PRELIMINARY PROXY STATEMENT – SUBJECT TO COMPLETION
A LETTER FROM OUR BOARD CHAIR
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Fellow Shareholder, On behalf of your Board of Directors, I want to thank you for your investment in Norfolk Southern. We will remember 2023 as a year in which we embraced the challenge to create an even stronger foundation for Norfolk Southern’s future. It was our first full year of implementing our new strategy to build a more resilient railroad by balancing safe service, productivity, and smart growth. It was also a year of responsiveness to the East Palestine derailment, with renewed focus on strengthening our programs to elevate the safety standard for both Norfolk Southern and the railroad industry. Your Board of Directors is highly engaged and will continue to actively oversee management’s execution of our strategy and response to East Palestine. As we look ahead, we are holding management accountable to deliver on our commitments, and are confident that our CEO, Alan Shaw, and the rest of the management team are focused on delivering safe, reliable service to customers, enhancing value for all shareholders, and fulfilling our commitments to our stakeholders. We will continue to work with federal, state, and local agencies and regulators to respond to the East Palestine derailment, and would like to thank our customers for their continued support and partnership as we continue to deliver on our promises. |
2023 Performance and Progress. Norfolk Southern’s performance this year demonstrated that our strategic transformation and enhanced focus on resilience and operational excellence is taking hold. As a result of our investments to enhance safety and service, we finished 2023 with a 42% reduction in our mainline accident rate, improved key metrics such as velocity, train speed, and dwell, and achieved the best intermodal service we have seen in years. While our financial results in 2023 reflected a weak freight market, lower fuel and storage revenue, and unexpected costs from service disruptions, we are moving forward with confidence and entering 2024 with a fluid network that will provide the platform to drive service and productivity improvements. Additional financial information is provided in the 2023 Annual Report on Form 10-K, enclosed with the proxy materials, and available on our website.
East Palestine Update. We continue to demonstrate our commitment to making it right for affected individuals and businesses in East Palestine. We are delivering on our commitment to pay for all remediation costs associated with the derailment and ensuring East Palestine and the surrounding communities recover and thrive. We also continue to work with regulators and government agencies to revitalize the whole region, overcome the impacts of the incident, and address broader economic challenges. These efforts include economic development, environmental remediation, and significant ongoing community support. Norfolk Southern has committed over $104 million to East Palestine and the surrounding areas in Ohio and Pennsylvania and assisted over 11,750 families through our Family Assistance Center. In January, we published Making it Right, our 12-Month Progress Report detailing our progress to date as well as what work remains to ensure the community continues to thrive in the future. Additional information related to these efforts is also available at www.NSMakingitRight.com.
Strengthening Our Safety Culture. In 2023, we made a significant effort to elevate safety across all aspects of our operations, and we are encouraged by the progress we’ve made. From progress toward our six-point safety plan to our partnership with Atkins Nuclear Secured (“ANS”), a leading independent safety consultant with Nuclear Navy experience, we are committed to achieving our goal of leading the industry in safety. We have also enhanced our engagement and cooperation with our craft employees as part of this process, as well as inclusion in our annual safety and quarterly pulse surveys and partnering to implement recommendations provided by ANS. These efforts have also led to our announcement in early 2024 that we have partnered with our craft colleagues and the Federal Railroad Administration (“FRA”) to co-develop and launch a Confidential Close Call Reporting System pilot program, becoming the first Class I railroad to deliver such a program.
Refreshed Board Supports our Balanced Strategy. Since last May, we have welcomed two new independent directors to the Board as part of our active and ongoing refreshment: Admiral Philip Davidson, U.S. Navy (Ret.) and Francesca DeBiase. They are experienced executives who have already provided significant contributions to the Board’s work in reviewing safety and risk oversight processes. We also look forward to welcoming, subject to their election, two distinguished new directors, Richard Anderson and Heidi Heitkamp. As previously announced, we will say farewell to Mitch Daniels, Jr. and Mike Lockhart, who are retiring from our Board at the 2024 Annual Meeting, along with Tom Bell and Steve Leer, who are not standing for re-election at this meeting. We thank them all for their service. Our Board is highly engaged, with each Director bringing superior credentials and skills, including significant safety, operational, risk management, and strategic leadership experience that are essential to support Norfolk Southern’s strategic goals.
Shareholder Engagement. Over the past year, our engagement team held 55 meetings with 40 of our top shareholders representing 49% of our outstanding shares. These meetings provided us with important feedback and constructive discussions about our path forward. As a participant in many of these meetings, I appreciated the candor and valuable perspectives shared. These conversations form a critical part of our Board considerations and actions. Specifically, we have incorporated shareholder feedback into our remediation efforts, operational plans, executive compensation structure, and governance decisions. I look forward to continuing this engagement in the year ahead.
Sustainability Means Business. Commitment to environmental sustainability is rooted in Norfolk Southern’s values, and we continue to make progress in our efforts toward the transition to a low-carbon economy. In December 2023, Norfolk Southern published its inaugural Climate Transition Plan, identifying the roadmap to achieving our science-based target of reducing greenhouse gas emissions intensity 42% by 2034. In addition, as part of our effort to enhance the quality of life for our craft workforce, we adopted a paid sick leave policy for all our craft employees, which is the first such policy of its kind among Class I railroads.
Norfolk Southern Corporation
BACKGROUND OF THE SOLICITATION
On November 14, 2023, Norfolk Southern received an email from outside counsel of Ancora Catalyst Institutional, LP (together with its affiliates and associates, “Ancora”) requesting Norfolk Southern’s director candidate questionnaire required to propose director nominations under Norfolk Southern’s Bylaws. Ancora had not previously contacted Norfolk Southern nor requested any involvement in any of Norfolk Southern’s shareholder engagement efforts prior to this contact.
On November 17, 2023, Norfolk Southern’s outside counsel provided the questionnaire to Ancora’s outside counsel.
On November 28, 2023, Norfolk Southern received a notice from Ancora and EdgePoint Investment Group, Inc. (together with its affiliates and associates, “EdgePoint,” and together with Ancora, the “Investor Group”) indicating the Investor Group’s intent to nominate seven director candidates – Betsy Atkins, James Barber, Jr., William Clyburn, Jr., Sameh Fahmy, John Kasich, Gilbert Lamphere and Allison Landry – for election to the Board at the Annual Meeting.
On November 29, 2023, Norfolk Southern received an amended and restated notice of nomination from the Investor Group indicating its intent to nominate an additional director candidate – Nelda Connors – for a control slate of eight director candidates for election to the Board at the Annual Meeting.
Between the date that Ancora requested the director candidate questionnaire and the date of the delivery of the nomination notices, the Investor Group made no attempt to have discussions with Norfolk Southern’s Board of Directors or management team. On December 1, 2024, a representative of Norfolk Southern emailed a representative of EdgePoint to request a call in light of the nomination notices. Norfolk Southern did not hear back from EdgePoint.
Over the next couple of weeks, outside counsel to both Norfolk Southern and Ancora corresponded about scheduling a meeting between representatives of Norfolk Southern and representatives of the Investor Group. During the course of the correspondence, Norfolk Southern’s counsel indicated that the participants on the call from Norfolk Southern would be Board Chair Amy Miles, Board members Claude Mongeau and Thomas C. Kelleher, and CEO Alan Shaw. Ancora’s counsel then requested that Mr. Shaw not participate in the meeting. In addition, Ancora’s counsel noted that representatives of EdgePoint would not attend the meeting.
On December 14, 2023, Ms. Miles, Mr. Mongeau and Mr. Kelleher met virtually with James Chadwick, President of Ancora Alternatives LLC, Conor Sweeney, Portfolio Manager of Ancora Alternatives LLC, and Investor Group nominees Mr. Lamphere and Ms. Landry, to discuss the Investor Group’s views on Norfolk Southern. During the meeting, representatives of Ancora expressed concerns about Norfolk Southern’s strategy, performance, and operations, particularly with respect to management’s implementation of precision-scheduled railroading (PSR), and indicated that significant change is needed at the Company, including a change in management. After listening to the Investor Group’s perspective, representatives of the Board urged Ancora and its representatives to meet with management to learn first-hand what Norfolk Southern is doing before drawing conclusions and come back to the Board with a specific view of what Ancora would do differently.
On January 4, 2024, Mr. Shaw, Mark George, Executive Vice President and Chief Financial Officer of Norfolk Southern, and Paul Duncan, Executive Vice President and Chief Operating Officer of Norfolk Southern, met virtually with Mr. Chadwick and Mr. Sweeney, as well as Investor Group nominees Mr. Lamphere, Ms. Landry, Mr. Fahmy, and Mr. Barber and David Dealy, who Ancora’s outside counsel indicated was an advisor to the Investor Group. During the meeting, representatives of Norfolk Southern’s management team discussed Norfolk Southern’s business, strategy, and operations. Norfolk Southern’s management sought feedback from the Investor Group representatives on their views of Norfolk Southern and answered questions, which mainly focused on the Company’s operations. The Investor Group representatives did not ask any questions about the Company’s initiatives with respect to safety or its response to the East Palestine derailment.
