UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities

Exchange Act of 1934 (Amendment No. )

       
þ   Filed by the Registrant o   Filed by a Party other than the Registrant

 

Check the appropriate box:
o Preliminary Proxy Statement
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þ Definitive Proxy Statement
o Definitive Additional Materials
o Soliciting Material Under Rule 14a-12

  

Norfolk Southern Corporation

(Name of Registrant as Specified In Its Charter)

 

 
(Name of Person(s) Filing Proxy Statement, if Other than the Registrant)

   
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o Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11.
 
 

Table of Contents
 

 

 

 
 

Table of Contents
 

Cautionary Note Regarding Forward-Looking Statements

 

Certain statements in this Proxy Statement are “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, as amended, including but not limited to statements included in the letter from Lead Director Steven F. Leer and in the section titled “Business Highlights.” In some cases, forward-looking statements may be identified by the use of words like “believe,” “expect,” “anticipate,” “estimate,” “plan,” “consider,” “project,” and similar terminology with references to the future. Forward-looking statements reflect our good- faith evaluation of information available at the time the forward-looking statements were made. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond the Corporation’s control. These and other important factors, including those discussed under “Risk Factors” in the Corporation’s Form 10-K for the year ended December 31, 2021, as well as the Corporation’s other public filings with the Securities and Exchange Commission (“SEC”), may cause our actual results, performance or achievement to differ materially from those expressed or implied by these forward-looking statements. Forward-looking statements are not, and should not be relied upon as a guarantee of future performance or results, nor will they necessarily prove to be accurate indications of the times at or by which any such performance or results will be achieved. As a result, actual outcomes and results may differ materially from those expressed in forward-looking statements. We undertake no obligation to update or revise forward-looking statements.

 

Incorporation by Reference

 

To the extent that this Proxy Statement has been or will be specifically incorporated by reference into any other filing of Norfolk Southern Corporation under the Securities Act of 1933 or the Securities Exchange Act of 1934, the sections of this Proxy Statement entitled “Report of the Audit Committee” (to the extent permitted by the rules of the SEC) and“Compensation Committee Report” shall not be deemed to be so incorporated, unless specifically provided otherwise in such filing.

 

Website references throughout this document are provided for convenience only, and the content on the referenced websites is not incorporated by reference into this document.

 
 

Table of Contents
 

 

 

Norfolk Southern Corporation
650 West Peachtree Street, NW
Atlanta, Georgia 30308

Notice of 2022 Annual Meeting of Shareholders

       
AGENDA
At the Annual Meeting of Norfolk Southern Corporation (“Norfolk Southern” or the “Corporation”), shareholders will vote on the following items:
ITEM 1 Election of the 14 directors named in the proxy statement for a one- year term
ITEM 2

Ratification of the appointment of KPMG LLP, independent registered public accounting firm, as our independent auditors for 2022

ITEM 3 Approval of the advisory resolution on executive compensation
ITEM 4 A shareholder proposal regarding reducing the percentage of shareholders required to call a special meeting
     
   

Such other business as properly may come before the meeting and any adjournments or postponements.

VOTING

Each share of common stock is entitled to one vote on each of the items to be voted on at the Annual Meeting.

YOUR VOTE IS VERY IMPORTANT

If you do not expect to attend the virtual Annual Meeting, we urge you to vote by telephone or Internet as described below, or, if you received your materials by mail, by completing, dating, and signing the proxy card/voting instruction form, and returning it in the accompanying envelope.

You may revoke your proxy or instructions at any time before your shares are voted by following the procedures described in “Voting and Proxies” beginning on page 76.

PROXY VOTING METHODS

Even if you plan to attend the virtual Annual Meeting, please vote right away by using one of the following advance voting methods (see “Voting and Proxies” beginning on page 76 for additional details). Make sure to have the proxy card/voting instruction form or Notice of Internet Availability in hand, and follow the instructions. You can vote in advance in one of three ways:

 

         
VIA THE INTERNET   BY TELEPHONE   BY MAIL
Visit the website
listed on the proxy
card/voting
instruction form or
Notice of Internet
Availability to vote
  Call the telephone
number on the proxy
card/voting
instruction form or
Notice of Internet
Availability to vote
  Complete, sign, and
date, and then return
the proxy card/
voting instruction
form in the enclosed
envelope to vote
     
     
  Date and Time  
  Thursday, May 12, 2022,
8:30 A.M., Eastern Daylight Time
 
     
     
  Virtual Meeting  
  This year’s meeting is a virtual
shareholders meeting at:
www.virtualshareholdermeeting.com/NSC2022
 
     
     
  Record Date  
  Only shareholders of record as of
the close of business on March 4,
2022, will be entitled to notice
of and to vote at the Annual
Meeting.
 
     
     
  Attendance  
  Only shareholders or their legal
proxies may attend the virtual
Annual Meeting. Please refer to
page 77 for more information
about joining the virtual Annual
Meeting.
 
     
     


 

By order of the Board of Directors, DENISE W. HUTSON

Corporate Secretary
Dated: March 31, 2022

 

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE SHAREHOLDER MEETING TO BE HELD ON MAY 12, 2022
Pursuant to rules promulgated by the Securities and Exchange Commission (“SEC”), we have elected to provide access to our proxy materials by notifying you of the availability of our proxy materials on the Internet. On or about March 31, 2022, we are sending an Important Notice Regarding the Availability of Proxy Materials (the “Notice of Internet Availability”) to certain of our shareholders of record, and we are sending a paper copy of the proxy materials to those shareholders of record who have requested a paper copy. Brokers and other nominees who hold shares on behalf of beneficial owners may be sending their own similar notice.
In accordance with SEC rules, you may access our Notice and Proxy Statement, our Annual Report, and our form of proxy at http://www.proxyvote.com, which does not have “cookies” that identify visitors to the site. The Notice of Internet Availability also includes instructions for shareholders to request, at no charge, a printed copy of these materials. In addition, our Notice and Proxy Statement and Annual Report are available on our website at www.norfolksouthern.com.

