NSC Norfolk Southern Corp

Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

On May 14, 2020, Norfolk Southern Corporation (the “Corporation”) adopted the Norfolk Southern Executive Severance Plan (the “Severance Plan”), which is applicable to the Company’s executive vice presidents, and which may be applicable to a senior vice president of the Company.

The Company previously did not maintain any severance arrangements specifically for its senior or executive vice presidents.  The Board’s purpose in adopting the Severance Plan is to meet the needs of the Company, its executives and prospective executives, by providing a severance arrangement similar to that offered by competitors for executive talent, and which allows the Company’s executives to continue to exercise their judgment and perform their responsibilities without the potential for distraction that can arise from concerns regarding their personal circumstances.

In reviewing the Severance Plan, the Compensation Committee of the Company’s Board of Directors consulted with its independent compensation consultant, Pay Governance, LLC, to develop market-based severance benefits that are competitive and that reflect broader U.S. industry practices. 

The Severance Plan provides the following severance benefits if an eligible executive’s employment with the Company is terminated by the Company other than for “cause” or for disability under the Company’s long-term disability plan, or is terminated by the executive for “good reason” (each term as defined in the Severance Plan):

(1)    Cash Severance. The executive would receive a cash severance amount equal to the sum of:

(2) Equity Awards. The executive would receive cash payment equal to the sum of:

However, if an executive terminated before October 1, any restricted stock units or performance share units granted in the year of the termination would be forfeited in accordance with the terms of such awards. Moreover, an executive would not be entitled to the cash payout of the equity awards if the executive is entitled to continued or accelerated vesting of stock options, continued vesting of restricted stock units, or payout of performance share units in accordance with the terms of the Norfolk Southern Corporation Long-Term Incentive Plan, including if the executive is eligible to retire; in that instance, the terms of the awards under the Long-Term Incentive Plan would govern.

The executive’s receipt of the foregoing benefits are subject to the executive’s execution of a release of any claims against the Company, and including compliance with restrictive covenants, including non-disparagement, non-competition and confidentiality covenants. The Severance Plan does not provide any benefits in the event of a change in control of the Company.

The Board previously established a guideline under which the Board would seek shareholder approval of future severance benefits if the value of such severance benefits would exceed 2.99 times the sum of the executive’s salary plus bonus. The Board considered that the cash payout of the equity awards for a long-serving executive who had received awards under the Long-Term Incentive Plan and who was not retirement eligible, when added to the cash severance, could cause the benefits payable under the Severance Plan to exceed the limit set forth in the guideline. The Board determined that it was in the best interests of the Company to waive the guideline with respect to the adoption of the Severance Plan for the reasons set forth above.

The foregoing description of the Severance Plan is qualified in its entirety by the full text of the Severance Plan, a copy of which is filed as Exhibit 10.1 hereto and is incorporated by reference herein.