On January 8, 2024, Ms. Miles had a conversation with Mr. Chadwick where they discussed a follow-up meeting between representatives of the Board and representatives of the Investor Group.
On January 9, 2024, Mr. Chadwick sent an email to Ms. Miles to schedule a time for a follow-up discussion between representatives of the Board and representatives of the Investor Group. Over the next several days, Ms. Miles and Mr. Chadwick exchanged correspondence regarding the logistics and scheduling of their next meeting.
On January 21, 2024, Ms. Miles, Mr. Mongeau, and Mr. Kelleher met virtually with Mr. Chadwick, Mr. Sweeney, Mr. Lamphere, Ms. Landry, Mr. Fahmy, and Mr. Dealy to discuss further the Investor Group’s thoughts on Norfolk Southern’s business, strategy, and operational performance and the Investor Group’s objectives.
On January 22, 2024, Mr. Chadwick sent an email to Ms. Miles noting that Ancora planned to brief the entire Investor Group slate as well as its “partner” (without indicating to whom they were referring) on the January 21 meeting discussions. Mr. Chadwick also expressed his desire to keep the dialogue between the parties private and suggested that they resume discussions after Norfolk Southern’s earnings call, which was scheduled for January 26, 2024.
On the same day, Ms. Miles responded to Mr. Chadwick by email noting that the Board had been kept informed of the discussions with the Investor Group. Ms. Miles also expressed the Board’s alignment with the desire to keep the discussions between the parties private.
Over the next several days, outside counsel to both Norfolk Southern and Ancora corresponded about scheduling interviews of the Investor Group nominees by members of the Board, which ultimately were scheduled to take place on February 4 and February 5, 2024.
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| 12 2024 Proxy Statement |
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Norfolk Southern Corporation |
Background of the Solicitation
On January 31, 2024, The Wall Street Journal reported that, according to unnamed sources described as “people familiar with the matter,” Ancora had built a roughly $1 billion stake in Norfolk Southern. The article also stated that Ancora had nominated a majority slate of directors for election to the Norfolk Southern Board, including Mr. Kasich and Mr. Fahmy, in order to “take control of the Board” and seek a CEO change.
On February 4, 2024 and February 5, 2024, Ms. Miles and members of the Board’s Governance and Nominating Committee interviewed each of the Investor Group’s director nominees.
On February 6, 2024, Ms. Miles sent an email to Mr. Chadwick requesting a meeting for later in the week. Mr. Chadwick and Ms. Miles exchanged subsequent emails about the timing of the meeting and who would attend.
On February 9, 2024, Ms. Miles and Mr. Mongeau met with Mr. Chadwick and Mr. Sweeney to further discuss the Investor Group’s concerns and desire for board seats. Ms. Miles and Mr. Mongeau noted that the Board regularly identifies potential new director candidates with the right skillsets to enhance the Board, had an excellent group of potential new directors that would make outstanding additions to the Board and that perhaps they could mutually agree on adding two or three of those previously identified candidates. Ms. Miles and Mr. Mongeau also indicated a willingness to consider certain Investor Group nominees in order to work constructively with the Investor Group. Mr. Chadwick indicated that the Investor Group was interested in filling five board seats and that any settlement framework would have to include a CEO change. Ms. Miles and Mr. Mongeau explained that the Board was not prepared to make a CEO change and that they believed doing so would not be a responsible course of action and would harm Norfolk Southern and ultimately put shareholders at risk. Ms. Miles and Mr. Mongeau reiterated that the Board was open to considering a resolution involving mutually agreeable director candidates. While no agreement was reached during the meeting, the parties agreed to continue to discuss a potential resolution.
On February 13, 2024, Norfolk Southern’s outside counsel called Ancora’s outside counsel to reiterate the Board’s desire to continue a dialogue with the Investor Group and the Board’s openness to adding mutually agreeable candidates to the Board, including from among those proposed by the Investor Group. Ancora’s outside counsel responded that, unless the Board would agree to a CEO change, there was no opportunity to reach a mutually agreed resolution. Ancora’s counsel noted that Ancora had identified a “credible” CEO candidate that it would propose, without offering to identify who it was, and raised the possibility of adding an operational role as a potential resolution. Ancora’s counsel mentioned Jamie Boychuk, but did not offer any further details about how Ancora envisioned the operational role or how Mr. Boychuk could fill that role given his current non-compete agreement with CSX Corporation. Norfolk Southern’s counsel reiterated the Board’s belief that a management change would be harmful to the business and Norfolk Southern shareholders, but agreed to take it back to the Board.
On February 14, 2023, Norfolk Southern’s outside counsel called Ancora’s outside counsel to relay that the Board fully supports Mr. Shaw and the management team and would not agree to a management change. However, the Board remained open to a resolution involving board refreshment and potential governance opportunities. Ancora’s counsel noted that the board seats that Ms. Miles and Mr. Mongeau proposed during the February 9 call were not acceptable but indicated that, if there was also a change in the principal operations role, it might be enough to reach a resolution.
On February 16, 2024, Mr. Chadwick sent an email to Ms. Miles indicating that the parties were far apart on a prospective settlement, which necessarily would include a strong minority representation of the Investor Group nominees on the Board and a CEO change. Mr. Chadwick noted that he would give the Board into the next week to reflect on the Investor Group’s position before going public with their full slate of nominees.
On February 17, 2024, Ms. Miles sent an email to Mr. Chadwick reiterating the Board’s support of Mr. Shaw and the management team and noting that the Board did not need additional time to reflect on that point. Ms. Miles indicated that the Board had offered board refreshment and governance opportunities as a potential resolution and that the Board remained open to continuing a constructive dialogue in an effort to reach a mutually agreed resolution that would be in the best interests of Norfolk Southern’s shareholders.
On February 21, 2024, Mr. Chadwick participated in an interview on CNBC in which he announced the Investor Group’s nomination of a majority slate of eight director candidates for election to the Board at the Annual Meeting and the proposal of Mr. Barber as CEO and Mr. Boychuk as COO of Norfolk Southern. The Investor Group also issued a press release and presentation relating to the announcement.
Also on February 21, 2024, Norfolk Southern issued a press release responding to the Investor Group’s public announcement.
On February 26, 2024, Norfolk Southern filed its preliminary Proxy Statement with the SEC and issued a press release.
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| Norfolk Southern Corporation |
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2024 Proxy Statement 13 |
Corporate Governance
CORPORATE GOVERNANCE BEST PRACTICES
Annual Election of Directors: All of our directors are elected annually with a one-year term.
Director Elections Majority Voting Policy and Resignation Requirement: Norfolk Southern’s Bylaws provide that directors will be elected by a majority of votes cast in an uncontested election of directors. Pursuant to our Bylaws, any incumbent director who is not re-elected must 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.
Proxy Access: Our Bylaws permit a group of up to 20 shareholders holding at least 3% of our outstanding shares for at least 3 years, and who otherwise comply with the requirements provided in our Bylaws, to nominate for election to the Board the greater of 2 directors or 20% of number of directors then in office.
Special Meetings: A special meeting will be called by our Corporate Secretary upon written request by one or more shareholders who in the aggregate represent at least 20% of our voting shares and who otherwise comply with the requirements provided in our Bylaws.
Shareholder Engagement: Norfolk Southern has a long history of shareholder engagement. We believe that regular engagement with our shareholders allows us to improve our decision making through better understanding of our shareholders’ priorities. During 2023, we expanded our existing shareholder outreach program and reached out to shareholders representing 55% of our outstanding shares, ultimately engaging with shareholders representing approximately 49% of our outstanding shares, a 16% increase from the previous year.
Our outreach program included meetings with members of our investor relations, finance, safety, sustainability, and legal teams, with our independent Board Chair, Safety Committee Chair, and our CEO participating in discussions with our largest shareholders. Our engagement team presented shareholder feedback to our Board of Directors and to our Governance and Nominating Committee or Human Capital Management and Compensation Committee, as appropriate, for further consideration. Our Governance and Nominating Committee further reviewed the process for conducting this outreach program and the results of these shareholder meetings with our Board of Directors. Our investor relations team also regularly participates in investor conferences and has meetings with investment analysts and investors on topics relating to company financial performance to discuss our primary strategic and operational priorities.
For more information on our shareholder engagement program, please see the “2023 Say-on-Pay and Shareholder Engagement” section in our Compensation Discussion & Analysis on page 65.