 

 
 

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Letter to Shareholders

 

 

 

March 31, 2022

 

Fellow Shareholder,

 

On behalf of your Board of Directors, I invite you to join our 2022 Annual Meeting of Shareholders on May 12, 2022.

 

Please refer to the Notice of Meeting page for instructions on how to access the virtual Annual Meeting.

 

This document includes the formal notice of the meeting and proxy statement. The proxy statement tells you about the agenda, procedures, and rules of conduct for the meeting. It also describes how the Board operates, gives information about our director candidates, and provides information about items of business to be conducted at the meeting.

 

Your vote is important! I encourage you to review the proxy materials and vote as soon as possible to ensure that your shares are represented and voted. You may vote by telephone or over the Internet, or, if you receive these materials by mail, by completing, signing, dating, and returning the enclosed proxy card/voting instruction form.

 

Three-Year Strategic Plan Achievements & 2021 Performance. Our management team delivered upon our company’s three-year strategic plan, producing industry-leading total shareholder return of 110% over the course of our plan, and an all-time record full year operating ratio of 60.1%, in the face of significant headwinds associated with the pandemic and global supply chain disruptions. Thanks to regimented control of capital spending and operating expenses by management, your Board approved cumulative shareholder distributions totaling nearly $10 billion between 2019 and 2021. In addition, earnings per share grew by 27% over the same three-year period. Your Board will continue to focus on returning capital to shareholders, while ensuring the company has strong liquidity.

 

In 2021, the company grew revenue 14% over 2020 results, resulting in record income from railway operations of $4.45 billion. Norfolk Southern’s powerful 2021 results are indicative of our employees’ ability to adapt and innovate against a challenging environment. Their hard work and dedication

   

in identifying creative ways to overcome challenges allowed Norfolk Southern to continue to meet its commitments, and enhance shareholder value.

 

Financial information is provided in the 2021 Annual Report on Form 10-K, enclosed with the proxy materials, and available online to all shareholders.

 

Digital Transformation. Norfolk Southern’s innovation is also demonstrated in its continued digital transformation. Our company is driven by a focus on data, automation, and self-service technologies that advances a comprehensive technology strategy to improve the productivity of our people, enhance the safety and efficiency of our operations, and enrich the experience of our customers. Management introduced digital tools such as an industrial development website for businesses seeking rail-served sites and app-based technologies for employees that lay the groundwork for the digital railroad of the future.

 

Corporate Responsibility. Our commitment to sustainability is integrated into every aspect of our company. As one of the most sustainable ways to move the goods that power our economy, rail provides shippers with an opportunity to significantly reduce their carbon footprint. Norfolk Southern is partnering with our customers to help them avoid 15 million metric tons of carbon emissions annually, and in 2021, set a science-based target to further reduce our carbon emissions. The company was also awarded an A- rating by CDP, the leading carbon disclosure system for the global business community.

 

Corporate Governance. Our Board is concentrated on vigorous oversight, careful governance, and representing your interests. We are dedicated to understanding your views on topics such as Diversity, Equity, and Inclusion (“DEI”), compensation, financial performance, and climate change, and are devoted to management’s shareholder engagement efforts so that we are well positioned to consider your interests.

 

Through our robust committee structure, the Board ensures oversight of the issues that are important to you. The Board is committed to safety as a core value of Norfolk Southern, and we continue to use our Safety Committee to consider safety topics regularly. In addition, in 2021, the Board added oversight of cybersecurity and cyber-incident response to the Finance and Risk Management Committee’s charter. With significant expertise and representation from the technology and cybersecurity fields, our Board offers valuable guidance to help ensure the safety and security of our organization as new threats emerge.

 

Your Board also recognizes that it is the talent, dedication, and resolve of our people that play the biggest role in delivering enduring excellence. Therefore, oversight

   

of human capital management was added to the Compensation Committee’s charter in 2021. A key element of the Board’s understanding of human capital management strategies is ensuring that we create a workplace that is committed to DEI. To this end, senior management reinvigorated its Inclusion Leadership Council and appointed a senior leader dedicated to overseeing diversity initiatives.

 

The strength of your Board, both in terms of broad experience and diversity, is critical to working with the company’s management team and driving solid returns for all shareholders. I encourage you to review the qualifications, skills, and experience of each of our 14 director nominees as presented in this Proxy Statement.

 

Leadership Transitions. Your Board’s commitment to orderly succession planning was demonstrated with Alan Shaw’s appointment as President in light of the planned retirement of Chairman and CEO Jim Squires on May 1, 2022. Alan will also join the Board upon becoming CEO at Jim’s retirement. Alan is one of the freight industry’s most respected leaders, with 27 years of experience at Norfolk Southern in operations, marketing, and finance. His unique combination of skills and experience will allow him to continue to drive improvement, provide a deep-seated understanding of our customers and the markets we serve, and grow shareholder value. Alan is the right leader to guide Norfolk Southern in its next chapter.

 

In January, your Board named Director Amy Miles as independent chair of the Board, effective May 1, 2022. Amy’s leadership, deep financial expertise, and service at other companies make her a natural fit to chair Norfolk Southern’s Board of Directors. Jim Squires is also one of your Board nominees this year as part of our transition plans. We are grateful for Jim’s many years of service to the company and congratulate him on his retirement. We are confident that the future of Norfolk Southern is in good hands with the leadership of Amy Miles and Alan Shaw, and the entire dedicated Board and management team.

 

Thank you for allowing me the honor to serve the interests of all shareholders as your Lead Director on our Board of Directors – and thank you for your continued confidence and investment in Norfolk Southern Corporation.

