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE
VOTED IN THE MANNER DIRECTED ON THE OTHER SIDE BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED “FOR” THE ELECTION OF DIRECTORS, APPROVAL OF PROPOSED AMENDMENTS TO
THE CORPORATION’S AMENDED AND RESTATED ARTICLES OF INCORPORATION, RATIFICATION OF KPMG LLP AS INDEPENDENT AUDITORS, AND
APPROVAL OF THE ADVISORY RESOLUTION ON EXECUTIVE COMPENSATION, AND “AGAINST” THE SHAREHOLDER PROPOSAL REGARDING THE
RIGHT TO ACT BY WRITTEN CONSENT. THIS PROXY ALSO DELEGATES DISCRETIONARY AUTHORITY TO VOTE WITH RESPECT TO ANY OTHER BUSINESS
THAT MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT OR POSTPONEMENT THEREOF.
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Address Changes/Comments: |
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(If you noted any Address Changes/Comments
above, please mark the corresponding box on the reverse side.)
(Continued and to be signed on the reverse side.)
This regulatory filing also includes additional resources:
e20158_nsc-def14acourtesy.pdf
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