Related Persons Transactions: During 2023, Norfolk Southern did not participate in any related persons transactions.
Related persons include our Executive Officers, directors, any nominee for director, 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 is responsible for the review and approval of each related person 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 person 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 person 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:
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the size of the transaction and the amount of consideration payable to the related person(s); |
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the nature of the interest of the applicable director, director nominee, Executive Officer, or 5% shareholder, in the transaction; and |
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whether we have developed an appropriate plan to monitor or otherwise manage the potential conflict of interest. |
The Chair of the Audit Committee reports 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 any related persons transaction.
Anti-Hedging and Anti-Pledging Policies: Our anti-hedging policy, which applies to all officers and members of the Board, provides that our executive and non-executive officers and members of the Board are prohibited from purchasing any financial instruments
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| Norfolk Southern Corporation |
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2024 Proxy Statement 39 |
Corporate Governance
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 Human Capital Management and Compensation Committee and the Board of Directors determine the annual compensation of non-employee directors each year. Directors who are executives of the Company receive no compensation for their Board service. 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 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 Human Capital Management and Compensation Committee and the Board seek to make any changes to non-employee director compensation in a gradual and incremental fashion.
The Company pays for or reimburses directors for expenses related to attending Board and committee meetings, director education programs, and other company business meetings.
Fees. In 2023, each member of the Board received a quarterly fee of $30,000 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. The independent Chair received an additional quarterly fee of $25,000. Beginning in the second quarter of 2023, members of the Special Litigation Committee (a temporary special purpose committee that was formed during 2023 and that is still reviewing litigation matters specific to the East Palestine derailment) each received an additional monthly fee of $5,000, and the chairperson of that Committee received an additional monthly fee of $6,000.
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.
Five directors elected to defer compensation that would have been payable in 2023 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. Norfolk Southern 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.
Long-Term Incentive Plan. Each of our non-employee directors was granted restricted stock units effective on January 26, 2023, or in the case of Adm. Davidson and Ms. DeBiase, on July 31, 2023, in connection with their appointment to the Board. Ms. Miles received an additional award of restricted stock units on April 28, 2023, in connection with her service as Board Chair. Each restricted stock unit represents the economic equivalent of one share of our common stock, and will be settled in shares of our stock. Beginning in 2020, each director was offered a choice as to the form for settlement of shares for the restricted stock unit award between (1) distribution one year after grant, with cash dividend equivalent payments made on the restricted stock units in an amount equal to, and commensurate with, regular quarterly dividends paid on our common stock, or (2) distribution upon leaving the Board, either in a lump sum or in ten annual distributions in accordance with the director’s prior election, with the award credited with dividend equivalents as dividends are paid on our common stock and the dividend equivalents converted into additional restricted stock units or fractions thereof based on the fair market value of our stock on the dividend payment date.
Under the LTIP, 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. Adm. Davidson and Ms. DeBiase received equity awards on July 31, 2023, in accordance with this protocol.
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 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 purchased before 2011 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 donations made under the program. No premiums were paid for these life insurance policies after 2019.
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| Norfolk Southern Corporation |
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2024 Proxy Statement 51 |
Executive Compensation
EXECUTIVE SEVERANCE PLAN
The Board in 2020 adopted the Executive Severance Plan 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. The plan allows our 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. Executives in positions at the executive vice president level and above and selected senior vice presidents are eligible for benefits under the plan in the event of a qualifying termination.
Benefits under the Executive Severance Plan include:
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a payment equal to two times the executive’s salary, paid as a lump sum; |
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a prorated annual incentive for time worked during the year in which the employee was severed if the employee was not retirement eligible; |
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either (i) for a retirement-eligible employee, favorable treatment of long-term incentives in accordance with the terms of the Norfolk Southern LTIP, or (ii) for an employee who is not retirement eligible, cash payment for the full value of restricted share units and the option profit on outstanding stock options, and a prorated cash payment for the value of performance share units; and |
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lump sum payments of $30,000 and $36,000 for outplacement services and health care coverage, respectively. |
To receive the above-listed benefits, an executive must execute a release of any claims against the Company, and the release includes non-disparagement, non-competition, and confidentiality covenants. The Executive Severance Plan does not provide any benefits in the event of a change in control.
The Executive Severance Plan eliminates the potential to exceed 2.99 times an executive’s pay plus annual incentive, so it will not be necessary to seek shareholder approval of future severance benefits for executives who receive benefits under the plan.
INDIVIDUAL AGREEMENT FOR PAYMENT IN CONNECTION WITH TERMINATION
As previously disclosed, we entered into an offer letter agreement with Mr. George, dated August 26, 2019, and which sets forth his compensation and certain other benefits that became effective upon his appointment as Executive Vice President & Chief Financial Officer (“George Offer Letter”). The George Offer Letter provides that although his employment is “at will,” if the Company 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 Company:
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All compensation due as of his termination date, including any applicable annual incentive awards, which awards would be prorated based on his actual employment during the year of termination (payable prior to March 1 of the year following termination); and |
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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 Company.
The Committee determined that it was appropriate to include this term in the offer letter to attract Mr. George to join us as our Executive Vice President & Chief Financial Officer and leave his prior employment.
We have no employment agreements or other employment arrangements with our Named Executive Officers, other than a Retention Agreement entered into with Ann A. Adams as more fully described in the Potential Payments Upon a Change in Control or Other Termination of Employment section beginning on page 98.
CHANGE-IN-CONTROL AGREEMENTS
We have entered into change-in-control agreements with our Named Executive Officers to provide certain economic protections to executives in the event of a termination of employment following a change in control. 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 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 on page 100.
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| 84 2024 Proxy Statement |
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Norfolk Southern Corporation |
Executive Compensation
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.
OTHER COMPENSATION POLICIES
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:
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MINIMUM VALUE |
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5 times annual salary |
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3 times annual salary |
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| Senior Vice Presidents, Vice Presidents |
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1 times annual salary |
Norfolk Southern common stock, stock equivalents held in Norfolk Southern’s 401(k) plan, and RSUs held in our LTIP are counted toward these holdings, but unexercised stock options or unvested PSUs are not counted. Officers may acquire such holdings over a five-year period. All officers currently meet these guidelines or are expected to meet the guidelines within the five-year period.
Please refer to the Beneficial Ownership of Stock table on page 112 for a summary of the number of common shares owned by our directors and Named Executive Officers as of February 1, 2024.
All Executive Officers of Norfolk Southern are required to clear any transaction involving its common stock with Norfolk Southern’s Corporate Secretary prior to the transaction, and pledging or hedging transactions will not be approved.
ANTI-PLEDGING/ANTI-HEDGING POLICY
The Company’s anti-hedging policy, which applies to all executive officers and members of the Board, provides that the Company’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 Company’s securities, whether granted by the Company as part of the officer’s or director’s compensation, or held, directly or indirectly, by the officer or director. Our policy also prohibits executive officers from entering into pledging transactions or positions regarding the Company’s securities. All of our executive officers and directors are in compliance with these policies.
CLAWBACK POLICIES
We have adopted both a mandatory and a supplemental clawback policy.
In November 2023, we adopted a mandatory clawback policy consistent with the NYSE listing requirements. The mandatory policy requires the recoupment of incentive compensation, which is defined as compensation granted, earned, or vested based wholly or in part upon the attainment of a financial reporting measure, in the event that the Company is required to restate its financial results due to the Company’s material non-compliance with any financial reporting requirement under the federal securities laws. Consistent with these requirements, the Company will seek recovery of erroneously awarded incentive-based compensation received by current and former executive officers during the three-year fiscal year period prior to the date the Company is required to prepare an accounting restatement.
In January 2024, we adopted a supplemental clawback policy that provides the Committee the discretion to recoup incentive compensation in all forms including time-and performance-based awards received by a current or former Vice President, Senior Vice President, Executive Vice President, President/CEO or other Executive Officer during the three-year period prior to which the Board or the Committee determines that Detrimental Conduct (as defined below) has occurred. “Detrimental Conduct” occurs when a Vice President or more senior officer engages in conduct that constitutes (a) gross negligence (including gross negligence in supervising the work of others), (b) fraud, (c) intentional misconduct, or (d) violation of a written Company policy that results in a material risk management, operational, safety, or reputational failure. The supplemental clawback policy applies to incentive compensation granted after adoption of the policy, beginning with our 2024 incentive awards and was not applicable to the East Palestine derailment since it occurred in 2023. As discussed above, the Committee was able to exercise negative discretion to reduce the annual incentive payout to zero, thereby aligning overall executive pay outcomes with the impact on shareholders, consistent with the feedback received during our engagements.