 

Sincerely,

 

 

 

 

Steven F. Leer
Lead Director

         
 
 

Table of Contents

 

       
  2022 PROXY SUMMARY 1  
  Voting Matters 1  
  Director Nominees 2  
       
  BUSINESS HIGHLIGHTS 3  
  2021 Business Highlights 3  
  ESG Highlights 5  
       
  CORPORATE GOVERNANCE AND THE BOARD 8  
  ITEM 1: Election of the 14 Directors Named in the Proxy Statement for a One-Year Term 8  
  Nominees - For Terms Expiring in 2023 8  
  Qualifications of Directors and Nominees 13  
  Director Independence 15  
  Governance Framework and Practices 16  
  Leadership Transitions 16  
  Board Leadership Structure 16  
  Board Self-Evaluation Process 16  
  Board Refreshment and Succession Planning Policy 16  
  Retirement Policy 17  
  Director Education 17  
  Director Elections Majority Voting Policy and Resignation Requirement 17  
  Proxy Access 17  
  Special Meetings 17  
  Shareholder Engagement 17  
  Risk Oversight 18  
  Related Persons Transactions 18  
  Anti-Hedging and Anti-Pledging Policies 19  
  The Thoroughbred Code of Ethics 19  
  Board Composition and Attendance 19  
  Committees of the Board 19  
  Compensation Committee Interlocks and Insider Participation 22  
  Compensation of Directors 23  
       
  AUDIT COMMITTEE MATTERS 26  
  ITEM 2: Ratification of Appointment of Independent Registered Public Accounting Firm 26  
         
  Audit Committee Report 27  
       
  EXECUTIVE COMPENSATION 28  
  ITEM 3: Approval of Advisory Resolution on Executive Compensation 28  
  Compensation Committee Report 30  
  Compensation Discussion and Analysis 31  
  Our 2021 Named Executive Officers 31  
  Leadership Transition 31  
  Executive Summary 32  
  Objectives of Compensation Program 35  
  Compensation Governance 35  
  Compensation Policies 37  
  Compensation Components 38  
  Severance Arrangements and Change-in-Control Agreements 47  
  Impact of the Tax Treatment of Awards on Norfolk Southern’s Compensation Policies 48  
  Share Ownership Guidelines for Officers 48  
  Policies and Decisions Regarding the Adjustment or Recovery of Awards 49  
  Executive Compensation Tables 50  
  Summary Compensation Table 50  
  2021 Grants of Plan-Based Awards 52  
  Outstanding Equity Awards at Fiscal Year-End 2021 56  
  Option Exercises and Stock Vested in 2021 58  
  Retirement Benefits 58  
  Deferred Compensation 60  
  Potential Payments Upon a Change in Control or Other Termination of Employment 61  
  Compensation Policy Risk Assessment 68  
  Pay Ratio Disclosure 68  
       
  SHAREHOLDER PROPOSALS 70  
  ITEM 4: Shareholder Proposal 70  
  Shareholder Proposal Deadlines 72  
  Shareholder Recommendations and Nominations 72  
  Other Matters 73  
       
  STOCK OWNERSHIP INFORMATION 74  
  Beneficial Ownership of Stock 74  
  Delinquent Section 16(a) Reports 75  
       
  VOTING AND PROXIES 76  
  Q&A 76  
       
       
       
       
       
       
       

 
 

Table of Contents
 

2022 Proxy Summary

 

This summary highlights information contained elsewhere in this Proxy Statement. This summary does not contain all of the information you should consider, and you should read the entire Proxy Statement before voting.

 

Voting Matters

 

  ITEM DESCRIPTION RECOMMENDATION PAGE  
  1 Election of the 14 directors named in the proxy statement for a one-year term FOR EACH NOMINEE 8  
  2

Ratification of appointment of independent registered public accounting firm

FOR 26  
  3 Approval of advisory resolution on executive compensation FOR 28  
  4 Shareholder proposal regarding reducing the percentage of shareholders required to call a special meeting AGAINST 70  

 

          Norfolk Southern Corporation         Page 1         www.norfolksouthern.com          
   
 
 

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2022 Proxy Summary | 2022 Annual Meeting and Proxy Statement

 

Director Nominees

12 of 14 director nominees are independent
Highly-qualified directors with diversity of skills, background, and experience

 

 

 

Name

 

Age

 

Director Since

 

Principal Occupation

 

Independent

 

Committee Memberships1

 
  Thomas D. Bell, Jr. 72 2010

Chairman

Mesa Capital Partners, LLC

ü

Compensation

Finance and Risk Management

 
  Mitchell E. Daniels, Jr. 73 2016

President

Purdue University

ü

Compensation
Executive

Governance and Nominating (Chair)

 
  Marcela E. Donadio 67 2016 Former Partner and Americas Oil & Gas Sector Leader  
Ernst & Young LLP
ü

Audit (Chair)
Executive

Finance and Risk Management

 
  John C. Huffard, Jr. 54 2020

Co-Founder Tenable Network Security, Inc.

Tenable Holdings, Inc.

ü

Compensation

Finance and Risk Management

 
  Christopher T. Jones 58 2020

Former Corporate Vice President and President Technology Services Sector

Northrop Grumman Corporation

ü

Audit

Governance and Nominating
Safety

 
  Thomas C. Kelleher 64 2019 Former President
Morgan Stanley
ü

Audit
Executive

Finance and Risk Management (Chair)

 
  Steven F. Leer 69 1999 Former CEO and Chairman
Arch Coal, Inc.
ü

Compensation

Governance and Nominating

 
  Michael D. Lockhart 73 2008

Former Chairman, President and CEO

Armstrong World Industries, Inc.

ü

Audit
Executive

Finance and Risk Management Safety (Chair)

 
  Amy E. Miles (Chair-Elect) 55 2014

Former Chair and CEO

Regal Entertainment Group, Inc.

ü

Audit

Executive (Chair-Elect)
Governance and Nominating

 
  Claude Mongeau 60 2019 Former President and CEO
Canadian National Railway
ü

Compensation

Finance and Risk Management
Safety

 
  Jennifer F. Scanlon 55 2018 President and CEO and Director
UL Inc.
ü

Compensation

Governance and Nominating
Safety

 
  Alan H. Shaw 54 2022

President

Norfolk Southern Corporation

  Executive  
  James A. Squires 60 2014

Chairman and CEO

Norfolk Southern Corporation

     
  John R. Thompson 70 2013 Former Senior Vice President and General Manager
BestBuy.com LLC
ü

Compensation (Chair)
Executive

Governance and Nominating

 
1Committee memberships shown as of May 1, 2022. On that date, Ms. Miles will become independent chair of the Board, and Ms. Donadio will become chair of the Audit Committee.

 

 

 

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Business Highlights

 

This summary provides highlights from our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, as filed with the Securities and Exchange Commission (“SEC”) on February 4, 2022 (the “2021 Form 10-K”), to assist you in reviewing Norfolk Southern’s 2021 performance. The information contained below is only a summary, and you should refer to the more comprehensive discussions contained in our 2021 Form 10-K, as supplemented by our Form 8-Ks filed during 2021 and in January 2022, for additional information about these highlights.

 

2021 Business Highlights

 

At our investor day in 2019, we announced an ambitious three-year strategic plan. Through a multi-year effort, we delivered on our commitments, overcoming significant headwinds associated with first a freight recession and then a global pandemic over the course of our plan. The results of our multi-year effort are highlighted by what we achieved in 2021:

 

Record Operating Ratio of 60.1%;
Diluted Earnings per share of $12.11;
Income from railway operations above $4.4 billion

 

In 2021, all three of our business units, Merchandise, Intermodal, and Coal posted gains reflecting strong demand for our service product coming out of the pandemic, tempered by supply chain pressures experienced throughout the year.

Revenue growth was strongest in our Merchandise segment where all lines of business, particularly Metals & Construction, benefited from higher demand and favorable price conditions associated with the economic recovery.

 

At the same time, we returned approximately $4.4 billion to shareholders through dividends and share repurchases. We repurchased approximately $3.4 billion of Norfolk Southern stock, and we paid over $1 billion in dividends during the year.

 

In January 2022, we announced a 14 percent increase in our quarterly dividend, from $1.09 to $1.24 per share, building upon the 10 percent increase announced in July 2021 from 99 cents to $1.09 per share. In 2021, we also reduced the days between shareholder of record date and payable date, effectively accelerating payments to shareholders.

 

2021 does not stand on its own though; it represents the culmination of our ambitious multi-year strategic plan. In the past three years, we’ve produced industry-leading total shareholder return. We’ve grown earnings per share by 27%, reduced our operating ratio by 530 basis points, and returned nearly $10 billion to our shareholders in the form of share repurchases and dividends. We met and exceeded our goals, albeit with a very different formula than originally anticipated given the volume headwinds, demonstrating our ability to adapt and innovate, and our dedication to deliver upon our commitments.

 

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Business Highlights | 2022 Annual Meeting and Proxy Statement

 

Total Shareholder Returns*

 

 

 

*This graph compares the cumulative stockholder return on Norfolk Southern Corporation common stock with the other identified indices. It assumes an investment of $100 in NSC common stock and each index on Dec. 31, 2016, and that all dividends were reinvested over the five-year period, ending Dec. 31, 2021. Data furnished by Bloomberg Financial Markets.

 

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Business Highlights | 2022 Annual Meeting and Proxy Statement

 

ESG Highlights

 

We continue to integrate sustainability into daily operations in ways that advance our business, help our customers achieve their sustainability goals, and honor our environmental and social commitments as a responsible corporate citizen. We strive to satisfy these commitments while driving business forward, to ensure long-term success for all stakeholders: investors, customers, employees, communities, and industry partners.

 

   

Economy

 

Norfolk Southern plays an essential role in the U.S. economy, moving the goods and materials that power growth, enabling commerce, and providing access to international markets. This role requires us to maintain and modernize our extensive rail network and invest in advanced technologies.

     
   

Safety

 

Safety is part of who we are. Safety is core to our business strategy and essential to achieving operational excellence. From our Board of Directors’ Safety Committee to our local safety and service committees, safety is top down-bottom up.

     
   

Diversity, Equity, and Inclusion

 

Because we value the unique experiences, perspectives, and contributions of all our people, we endeavor to promote diversity, equity, and inclusion in the workplace and in the communities we serve.

     
   

Environment

 

As a leading provider of the most sustainable mode of surface transportation, we have committed to do our part to reduce our carbon emissions by setting a science-based target consistent with the Paris Agreement on climate change, pursuing innovative solutions, and providing our customers with unparalleled, energy-efficient service.

 

     
    Our annual Environmental, Social, and Governance Report which highlights our accomplishments in integrating sustainable business practices into daily operations is published annually. The report is available on our website at www.norfolksouthern.com/content/nscorp/en/about-ns/sustainability.html. Please note that information contained on our website is not incorporated by reference in this Proxy Statement or considered to be part of this document.
     

 

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Business Highlights | 2022 Annual Meeting and Proxy Statement

 

Highlights from 2021

 

 

16%

year-over-year decline in number of FRA reportable mainline train accidents

 

$1.47 billion

invested to promote safe, efficient operations, modernize our technology, and support economic growth

 

SBTi

announced an emissions reduction target, approved by the Science Based Targets initiative (SBTi)

 

A-

CDP Climate Change leadership score

 

$189 million

spent with small businesses and diverse suppliers in 2021

 

Expanded

our Inclusion Leadership Council to include senior leaders from every business group across our company

 

           
    Economy      
       
         
 

Shipping: Norfolk Southern kept the economy moving in 2021, shipping over $2.2 billion in agriculture, forest, and consumer products, $1.5 billion in metals and construction merchandise, and $3.1 billion in intermodal shipments.