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| Norfolk Southern Corporation |
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2024 Proxy Statement 85 |
Executive Compensation
Stock Awards (Column (e))
The amounts reported for Stock Awards are the 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 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 13 to our consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023. For the grant date fair value of only those awards granted to the Named Executive Officers in 2023, see the Grants of Plan-Based Awards Table. For Performance Share Units, the grant date fair value is based on the probable outcome of the performance condition at the time of grant which is based on target performance achieved.
Assuming the highest level of performance is achieved, the value would be as follows: Mr. Shaw, $16,499,816; Mr. George, $3,600,969; Ms. Adams, $3,002,965; Mr. Elkins, $3,002,965; and Mr. Duncan, $3,600,969.
Option Awards (Column (f))
The amounts reported for Option Awards are the full grant date fair values of the awards computed in accordance with FASB ASC Topic 718. For discussions of the relevant assumptions made in calculating these amounts, see note 13 to our consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.
Non-Equity Incentive Plan Compensation (Column (g))
As more fully described in the Compensation Discussion and Analysis, the Committee exercised negative discretion to reduce the 2023 annual incentive awards below the earned 24% of opportunity to zero for all Named Executive Officers.
Change in Pension Value and Nonqualified Deferred Compensation Earnings (Column (h))
For all the Named Executive Officers, the amounts shown in this column solely represent the aggregate increase in the actuarial present value of the Named Executive Officers’ accumulated benefits under the Retirement Plan and the Supplemental Benefit Plan for 2023. In accordance with SEC rules, any increase or decrease in the present value of the benefits under our Retirement Plan is aggregated with any increase or decrease in the present value of the benefits under our Supplemental Benefit Plan.
Pension values may fluctuate significantly from year to year depending on a number of factors, including age, years of service, average annual compensation, and the assumptions used to determine the present value, such as the discount rate and mortality assumptions.
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| 88 2024 Proxy Statement |
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Norfolk Southern Corporation |
Executive Compensation
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Retirement ($) |
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Involuntary
Separation ($) |
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Death ($) |
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Disability ($) |
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Change in Control ($) |
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| Claude E. Elkins |
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Severance Pay |
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1,266,000 |
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3,416,674 |
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Performance Share Units |
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1,172,120 |
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1,172,120 |
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1,172,120 |
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1,172,120 |
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Unvested Stock Options |
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Restricted Stock Units |
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1,027,071 |
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1,027,071 |
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1,027,071 |
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1,027,071 |
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Life Insurance Proceeds |
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1,200,000 |
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TOTAL |
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2,199,191 |
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3,465,191 |
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3,399,191 |
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3,416,674 |
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| Paul B. Duncan |
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Severance Pay |
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2,673,747 |
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3,559,034 |
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Performance Share Units |
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872,792 |
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872,792 |
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Unvested Stock Options |
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3,075 |
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3,075 |
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Restricted Stock Units |
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1,117,132 |
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1,117,132 |
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Life Insurance Proceeds |
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1,250,000 |
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TOTAL |
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2,673,747 |
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3,242,999 |
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1,992,999 |
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3,559,034 |
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 Company’s long-term disability insurance program to any of our Named Executive Officers who terminated employment as a result of total disability.
Severance Pay: For an Involuntary Separation, reflects an amount payable under our Executive Severance Plan, as described in the Compensation Discussion and Analysis.
For a Change in Control, these amounts represent the sum of base salary plus target annual incentive pay times 2.99.
Performance Share Units: For Retirement, Death, or Disability, these amounts represent the estimated dollar value of the annual grants of PSUs to be earned during the performance cycles ending December 31, 2024, and December 31, 2025, assuming an earnout of 78.0% for the grants of PSUs made in 2022 and 63.75% for the grants of PSUs made in 2023. Because the number of PSUs 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, 2024, and December 31, 2025, are also included in the Outstanding Equity Awards at Fiscal Year-End Table. However, because the executives would forfeit these awards but for retirement or death benefit provisions under our 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.
For Involuntary Separation, amounts for Mr. Shaw and Mr. Elkins reflect that each was eligible to retire as of December 31, 2023, and would have been entitled to the retirement benefits described above. For an Involuntary Separation for Mr. George, the table reflects that his performance share units would be treated as if he retired as provided in the George Offer Letter. For Mr. Duncan and Ms. Adams, the amounts reflect a prorated cash payment for the value of PSUs determined under the Executive Severance Plan.
Unvested Stock Options: For Retirement and Death, these amounts represent the value of the unvested stock options for the Named Executive Officer. 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, amounts for Mr. Shaw and Mr. Elkins reflect that each was eligible to retire as of December 31, 2023 and would have been entitled to the retirement benefit provisions described above. For an Involuntary Separation for Mr. George, the table reflects that his unvested stock options would be treated as if he retired as provided in the George Offer Letter. For Mr. Duncan and Ms. Adams, the amounts represent the option profit on outstanding unvested stock options as determined under the Executive Severance Plan.
Restricted Stock Units: For Retirement, Death, and Disability, these amounts represent the dollar value of RSUs. If a participant retires 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 or become disabled.
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| Norfolk Southern Corporation |
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2024 Proxy Statement 99 |
Executive Compensation
For Involuntary Separation, amounts for Mr. Shaw and Mr. Elkins reflect that each was each eligible to retire as of December 31, 2023 and would have been entitled to the retirement benefit provisions described above. For an Involuntary Separation for Mr. George, the table reflects that his RSUs would be treated as if he retired as provided in the George Offer Letter. For Mr. Duncan and Ms. Adams, the amounts represent the value of the RSUs as determined under the Executive Severance Plan.
For a Change in Control, the change-in-control agreements do not provide for the acceleration of any unvested RSUs 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 RSUs if their employment is terminated for any reason other than retirement, disability, or death. The Committee has the authority under the LTIP to waive any restrictions on RSUs.
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.
Ms. Adams’ Departure: With respect to Ms. Adams, this table reflects the benefits that Ms. Adams would have been paid in the event of a termination occurring on December 31, 2023, due to retirement, involuntary separation, death, disability, or a change in control. As previously disclosed by the Company in its Current Report on Form 8-K, filed on February 1, 2024, Ms. Adams will leave her position as Executive Vice President and Chief Transformation Officer of the Company on March 16, 2024. The change in Ms. Adams’ position, as well as changes to certain internal administrative reporting line reorganizations constitutes a “good reason” event under the Executive Severance Plan, entitling Ms. Adams to the benefits described under “Involuntary Separation” in the Post-Employment Benefits table and consistent with the terms and conditions described above under “Executive Severance Plan.”
As previously disclosed, in order to retain Ms. Adams and benefit from her specialized skills relating to her oversight of the Company’s human resources, information technology, and labor relations matters, on January 29, 2024, the Company entered into an agreement with Ms. Adams (the “Retention Agreement”), pursuant to which Ms. Adams will remain an active employee of the Company for a period of time that may extend to July 31, 2025 (unless she is earlier terminated pursuant to the terms of the Retention Agreement). Pursuant to the Retention Agreement and subject to Ms. Adams’ execution of a separation agreement at the time of her departure from the Company, Ms. Adams will retain her entitlement to a “good reason” termination under the Executive Severance Plan and will remain eligible to receive the severance benefits she is entitled to under the Executive Severance Plan when her employment with the Company ends (the “Separation Date”).
The severance benefits that Ms. Adams will receive are materially consistent with the benefits described in the Post-Employment Benefits table above and include: a lump sum payment equal to two times Ms. Adams’ base salary; a prorated annual incentive for time worked in 2024 up to the March 16, 2024 transition date or, if greater, the accrued annual incentive as of her Separation Date; a cash payment for the full value of RSUs and the option profit on outstanding stock options, and a prorated cash payment for the value of PSUs, all calculated as of her Separation Date, or if she becomes a retirement-eligible employee prior to her Separation Date, treatment of her long-term incentives in accordance with the terms of the Company’s LTIP; and lump sum payments of $30,000 and $36,000 for outplacement services and health care coverage, respectively.
Under the Retention Agreement, Ms. Adams will assist in the transition of her prior responsibilities, assist in the transition to new leadership in the Human Resources and Information Technology departments, provide consultation and evaluation with respect to the Company’s organization structure, support on-going and pending litigation involving the Company, assist with the formulation and implementation of the Company’s plans regarding the upcoming round of national labor negotiations beginning in 2025, and perform other duties and responsibilities consistent with her skills and experience. During the time of Ms. Adams’ continued employment, in exchange for her services during the transition period and to incentivize her retention, it is expected that she will receive a base salary of $500,000 and be entitled to equity grants commensurate with her position.