  Providing: Provided employee compensation and benefits worth more than $2.4 billion, purchased approximately $3.2 billion in goods and services, and paid more than $332 million in local and state taxes in 22 states and the District of Columbia.  
         
         
  Investing: In 2021, we invested $1.47 billion to promote safe, efficient operations, modernize our technology, and support economic growth in the communities we serve.   Innovating: Developed NSites, a first-in-class industrial site search engine to help large manufacturers, site-selection professionals, and developers identify and compare rail-served industrial sites.  
         
         

 

           
    Safety      
       
         
 

Reducing Injuries: 21% reduction in total reportable injuries per 200,000 employee hours and 40% reduction in the number of overall serious injuries.

  Training: We provided training to 3,469 first responders in 2021 with a combination of online training, Safety Train events, and classroom training.  
         
         
  Reducing Accidents: 7% reduction in Federal Railroad Administration (FRA) reportable train accidents and a 16% reduction in FRA reportable mainline train accidents.   Engaging: Conducted first annual safety survey of entire workforce in 2021, developing baseline to gauge employee engagement and identify opportunities for improvement.  
         
         
         

 

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Business Highlights | 2022 Annual Meeting and Proxy Statement

 

           
    Diversity, Equity, and Inclusion      
       
         
 

Building Representation: NS partnered with local organizations across our system to build diverse representation at all levels. As part of this effort, NS contributed $275,000 to historically black colleges and universities (HBCUs), diverse student and academic groups, and other organizations that amplify our efforts to continue diversifying our workforce.

  Operationalizing: In 2021, Norfolk Southern expanded its Inclusion Leadership Council to include senior leaders from every business group across our company, further driving accountability for DEI throughout the organization.  
         
         
  Oversight: In March 2021, oversight of human capital management was added to the Compensation Committee’s charter.   Providing Data: In 2021, Norfolk Southern for the first time publicly released its EEO-1 data.  
         
         
  Supporting: Norfolk Southern spent $189 million with small businesses and diverse suppliers in 2021.  

Leading: In 2021, Norfolk Southern appointed a new senior leader to drive lasting change by spearheading our company-wide DEI strategy.

 
         
         

 

           
    Environment      
       
         
 

Reducing: In July 2021, we announced an emissions reduction target, approved by the Science Based Targets initiative (SBTi), to achieve a 42% reduction in scope 1 and 2 greenhouse gas emissions intensity by 2034.    

  Financing: In May 2021, Norfolk Southern was the first major North American railroad to establish a green financing framework and issue green bonds.  
         
         
  Improving Efficiency: Achieved a 7% improvement in locomotive fuel efficiency over the past two years which saved 26 million gallons of fuel and avoided over 270,000 metric tons of GHG emissions.   Oversight: Our Governance and Nominating Committee’s charter includes oversight of sustainability initiatives.      
         
         
  Reporting: Our 2021 ESG Report maps to GRI, TCFD, and SASB. Received a CDP Climate Change leadership score of A-, matching our highest rating ever.      

Building: In November 2021, we cut the ribbon on our new Atlanta headquarters which were designed and built to LEED version 4 specifications, and we aim to be among the first LEED Gold certified in Georgia.    

 
         
         

 

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Corporate Governance and the Board

 

 

ITEM
1

Election of the 14 Directors Named in The Proxy Statement for a One-Year Term

 

ü The Board of Directors unanimously recommends that shareholders vote FOR each of the nominees for election as directors.

 

ITEM

The following individuals have been nominated for election as directors for a one-year term expiring at the 2023 Annual Meeting: Thomas D. Bell, Jr., Mitchell E. Daniels, Jr., Marcela E. Donadio, John C. Huffard, Jr., Christopher T. Jones, Thomas C. Kelleher, Steven F. Leer, Michael D. Lockhart, Amy E. Miles, Claude Mongeau, Jennifer F. Scanlon, Alan H. Shaw, James A. Squires, and John R. Thompson.

 

If any nominee becomes unable to serve, your proxy will be voted for a substitute nominee to be designated by the Board of Directors, or the Board of Directors will reduce the size of the Board.

 

So that you have information concerning the independence of the process by which our Board of Directors selected the nominees, we confirm, as required by the SEC, that (1) there are no family relationships among any of the nominees or among any of the nominees and any officer, and (2) there is no arrangement or understanding between any nominee or director and any other person pursuant to which the nominee or director was selected. The age listed for each director nominee is as of May 12, 2022. Additional information on the experience and expertise of the director nominees can be found on the following pages.

 

Nominees

 

Thomas D. Bell, Jr.

Compensation, Finance and Risk Management

     

 

Director since 2010

Independent

Age 72

 

 

 

 

Career Highlights

 

Mr. Bell is the Chairman of Mesa Capital Partners, LLC, a real estate investment company. Mr. Bell previously served as Chairman and CEO of Cousins Properties, a publicly-traded real estate investment trust that invests in office buildings throughout the South, from 2002 to 2009. He is also a director of Southern Company Gas (formerly AGL Resources) and was a director of Regal Entertainment Group, Inc. until its acquisition in March 2018.

 

Areas of Expertise

 

CEO/Senior Officer; Environmental and Safety; Governance/Board; Governmental and Stakeholder Relations; Human Resources and Compensation; Marketing; Strategic Planning

     

 

Mitchell E. Daniels, Jr.

Compensation, Executive, Governance and Nominating (Chair)

     

 

Director since 2016

Independent

Age 73

 

 

 

 

Career Highlights

 

Mr. Daniels has been President of Purdue University since 2013 and served as Governor of Indiana from 2005 to 2013. From 1990 to 2000, Mr. Daniels worked for Eli Lilly and Company, holding the executive positions of President of North American Pharmaceutical Operations and Senior Vice President of Corporate Strategy and Policy. Mr. Daniels is also a director of Cerner Corporation.

 

Areas of Expertise

 

CEO/Senior Officer; Finance and Accounting; Governance/Board; Governmental and Stakeholder Relations; Strategic Planning

     

 

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Marcela E. Donadio

Audit (Chair-Elect), Finance and Risk Management

     

 

Director since 2016

Independent

Age 67

 

 

 

 

Career Highlights

 

Ms. Donadio, a certified public accountant with over 37 years of audit and public accounting experience, is a retired partner of Ernst & Young LLP, a multinational professional services firm, in 2014. From 2007 until her retirement, Ms. Donadio was Americas Oil & Gas Sector Leader, with responsibility for one of Ernst & Young’s significant industry groups helping set firm strategy for oil and gas industry clients in the United States and throughout the Americas. Ms. Donadio serves as Lead Independent Director of Marathon Oil Corporation, and as director of NOV Inc. and Freeport-McMoRan, Inc.

 

Areas of Expertise

 

CEO/Senior Officer; Finance and Accounting; Governance/Board; Human Resources and Compensation; Strategic Planning

     

 

John C. Huffard, Jr.

Compensation, Finance and Risk Management

     

 

Director since 2020

Independent

Age 54

 

 

 

 

Career Highlights

 

Mr. Huffard is a co-founder of Tenable Network Security, Inc. and Tenable Holdings, Inc., a cybersecurity software company. Mr. Huffard served as President and Chief Operating Officer and a director of Tenable Network Security, Inc. from 2002 to 2018, where he was responsible for driving Tenable’s global corporate strategy and business operations and was instrumental in the venture funding and IPO process. From 2018 to 2019, Mr. Huffard focused exclusively on business operations as chief operating officer of Tenable Holdings, Inc. He is also a director of Tenable Holdings, Inc.

 

Areas of Expertise

 

CEO/Senior Officer; Finance and Accounting; Governance/Board; Human Resources and Compensation; Information Technology Resources and Compensation; Marketing; Strategic Planning; Transportation

     

 

Christopher T. Jones

Audit, Governance and Nominating, Safety

     

 

Director since 2020

Independent

Age 58

 

 

 

 

Career Highlights

 

Mr. Jones served as Corporate Vice President and President of the technology services sector of Northrop Grumman Corporation, a global aerospace and defense technology company, from January 2013 through December 2019. Previously, he served as Vice President and General Manager of Northrop Grumman’s integrated logistics and modernization division from 2010 through 2012. Mr. Jones was a maintenance officer in the Connecticut Air National Guard from 1997 to 2011.

 

Areas of Expertise

 

CEO/Senior Officer; Finance and Accounting; Governmental and Stakeholder Relations; Information Technology; Strategic Planning

     

 

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Thomas C. Kelleher

Audit, Executive, Finance and Risk Management (Chair)

     

 

Director since 2019

Independent

Age 64

 

 

 

 

Career Highlights

 

Mr. Kelleher served as President of Morgan Stanley, a leading global financial services firm, from 2016 until his retirement in June 2019. He also served as Chairman and Chief Executive Officer of Morgan Stanley Bank, N.A. until June 2019. Previously, he was President of Morgan Stanley Institutional Securities from 2010 to 2016, CEO of Morgan Stanley International from 2011 to 2016, Chief Financial Officer and co-head of Corporate Strategy from 2007 to early 2010, and served as Morgan Stanley’s Head of Global Capital Markets from 2006 to 2007. Mr. Kelleher will stand for election as Chairman of UBS Group AG at its annual general meeting on April 6, 2022.

 

Areas of Expertise

 

CEO/Senior Officer; Finance and Accounting; Governance/Board; Governmental and Stakeholder Relations; Human Resources and Compensation; Strategic Planning

     

 

Steven F. Leer

Compensation, Governance and Nominating

     

 

Director since 1999

Independent

Age 69

 

 

 

 

Career Highlights

 

Mr. Leer served as the Chief Executive Officer of Arch Coal, Inc., a company engaged in coal mining and related businesses, from 1992 through 2012. He was Chairman of its board from 2006 through 2012 and its Executive Chairman from 2012 through 2014. He then served as Senior Advisor to the President and CEO of Arch Coal from 2014 through May 2015. Mr. Leer was a director of Cenovus Energy Inc. until January 1, 2021 and served as the non-executive Chairman of USG Corporation until April 2019. Mr. Leer is a director of Parsons Corporation and will serve as their Lead Independent Director effective April 14, 2022.

 

Areas of Expertise

 

CEO/Senior Officer; Environmental and Safety; Governance/Board; Governmental and Stakeholder Relations; Human Resources and Compensation; Marketing; Strategic Planning; Transportation

     

 

Michael D. Lockhart

Audit, Executive, Finance and Risk Management, Safety (Chair)

     

 

Director since 2008

Independent

Age 73

 

 

 

 

Career Highlights

 

Mr. Lockhart served as Chairman of the Board, President and Chief Executive Officer of Armstrong World Industries, Inc., and its predecessor, Armstrong Holdings, Inc., a leading global producer of flooring products and ceiling systems, from 2000 until his retirement in February 2010. Mr. Lockhart previously served as Chairman and Chief Executive Officer of General Signal Corporation, a diversified manufacturer, from September 1995 until it was acquired in 1998.

 

Areas of Expertise

 

CEO/Senior Officer; Environmental and Safety; Finance and Accounting; Governance/ Board; Marketing; Strategic Planning; Transportation

     

 

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Amy E. Miles

Independent Chair-Elect, Audit, Executive (Chair-Elect), Governance and Nominating

     

 

Director since 2014

Independent

Age 55

 

 

 

 

Career Highlights

 

Ms. Miles has been a director since 2014 and will be Chairman of the Board of Norfolk Southern effective May 1, 2022. Ms. Miles served as Chief Executive Officer of Regal Entertainment Group, Inc., a leading motion picture exhibitor, from 2009 until its acquisition in March 2018. During that time, she served as a director of Regal and was named Chair of its board in 2015. Ms. Miles previously served as Regal Entertainment’s Executive Vice President, Chief Financial Officer and Treasurer from 2002 to 2009. She is also a director of The Gap, Inc. and Amgen, Inc.