Change-in-Control Agreements
Generally: We have entered into change-in-control agreements with a number of key executives, including our Named Executive Officers employed as of the end of the fiscal year. A Named Executive Officer will only receive the benefits provided under these agreements if:
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a change in control of Norfolk Southern occurs; and |
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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:
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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; |
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a shareholder-approved consolidation or dissolution pursuant to a recommendation of our Board of Directors; |
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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; |
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| 100 2024 Proxy Statement |
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Norfolk Southern Corporation |
Executive Compensation
Termination for Any Other Reason: As noted above, Mr. Shaw and Mr. Elkins were each eligible to retire as of December 31, 2023; accordingly, had employment of either of them 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 Ms. Adams had terminated employment as of December 31, 2023, she would have been eligible for the accrued pension benefit disclosed in the Pension Benefits Table beginning at age 60. Mr. George and Mr. Duncan were not eligible for the benefits shown in the Pension Benefits Table as neither had five years of service as of December 31, 2023.
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 have an Executive Severance Plan that is applicable to all executives at the level of Executive Vice President or above and selected Senior Vice Presidents, as described in our Compensation Discussion and Analysis. The Executive Severance Plan provides the following severance benefits if an eligible executive’s employment is terminated other than for “cause” or for disability under our long-term disability plan, or is terminated by the executive for “good reason” (each term as defined in the Executive Severance Plan). Benefits under the Executive Severance Plan include:
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a payment equal to two times the executive’s salary, paid as a lump sum; |
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a prorated annual incentive for time worked during the year in which the employee was severed if the employee was not retirement eligible; |
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either (i) for a retirement eligible employee, favorable treatment of long-term incentives in accordance with terms of the LTIP, or (ii) for employees who are not retirement eligible, cash payment for the full value of RSUs, the option profit on outstanding unvested stock options based on the closing price of the Company’s stock on the severance date, and a prorated cash payment for the value of PSUs; and |
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lump sum payments of $30,000 and $36,000 for outplacement services and health care coverage, respectively. |
If Mr. George’s employment had been terminated by us for a reason other than for “Cause,” then as provided in the George Offer Letter, he would have been treated as retirement-eligible for purposes of the Executive Severance Plan.
Directors’ Charitable Award Program Benefit: In addition to the benefits described above, on May 1, 2023, Mr. Shaw became eligible to nominate one or more tax-exempt institutions to receive up to $100,000 in the aggregate from Norfolk Southern following his death. 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 the LTIP are 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.
Future Severance Benefits Policy: Our policy is 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. The Board in July 2020 revised the limit to specifically exclude retention of outstanding long-term incentive awards to be consistent with the newly adopted Executive Severance Plan. Most recently, the Executive Severance Plan was revised in November 2022 to clarify that employees above the level of Executive Vice President are covered under the plan, including the Chief Executive Officer (who was not previously subject to such plan).
COMPENSATION POLICY RISK ASSESSMENT
The 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 Company. As part of this assessment, in 2024, the Committee engaged Pay Governance LLC, an independent compensation consultant, 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 Company.
PAY RATIO DISCLOSURE
The ratio of the annual compensation of Alan H. Shaw, our President and Chief Executive Officer (our “CEO”) to the median annual compensation of our other employees in 2023 is 109 to 1. 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.
We used the following methodology to identify the estimated median employee, to determine the median employee’s annual compensation, and to determine annual compensation for our CEO:
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We identified 20,604 U.S. employees of Norfolk Southern Corporation and its consolidated subsidiaries as recorded in our payroll records as of December 31, 2023, excluding our CEO and our non-U.S. employees, and determined our median employee based on the total Medicare wages reported on Form W-2 paid during the twelve-month period ended December 31, 2023, for this total population. In determining the median employee, we did not annualize compensation for |
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| 102 2024 Proxy Statement |
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Norfolk Southern Corporation |
Voting and Proxies
What happens if I return a WHITE proxy card or WHITE voting instruction form but give voting instructions for fewer or more than 13 candidates? You are permitted to vote for fewer than 13 nominees. If you vote for fewer than 13 nominees, your shares will only be voted “FOR” with respect to those nominees you have so marked. If you submit a validly executed WHITE proxy card or WHITE voting instruction form but vote “FOR” more than 13 nominees, all of your votes with respect to the election of directors will be invalid and will not be counted.
What happens if the Investor Group withdraws or abandons its solicitation or fails to comply with the universal proxy rules? If the Investor Group withdraws its nominees, abandons its solicitation, or fails to comply with the universal proxy rules after a shareholder has already granted proxy authority, shareholders can still sign and date a later submitted WHITE proxy card or WHITE voting instruction form. If the Investor Group withdraws its nominees, abandons its solicitation, or fails to comply with the universal proxy rules, any votes cast in favor of any Investor Group Nominee will be disregarded and not be counted, whether such vote is provided on Norfolk Southern’s WHITE proxy card or WHITE voting instruction form or the Investor Group’s blue proxy card or blue voting instruction card.
What is the vote required to elect directors? As described previously, the Investor Group has notified Norfolk Southern of its intention to nominate eight candidates to stand for election as directors at the Annual Meeting in opposition to the nominees recommended by the Board. As a result, assuming such nominees are in fact nominated for election at the Annual Meeting and all such nominations have not been withdrawn by the Investor Group, the number of director nominees will exceed the number of directors to be elected and, as provided under Article II Section 2 of Norfolk Southern’s Bylaws, directors will be elected by a plurality of the votes cast. This means that the 13 director nominees receiving the greatest number of votes cast “FOR” their election will be elected. “WITHHOLD” votes and any broker non-votes will be counted for purposes of determining if there is a quorum at the Annual Meeting for this vote but will not be counted as votes cast and will result in the applicable nominee(s) receiving fewer votes cast “FOR” such nominee(s).
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 2024 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. Withhold votes, 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 Norfolk Southern Board of Directors is soliciting your proxy to vote your shares at the 2024 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 WHITE proxy card.
Why have I received different color proxy cards? The Investor Group has notified Norfolk Southern of its intention to nominate eight candidates to stand for election as directors at the Annual Meeting in opposition to the nominees recommended by the Board. We have provided you with the enclosed WHITE proxy card. The Investor Group may send you a blue proxy card. The Board unanimously recommends using the enclosed WHITE proxy card to vote “FOR” the election of ONLY the 13 nominees recommended by the Board. The Board recommends that you simply DISREGARD the Investor Group’s blue proxy card. If the Investor Group proceeds with its previously announced nominations, we will likely conduct multiple mailings prior to the date of the meeting to ensure that shareholders have our latest proxy information and materials to vote. The latest dated, validly executed proxy you submit will be counted, and, if you wish to vote as recommended by our Board, then you should only submit the WHITE 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.
As a result of the potential proxy solicitation by the Investor Group, we will incur additional costs in connection with our solicitation of proxies. We have retained Innisfree M&A Incorporated (“Innisfree”) to aid in the solicitation of proxies for a fee estimated not to exceed $[●]. Innisfree expects that approximately [●] of its employees will assist in the solicitation. The total amount to be spent for our solicitation of proxies from shareholders for the Annual Meeting in excess of that normally spent for an annual meeting is estimated to be approximately $[●], approximately $[●] of which has been accrued to date. The actual amount could be higher or lower depending on the facts and circumstances arising in connection with this solicitation.
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, Equiniti 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, dating and returning the enclosed WHITE proxy card in the postage-paid envelope provided.
You also may vote by telephone or the internet in the manner described on the WHITE proxy card.
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| Norfolk Southern Corporation |
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2024 Proxy Statement 117 |
Voting and Proxies
Finally, you may attend the Annual Meeting via the internet and vote by ballot during the Annual Meeting. [The Annual Meeting can be accessed by visiting [●] and entering the 16-digit number that is printed in the box marked by an arrow included in the WHITE proxy card mailed to you. Please have your WHITE proxy card 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 WHITE voting instruction form. The record holder will then vote your shares in accordance with your voting instructions.
If you hold shares in street name and do not provide your broker with specific voting instructions on Items 1, 3, and 4, which are considered non-routine matters, your broker does not have the authority to vote on those proposals.
Typically, Item 2 would be considered to be a “routine” matter under NYSE rules. Accordingly, typically, if you hold your shares in street name and do not provide voting instructions to your broker, bank, or other nominee that holds your shares, your broker, bank, or other nominee has discretionary authority under NYSE rules to vote your shares on this proposal. However, to the extent that the Investor Group provides a voting instruction form to shareholders who hold their shares in “street name,” Item 2 will be a “non-routine” matter, and brokers will not have discretionary voting authority to vote on any of the proposals presented at the Annual Meeting. If, however, the Investor Group does not provide a voting instruction form to shareholders who hold their shares in “street name,” then Item 2 would be considered to be a routine matter, and your broker, bank, or other nominee would be able to vote upon the matter if you do not provide them with specific voting instructions. However, in that event, it is possible that a broker may choose not to exercise discretionary authority with respect to the Item 2. In that case, if you do not instruct your broker how to vote with respect to Item 2, your broker may not vote with respect to such proposal.
Certain of our shareholders hold their shares in more than one account and may receive separate proxy cards or voting instruction forms for each of those accounts. To ensure that all of your shares are represented at the Annual Meeting, we recommend that you submit every WHITE proxy card or WHITE voting instruction form you receive.
The Board of Directors strongly urges you to discard and NOT vote using the blue proxy card or voting instruction form sent to you by the Investor Group.
Finally, you may attend the Annual Meeting via the internet and vote by ballot during the Annual Meeting. [The Annual Meeting can be accessed by visiting [●] and entering the 16-digit number that is printed in the box marked by an arrow included in the WHITE voting instruction form 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.] 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 by ballot during the virtual Annual Meeting.
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 [●] the trustee will vote your shares for each item on the WHITE 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.
Because of the expected contested nature of the solicitation, it is very important that you direct the trustee how to vote your plan shares. The Board does not endorse the Investor Group Nominees and unanimously recommends that you use the WHITE voting instruction form to direct your trustee to vote your shares “FOR” ONLY the 13 nominees proposed by the Board (Richard H. Anderson, Philip S. Davidson, Francesca A. DeBiase, Marcela E. Donadio, Mary Kathryn “Heidi” Heitkamp, John C. Huffard, Jr., Christopher T. Jones, Thomas C. Kelleher, Amy E. Miles, Claude Mongeau, Jennifer F. Scanlon, Alan H. Shaw, and John R. Thompson). The Board strongly urges you NOT to vote using any blue voting instruction form that may be sent to you by the Investor Group and strongly urges you not to support the election of the Investor Group Nominees.
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 2024 Annual Meeting and voting by ballot 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 by ballot during the Annual Meeting.
Employee plan participants may change their voting instructions by submitting new voting instructions to [●].
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| 118 2024 Proxy Statement |
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Norfolk Southern Corporation |
Voting and Proxies
If you have already voted using a blue proxy card sent to you by the Investor Group, you have every right to change your vote and we strongly urge you to revoke that proxy by using the WHITE proxy card to vote in favor of ONLY the 13 nominees proposed by the Board of Directors (Richard H. Anderson, Philip S. Davidson, Francesca A. DeBiase, Marcela E. Donadio, Mary Kathryn “Heidi” Heitkamp, John C. Huffard, Jr., Christopher T. Jones, Thomas C. Kelleher, Amy E. Miles, Claude Mongeau, Jennifer F. Scanlon, Alan H. Shaw, and John R. Thompson) by mail, telephone, or via the internet. Only the latest validly executed proxy that you submit will be counted. Any proxy may be revoked at any time prior to its exercise at the Annual Meeting.
How do I participate in 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 who have registered in advance may participate in the Annual Meeting. The Annual Meeting can be accessed by visiting [●] [and entering the 16-digit number that is printed in the box marked by an arrow included in the WHITE proxy card or WHITE voting instruction form 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 [●]. There will be no physical location for in-person attendance at the Annual Meeting.
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.
We are committed to ensuring that shareholders who attend the virtual Annual Meeting are afforded the same rights and opportunities to participate as they would at an in-person meeting, using online tools to ensure shareholder access and participation. The virtual format allows our shareholders the ability to review and/or participate in the Annual Meeting, including the live, online Q&A portion of the annual meeting. The virtual meeting format enhances participation by providing an opportunity for participation by all of our shareholders from around the globe, and the virtual meeting format aligns with our broader sustainability goals.
How do I register for the Annual Meeting? The Annual Meeting will be a virtual shareholder meeting of the shareholders conducted via live webcast. All shareholders of record on [●], 2024 who have registered in advance are invited to participate in the meeting.
In order to attend the virtual Annual Meeting, you must register in advance no later than [●], 2024, at [●] Eastern Time by visiting [●]. [You will need the 16-digit control number included on your WHITE proxy card or WHITE voting instruction form. You will receive a confirmation e-mail with information on how to attend the meeting. On the day of the meeting, you will be able to participate in the annual meeting by visiting [●] and entering the same 16-digit control number you used to pre-register and as shown in your confirmation e-mail. Beneficial shareholders who do not have a 16-digit control number should follow the instructions provided on the voting instruction form provided by your broker, bank, or other nominee. In addition to pre-registering for the meeting, beneficial holders that wish to vote must provide a legal proxy from their bank, broker, or other nominee when they vote at the meeting. Such beneficial owners are strongly encouraged to obtain the legal proxy at least five days prior to the meeting. You will need to have an electronic image (such as a pdf file or scan) of the legal proxy ready to include when voting.]
Additional information regarding the rules and procedures for participating in the virtual Annual Meeting will be provided in our meeting rules of conduct, which shareholders can view during the meeting at the meeting website.
Please note that participation in the meeting is limited due to the capacity of the host platform and access to the meeting will be accepted on a first-come, first-served basis once electronic entry begins. Electronic entry to the meeting will begin at [●] ET and the meeting will begin promptly at [●] ET. [If you cannot attend the meeting or if you are not a shareholder of record, you can still listen to the meeting, which will be available on www.norfolksouthern.com.]
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 [●].
Can I ask questions at the Annual Meeting? This year’s virtual Annual Meeting will include questions submitted online both live and in advance. Questions that are not relevant to the business of the Annual Meeting will be addressed in the Q&A portion of the Annual Meeting.
[Shareholders of record as of the Record Date who have pre-registered and wish to ask a question may submit a question in advance of the meeting at [●] by logging in with the 16-digit number printed in the box marked by an arrow included in your WHITE proxy card or WHITE voting instruction form. Once you are past the login screen, click on “Questions for Management,” type in your question and click “Submit.”]
Live questions may be submitted online beginning shortly before the start of the meeting by typing your question in the “Ask a Question” box in the Annual Meeting portal, at [●] and clicking submit.
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| Norfolk Southern Corporation |
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2024 Proxy Statement 119 |
Pay vs Performance Disclosure
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12 Months Ended |
20 Months Ended |
83 Months Ended |
|
Dec. 31, 2023
USD ($)
|
Dec. 31, 2022
USD ($)
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Dec. 31, 2021
USD ($)
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Dec. 31, 2020
USD ($)
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Dec. 31, 2023 |
Apr. 30, 2022 |
| Pay vs Performance Disclosure |
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| Pay vs Performance Disclosure, Table |
PAY VERSUS PERFORMANCE TABLE AND RELATED DISCLOSURE
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Value of Initial Fixed $100 Investment on December 31, |
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Compensation Actually Paid to PEO 1 |
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Compensation Actually Paid to PEO 2 |
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Average Summary Compensation Total for Non- |
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Average Compensation Actually Paid to Non-PEO NEOs |
|
Southern
Total Shareholder Return |
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Peer Group Total Shareholder Return |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,418,978 |
|
|
|
4,077,950 |
|
|
|
3,478,630 |
|
1,402,195 |
|
132 |
|
148 |
|
1,827 |
|
11.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
9,770,910 |
|
9,615,456 |
|
10,444,401 |
|
1,969,194 |
|
4,239,302 |
|
4,343,073 |
|
134 |
|
130 |
|
3,270 |
|
14.1 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,016,942 |
|
|
|
25,072,294 |
|
4,059,729 |
|
5,783,924 |
|
159 |
|
155 |
|
3,005 |
|
12.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,125,279 |
|
|
|
12,202,837 |
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3,976,507 |
|
2,785,700 |
|
125 |
|
122 |
|
2,013 |
|
10.4 |
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(1) |
PEO 1: Alan H. Shaw has been our Chief Executive Officer since May 1, 2022. |
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(2) |
PEO 2: James A. Squires was our Chief Executive Officer from June 1, 2015, to May 1, 2022. |
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(3) |
The following non-principal executive officer (PEO) named executive officers (NEOs) are reflected in the averages: For 2023, Mr. George, Mr. Duncan, Ms. Adams, and Mr. Elkins. For 2022, Mr. George, Ms. Sanborn, Ms. Adams, and Mr. Elkins. For 2021, Mr. Shaw, Mr. George, Ms. Sanborn, and Ms. Adams. For 2020, Mr. Shaw, Mr. George, Ms. Sanborn, Ms. Adams, Mr. Scheib, and Mr. Wheeler. |
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(4) |
To calculate 2023 compensation actually paid, the following amounts were deducted from and added to Summary Compensation Table total compensation: | Summary Compensation Table to Compensation Actually Paid Reconciliation
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| |
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Average of Non-PEO Named Executive Officers |
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Components of Compensation |
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Summary Compensation Table (SCT) Total |
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Deductions From SCT Total |
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Stock Awards and Option Awards Value |
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10,000,331 |
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2,200,920 |
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Change in Pension Value and Nonqualified Deferred Compensation Earnings |
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2,171,580 |
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582,978 |
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Additions to SCT Total (i) |
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Year-End Fair Value of Equity Awards Granted During the Year Remaining Unvested |
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3,661,626 |
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1,021,970 |
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Change in Value During the Year of Prior-Year Awards Remaining Unvested |
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(1,213,133 |
) |
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(410,891 |
) |
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Change in Value During the Year of Prior-Year Awards Vesting During the Year |
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(225,683 |
) |
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(123,238 |
) |
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Dividend Equivalent Payments Made on Unvested Awards |
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357,116 |
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100,656 |
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Current-Year Pension Service Cost |