 

Areas of Expertise

 

CEO/Senior Officer; Finance and Accounting; Governance/Board; Information Technology; Marketing; Strategic Planning

     

 

Claude Mongeau

Compensation, Finance and Risk Management, Safety

     

 

Director since 2019

Independent

Age 60

 

 

 

 

Career Highlights

 

Mr. Mongeau served as President and Chief Executive Officer of Canadian National Railway Company (CN), a North American railroad and transportation company, from January 2010 to June 2016 and as a director of CN from October 2009 to June 2016. During his 22-year career at CN, he also served as Executive Vice President and Chief Financial Officer, Vice President Strategic and Financial Planning, and Assistant Vice President Corporate Development. Mr. Mongeau is also a director of Cenovus Energy and Toronto-Dominion Bank. He was formerly a director of Telus from 2017 to 2019.

 

Areas of Expertise

 

CEO/Senior Officer; Environmental and Safety; Finance and Accounting; Governance/ Board; Governmental and Stakeholder Relations; Human Resources and Compensation; Marketing; Strategic Planning; Transportation

     

 

Jennifer F. Scanlon

Compensation, Governance and Nominating, Safety

     

 

Director since 2018

Independent

Age 55

 

 

 

 

Career Highlights

 

Ms. Scanlon has been President and Chief Executive Officer and Director of UL Inc., a global science safety organization, since September 30, 2019. She is the first woman to lead the organization. She previously served as President and Chief Executive Officer of USG Corporation from 2016 until its acquisition in April 2019. During that time, she served as a director of USG. Ms. Scanlon also previously served as President of USG’s international business, President of its L & W Supply Corporation, and Chief Information Officer and Chairman of the Board for USG Boral Building Products.

 

Areas of Expertise

 

CEO/Senior Officer; Environmental and Safety; Governance/Board; Information Technology; Marketing; Strategic Planning; Transportation

     

 

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Alan H. Shaw

Executive Board Member (Elect)

     

 

Director since 2022

Age 54

 

 

 

 

Career Highlights

 

Mr. Shaw has been President of Norfolk Southern Corporation since December  1, 2021 and a director since May 1, 2022. Mr. Shaw has 27 years of experience at Norfolk Southern and most recently served as Norfolk Southern’s Executive Vice President and Chief Marketing Officer from May 2015 until December 2021. Mr. Shaw previously served as Norfolk Southern’s Vice President Intermodal Operations from 2013 to 2015 and has been with Norfolk Southern in various positions since 1994.

 

Areas of Expertise

 

CEO/Senior Officer; Governmental and Stakeholder Relations; Information Technology; Marketing; Strategic Planning; Transportation

     

 

James A. Squires

Executive Board Member

     

 

Director since 2014

Age 60

 

 

 

 

Career Highlights

 

Mr. Squires has been Chief Executive Officer since June 2015 and will be Chairman of the Board of Norfolk Southern until his retirement on May 1, 2022. Mr. Squires served as Norfolk Southern’s President from 2013 until December 2021 and previously served as Executive Vice President-Administration, Executive Vice President-Finance and Chief Financial Officer, Senior Vice President Finance, Senior Vice President Law, and Vice President Law.

 

Areas of Expertise

 

CEO/Senior Officer; Finance and Accounting; Governance/Board; Governmental and Stakeholder Relations; Human Resources and Compensation; Marketing; Strategic Planning; Transportation

     

 

John R. Thompson

Compensation (Chair), Executive, Governance and Nominating

     

 

Director since 2013

Independent

Age 70

 

 

 

 

Career Highlights

 

Mr. Thompson served as a government relations consultant for Best Buy Co., Inc., a multinational consumer electronics corporation, from October 2012 to April 2016, and as Senior Vice President and General Manager of BestBuy.com LLC, a subsidiary of Best Buy Co., Inc., from 2002 through 2012. Mr. Thompson was formerly a director of Belk, Inc. and Wendy’s International, Inc.

 

Areas of Expertise

 

CEO/Senior Officer; Finance and Accounting; Governance/Board; Governmental and Stakeholder Relations; Human Resources and Compensation; Information Technology; Marketing; Strategic Planning

     

 

 

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Qualifications of Directors and Nominees

 

 

 

Our directors have diverse backgrounds and provide critical experience and expertise to Norfolk Southern. The Governance and Nominating Committee carefully considers the experience and qualifications of each director standing for re-election and potential nominees for election, including how the director will contribute to the diversity of the Board, to ensure that the Board can effectively carry out its oversight role on behalf of our shareholders. The Governance and Nominating Committee annually reviews director commitment levels, with consideration given to public company leadership roles, including our limitation on directors that they sit on no more than four public company boards (including ours) and outside commitments. Based on this review, the Governance and Nominating Committee affirms that our directors do not have excessive external commitments.

 

The Governance and Nominating Committee has identified ten areas of expertise that are of particular importance to Norfolk Southern given the nature of our business and our expectations for the future of our company. The categories identified by the Governance and Nominating Committee are as follows:

 

CEO/Senior Officer

Experience working as a CEO or senior executive of a major public, private, or non-profit entity.

Environmental and Safety

A thorough understanding of safety and environmental issues and transportation industry regulations.

Finance and Accounting

Senior executive level experience in financial accounting and reporting, auditing, corporate finance, and/or internal controls.
Governance/Board Prior or current experience as a board member of a major public, private, or non-profit entity.