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250,957 |
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118,966 |
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Value of Changes in Pension Plan |
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0 |
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0 |
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Compensation Actually Paid |
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| |
(i) |
Amounts were calculated in accordance with the SEC methodology for determining compensation actually paid for each year shown. Fair values for equity awards were determined as of each measurement date using valuation methodologies and assumptions consistent with those used to estimate fair value at grant under US GAAP. The valuation assumptions used to estimate the year-end fair value of PSUs differed from those used for grant-date estimates in that they took into account the |
| |
most recent estimated earnout percentage of the awards at each year end, and updated Monte Carlo simulations of relative total shareholder returns for Norfolk Southern and the relevant peer companies; and the vesting-date value of PSUs was calculated using the actual earnout percentage for the performance period. Year-end and vesting-date valuations of outstanding stock options used a shorter expected option term than the 7 years used for grant-date fair values to take into account the passage of time, and used updated risk-free interest rates to reflect changes in market interest rates between the grant date and the valuation dates. Both the year-end and vesting date valuations of PSUs, stock options, and RSUs used current share prices as of each valuation date, rather than the grant-date share price. |
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(5) |
The peer group total shareholder return calculations are based on the Standard & Poor’s (S&P) Railroad Stock Price Index. |
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(6) |
After-tax ROAIC used here is a non-GAAP financial measure and is calculated by dividing Norfolk Southern’s net operating profit after-tax (defined as net income excluding interest expense, taxes on interest, and interest on operating lease liabilities, 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). As described in the Compensation Discussion and Analysis, 2023 ROAIC is adjusted for the accounting charges relating to the East Palestine derailment and to exclude the effects of the acquisition of the Cincinnati Southern Railway. Excluding such adjustments, 2023 ROAIC would have been 8.4%. |
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| Company Selected Measure Name |
After-tax ROAIC
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| Named Executive Officers, Footnote |
The following non-principal executive officer (PEO) named executive officers (NEOs) are reflected in the averages: For 2023, Mr. George, Mr. Duncan, Ms. Adams, and Mr. Elkins. For 2022, Mr. George, Ms. Sanborn, Ms. Adams, and Mr. Elkins. For 2021, Mr. Shaw, Mr. George, Ms. Sanborn, and Ms. Adams. For 2020, Mr. Shaw, Mr. George, Ms. Sanborn, Ms. Adams, Mr. Scheib, and Mr. Wheeler.
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| Peer Group Issuers, Footnote |
The peer group total shareholder return calculations are based on the Standard & Poor’s (S&P) Railroad Stock Price Index.
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| Adjustment To PEO Compensation, Footnote |
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(4) |
To calculate 2023 compensation actually paid, the following amounts were deducted from and added to Summary Compensation Table total compensation: | Summary Compensation Table to Compensation Actually Paid Reconciliation
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| |
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Average of Non-PEO Named Executive Officers |
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Components of Compensation |
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Summary Compensation Table (SCT) Total |
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Deductions From SCT Total |
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Stock Awards and Option Awards Value |
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10,000,331 |
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2,200,920 |
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Change in Pension Value and Nonqualified Deferred Compensation Earnings |
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|
2,171,580 |
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|
|
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|
582,978 |
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Additions to SCT Total (i) |
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Year-End Fair Value of Equity Awards Granted During the Year Remaining Unvested |
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3,661,626 |
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1,021,970 |
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Change in Value During the Year of Prior-Year Awards Remaining Unvested |
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(1,213,133 |
) |
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|
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(410,891 |
) |
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Change in Value During the Year of Prior-Year Awards Vesting During the Year |
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(225,683 |
) |
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(123,238 |
) |
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Dividend Equivalent Payments Made on Unvested Awards |
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357,116 |
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100,656 |
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Current-Year Pension Service Cost |
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250,957 |
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118,966 |
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Value of Changes in Pension Plan |
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0 |
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0 |
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|
|
Compensation Actually Paid |
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|
|
|
|
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|
|
|
|
|
| |
(i) |
Amounts were calculated in accordance with the SEC methodology for determining compensation actually paid for each year shown. Fair values for equity awards were determined as of each measurement date using valuation methodologies and assumptions consistent with those used to estimate fair value at grant under US GAAP. The valuation assumptions used to estimate the year-end fair value of PSUs differed from those used for grant-date estimates in that they took into account the |
| |
most recent estimated earnout percentage of the awards at each year end, and updated Monte Carlo simulations of relative total shareholder returns for Norfolk Southern and the relevant peer companies; and the vesting-date value of PSUs was calculated using the actual earnout percentage for the performance period. Year-end and vesting-date valuations of outstanding stock options used a shorter expected option term than the 7 years used for grant-date fair values to take into account the passage of time, and used updated risk-free interest rates to reflect changes in market interest rates between the grant date and the valuation dates. Both the year-end and vesting date valuations of PSUs, stock options, and RSUs used current share prices as of each valuation date, rather than the grant-date share price. |
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| Non-PEO NEO Average Total Compensation Amount |
$ 3,478,630
|
$ 4,239,302
|
$ 4,059,729
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$ 3,976,507
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| Non-PEO NEO Average Compensation Actually Paid Amount |
$ 1,402,195
|
4,343,073
|
5,783,924
|
2,785,700
|
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|
| Adjustment to Non-PEO NEO Compensation Footnote |
| |
(4) |
To calculate 2023 compensation actually paid, the following amounts were deducted from and added to Summary Compensation Table total compensation: | Summary Compensation Table to Compensation Actually Paid Reconciliation
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|
| |
|
|
|
|
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|
Average of Non-PEO Named Executive Officers |
|
Components of Compensation |
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Summary Compensation Table (SCT) Total |
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|
Deductions From SCT Total |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Awards and Option Awards Value |
|
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10,000,331 |
|
|
|
|
|
|
|
2,200,920 |
|
|
|
|
|
|
Change in Pension Value and Nonqualified Deferred Compensation Earnings |
|
|
2,171,580 |
|
|
|
|
|
|
|
582,978 |
|
|
|
|
|
|
Additions to SCT Total (i) |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year-End Fair Value of Equity Awards Granted During the Year Remaining Unvested |
|
|
3,661,626 |
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|
|
|
|
|
|
1,021,970 |
|
|
|
|
|
|
Change in Value During the Year of Prior-Year Awards Remaining Unvested |
|
|
(1,213,133 |
) |
|
|
|
|
|
|
(410,891 |
) |
|
|
|
|
|
Change in Value During the Year of Prior-Year Awards Vesting During the Year |
|
|
(225,683 |
) |
|
|
|
|
|
|
(123,238 |
) |
|
|
|
|
|
Dividend Equivalent Payments Made on Unvested Awards |
|
|
357,116 |
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|
|
|
|
|
|
100,656 |
|
|
|
|
|
|
Current-Year Pension Service Cost |
|
|
250,957 |
|
|
|
|
|
|
|
118,966 |
|
|
|
|
|
|
Value of Changes in Pension Plan |
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|
0 |
|
|
|
|
|
|
|
0 |
|
|
|
|
|
|
Compensation Actually Paid |
|
|
|
|
|
|
|
|
|
|
|
|
| |
(i) |
Amounts were calculated in accordance with the SEC methodology for determining compensation actually paid for each year shown. Fair values for equity awards were determined as of each measurement date using valuation methodologies and assumptions consistent with those used to estimate fair value at grant under US GAAP. The valuation assumptions used to estimate the year-end fair value of PSUs differed from those used for grant-date estimates in that they took into account the |
| |
most recent estimated earnout percentage of the awards at each year end, and updated Monte Carlo simulations of relative total shareholder returns for Norfolk Southern and the relevant peer companies; and the vesting-date value of PSUs was calculated using the actual earnout percentage for the performance period. Year-end and vesting-date valuations of outstanding stock options used a shorter expected option term than the 7 years used for grant-date fair values to take into account the passage of time, and used updated risk-free interest rates to reflect changes in market interest rates between the grant date and the valuation dates. Both the year-end and vesting date valuations of PSUs, stock options, and RSUs used current share prices as of each valuation date, rather than the grant-date share price. |
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| Compensation Actually Paid vs. Total Shareholder Return |
Compensation Actually Paid Compared to TSR As shown in the chart below, compensation actually paid (“CAP”) to the PEOs and the non-PEO NEOs is aligned with total shareholder return on Norfolk Southern’s stock. This is primarily because the majority of compensation to the Named Executive Officers is in the form of long-term, stock-based incentives which are tied directly to stock price, as described in the CD&A report. Mr. Squires’ CAP was reduced substantially in 2022 due to his retirement on May 1 and the resulting pro-rata forfeiture of the stock incentives granted to him in that year, and partial-year payment of his salary and annual incentive award. Norfolk Southern’s cumulative TSR compared favorably with the peer group for 2020 through 2022, and declined somewhat in 2023 largely due to the effects of the East Palestine derailment.
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| Compensation Actually Paid vs. Net Income |
Compensation Actually Paid Compared to Net Income As shown in the chart below, CAP to the PEOs and other NEOs is generally, but not directly, aligned with net income. This is primarily because the majority of compensation to the named executive officers is in the form of long-term, stock-based incentives which are sensitive to changes in stock price. Compensation to our Named Executive Officers is not tied directly to net income, although annual incentive awards are partially based on operating income.
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| Compensation Actually Paid vs. Company Selected Measure |
Compensation Actually Paid Compared to ROAIC As described in the CD&A report, three-year average ROAIC is the primary performance measure that determines the number of shares earned under our PSU awards, and 50% or more of our Named Executive Officers’ long-term incentiv e awards are made in PSUs. Because of ROAIC’s impact on the number of PSU awards earned, we believe that after-tax ROAIC is the most important financial performance measure used in determining CAP to our Named Executive Officers. As required by SEC guidance, we are presenting our one-year ROAIC for each listed year, rather than our three-year average ROAIC. As shown in the chart below, Norfolk Southern’s annual after-tax ROAIC increased significantly between 2000 and 2022, and declined in 2023, and CAP to the PEOs and other NEOs is generally aligned with this performance measure. However, because the majority of compensation to the named executive officers is in the form of stock-based incentives, total shareholder return has a more significant effect on CA |
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| Total Shareholder Return Vs Peer Group |
Compensation Actually Paid Compared to TSR As shown in the chart below, compensation actually paid (“CAP”) to the PEOs and the non-PEO NEOs is aligned with total shareholder return on Norfolk Southern’s stock. This is primarily because the majority of compensation to the Named Executive Officers is in the form of long-term, stock-based incentives which are tied directly to stock price, as described in the CD&A report. Mr. Squires’ CAP was reduced substantially in 2022 due to his retirement on May 1 and the resulting pro-rata forfeiture of the stock incentives granted to him in that year, and partial-year payment of his salary and annual incentive award. Norfolk Southern’s cumulative TSR compared favorably with the peer group for 2020 through 2022, and declined somewhat in 2023 largely due to the effects of the East Palestine derailment.
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| Tabular List, Table |
Most Important Performance Measures to Link Compensation Actually Paid to Company Performance The four measures listed below represent the most important performance measures we used to link compensation actually paid to our Named Executive Officers in 2023 to Company performance, as described in the Compensation Discussion and Analysis (“CD&A”) sections titled “2023 Annual Incentives” and “Long-Term Incentive Awards.”
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Most Important Performance Measures |
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After-Tax Return On Average Invested Capital |
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Operating Income |
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Annual Revenue |
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Total Shareholder Return |
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| Total Shareholder Return Amount |
$ 132
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134
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159
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125
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| Peer Group Total Shareholder Return Amount |
148
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130
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155
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122
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| Net Income (Loss) |
$ 1,827,000,000
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$ 3,270,000,000
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$ 3,005,000,000
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$ 2,013,000,000
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| Company Selected Measure Amount |
0.114
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0.141
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0.127
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0.104
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| PEO Name |
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Alan H. Shaw
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James A. Squires
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| Measure:: 1 |
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| Pay vs Performance Disclosure |
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| Name |
After-Tax Return On Average Invested Capital
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| Non-GAAP Measure Description |
After-tax ROAIC used here is a non-GAAP financial measure and is calculated by dividing Norfolk Southern’s net operating profit after-tax (defined as net income excluding interest expense, taxes on interest, and interest on operating lease liabilities, 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). As described in the Compensation Discussion and Analysis, 2023 ROAIC is adjusted for the accounting charges relating to the East Palestine derailment and to exclude the effects of the acquisition of the Cincinnati Southern Railway. Excluding such adjustments, 2023 ROAIC would have been 8.4%.
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| Measure:: 2 |
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| Pay vs Performance Disclosure |
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| Name |
Operating Income
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| Measure:: 3 |
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| Pay vs Performance Disclosure |
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| Name |
Annual Revenue
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| Measure:: 4 |
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| Pay vs Performance Disclosure |
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| Name |
Total Shareholder Return
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| Alan H. Shaw [Member] |
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| Pay vs Performance Disclosure |
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| PEO Total Compensation Amount |
$ 13,418,978
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$ 9,770,910
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| PEO Actually Paid Compensation Amount |
4,077,950
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10,444,401
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| Alan H. Shaw [Member] | Stock Awards and Option Awards Value [Member] |
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| Pay vs Performance Disclosure |
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| Adjustment to Compensation, Amount |
10,000,331
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| Alan H. Shaw [Member] | Change in Pension Value and Nonqualified Deferred Compensation Earnings [Member] |
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| Pay vs Performance Disclosure |
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| Adjustment to Compensation, Amount |
2,171,580
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| Alan H. Shaw [Member] | YearEnd Fair Value of Equity Awards Granted During the Year Remaining Unvested [Member] |
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| Pay vs Performance Disclosure |
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| Adjustment to Compensation, Amount |
3,661,626
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| Alan H. Shaw [Member] | During the Year of PriorYear Awards Remaining Unvested [Member] |
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| Pay vs Performance Disclosure |
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| Adjustment to Compensation, Amount |
(1,213,133)
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| Alan H. Shaw [Member] | During the Year of PriorYear Awards Vesting During the Year [Member] |
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| Pay vs Performance Disclosure |
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| Adjustment to Compensation, Amount |
(225,683)
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| Alan H. Shaw [Member] | Dividend Equivalent Payments Made on Unvested Awards [Member] |
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| Pay vs Performance Disclosure |
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| Adjustment to Compensation, Amount |
357,116
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| Alan H. Shaw [Member] | CurrentYear Pension Service Cost [Member] |
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| Pay vs Performance Disclosure |
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| Adjustment to Compensation, Amount |
250,957
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| Alan H. Shaw [Member] | Value of Changes in Pension Plan [Member] |
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| Pay vs Performance Disclosure |
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| Adjustment to Compensation, Amount |
0
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| James A. Squires [Member] |
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| Pay vs Performance Disclosure |
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| PEO Total Compensation Amount |
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9,615,456
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$ 14,016,942
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$ 14,125,279
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| PEO Actually Paid Compensation Amount |
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$ 1,969,194
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$ 25,072,294
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$ 12,202,837
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| Non-PEO NEO | Stock Awards and Option Awards Value [Member] |
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| Pay vs Performance Disclosure |
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| Adjustment to Compensation, Amount |
2,200,920
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| Non-PEO NEO | Change in Pension Value and Nonqualified Deferred Compensation Earnings [Member] |
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| Pay vs Performance Disclosure |
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| Adjustment to Compensation, Amount |
582,978
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| Non-PEO NEO | YearEnd Fair Value of Equity Awards Granted During the Year Remaining Unvested [Member] |
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| Pay vs Performance Disclosure |
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| Adjustment to Compensation, Amount |
1,021,970
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| Non-PEO NEO | During the Year of PriorYear Awards Remaining Unvested [Member] |
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| Pay vs Performance Disclosure |
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| Adjustment to Compensation, Amount |
(410,891)
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| Non-PEO NEO | During the Year of PriorYear Awards Vesting During the Year [Member] |
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| Pay vs Performance Disclosure |
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| Adjustment to Compensation, Amount |
(123,238)
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| Non-PEO NEO | Dividend Equivalent Payments Made on Unvested Awards [Member] |
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| Pay vs Performance Disclosure |
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| Adjustment to Compensation, Amount |
100,656
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| Non-PEO NEO | CurrentYear Pension Service Cost [Member] |
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| Pay vs Performance Disclosure |
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| Adjustment to Compensation, Amount |
118,966
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| Non-PEO NEO | Value of Changes in Pension Plan [Member] |
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| Pay vs Performance Disclosure |
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| Adjustment to Compensation, Amount |
$ 0
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