Governmental and Stakeholder Relations

Experience in or a strong understanding of the workings of government and public policy on a local, state, and national level and stakeholder strategy and engagement.

Human Resources and Compensation

Senior executive level experience or membership on a board compensation committee with an extensive understanding of human resource management and compensation programs, particularly compensation programs for executive level employees and incentive-based compensation programs.

Information Technology

Senior executive level or board experience with information technology issues, including cybersecurity, for a major public, private, or non-profit entity.

Marketing

Senior executive level experience in marketing combined with a strong working knowledge of Norfolk Southern’s markets, customers, and strategy.

Strategic Planning

Senior executive level experience in strategic planning for a major public, private, or non- profit entity.

Transportation

Extensive knowledge and experience in the transportation industry, either as a senior executive of a transportation or logistics company or as a senior executive of a customer of a transportation  company.

 

The table and chart below summarize the areas of expertise that our Governance and Nominating Committee has identified as being represented on our Board, both from an individual and collective standpoint. In addition to these areas of expertise, the Governance and Nominating Committee also considers ethical integrity, board dynamics, reputation of potential nominees, recommendations of director search firms, and diversity of the Board.

 

Norfolk Southern defines diversity as the collective mixture of similarities and differences that impact our workforce, workplace, and marketplace. Our Governance and Nominating Committee views diversity broadly, seeking to nominate individuals from varied backgrounds, perspectives, and experiences. The Governance and Nominating Committee does not have a specific written policy on the diversity of the Board of Directors at this time. However, more information on Norfolk Southern’s diversity principles and philosophy can be found on our website on the “Work at NS” page under “Learn more about NS.”

 

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Qualifications of Directors and Nominees (continued)

 

 

 

 

 

 

More information on director qualifications and nomination is contained in Norfolk Southern’s Corporate Governance Guidelines, posted on the “Invest in NS” page under “Corporate Governance Documents” on our website.

 

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Corporate Governance | 2022 Annual Meeting and Proxy Statement

 

     

Director Independence

 

 

 

The Board of Directors has considered whether the members of our Board of Directors are independent. A director is considered “independent” if the Board determines that the director has no material relationship with Norfolk Southern (directly or as a partner, shareholder, or officer of an organization that has a relationship with Norfolk Southern). The Board makes these determinations after full deliberation, considering all relevant facts and circumstances. To aid in its evaluation of director independence, the Board has adopted categorical independence standards. Under the standards, an individual director is “independent,” unless the Board determines otherwise, if none of the following relationships exist between Norfolk Southern and the director:

 

the director is, or has been within the last three years, an employee, or an immediate family member of the director is, or has been within the last three years, an Executive Officer of Norfolk Southern or any of our consolidated subsidiaries;
the director or an immediate family member of the director has received during any twelve-month period within the last three years more than $120,000 in direct compensation from Norfolk Southern or any of our consolidated subsidiaries, other than director and committee fees and deferred compensation for prior service (provided such deferred compensation is not contingent in any way on continued service);
(a) the director is a current partner or employee of a present or former internal or external auditor of Norfolk Southern or any of our consolidated subsidiaries, (b) the director has an immediate family member who is a current partner of such a firm, (c) the director has an immediate family member who is a current employee of such a firm and personally works on Norfolk Southern’s audit, or (d) the director or an immediate family member was within the last three years a partner or employee of such a firm and personally worked on Norfolk Southern’s audit within that time;
the director or an immediate family member is, or has been within the last three years, employed as an executive officer of another company where one of our Executive Officers serves as a director and sits on that company’s compensation committee;
the director is an executive officer or employee, or an immediate family member of the director is an executive officer, of a company that makes payments to, or receives payments from, Norfolk Southern or any of our consolidated subsidiaries for property or services in an amount which, in any of the last three fiscal years, exceeds the greater of $1 million or 2% of such other company’s consolidated gross revenues; and
the director is an executive officer or compensated employee, or an immediate family member of the director is an executive officer, of a charitable organization that receives donations from Norfolk Southern, any of our consolidated subsidiaries, or the Norfolk Southern Foundation in an amount which, in any of the last three fiscal years, exceeds the greater of $1 million or 2% of such charitable organization’s donations.

 

For purposes of these categorical standards, “immediate family member” has the definition used in the New York Stock Exchange’s Listing Standards. These categorical independence standards are available on our website at www.norfolksouthern.com on the “Invest in NS” page under “Corporate Governance Documents.”

 

The Board has determined that all the director nominees other than Messrs. Shaw and Squires satisfy the above categorical standards and qualify as independent directors of Norfolk Southern. In making these independence determinations, our Board of Directors considered the following transactions:

 

The Norfolk Southern Foundation made charitable grants to Purdue University during the past three years, pursuant to Norfolk Southern’s College Partnership program. From time to time, the Norfolk Southern Foundation makes charitable contributions to Purdue University pursuant to the Foundation’s employee-directed matching gift program. Mr. Daniels has been President of Purdue University since January 2013.
Mr. Kelleher served as President of Morgan Stanley from 2016 until his retirement in June 2019. Morgan Stanley provided banking/financial advisory services to Norfolk Southern in the past and is a participating lender in Norfolk Southern’s credit facility. These transactions were in the ordinary course, on substantially the same terms as those prevailing at the time for comparable services provided by other investment banks and participating lenders in the credit facility, and the dollar amounts involved were not material to either Norfolk Southern or Morgan Stanley.

 

These transactions did not exceed our categorical independence standards and were not sufficiently material as to require disclosure as a Related Persons Transaction under Item 404(a) of Regulation S-K. In addition, the Board considered these relationships in its nomination of Mr. Kelleher and determined that his independence as a director of Norfolk Southern is not impaired.

 

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Governance Framework and Practices

 

 

 

The Board of Directors has adopted Corporate Governance Guidelines that, among other matters, describe procedures for shareholders and other interested parties to communicate with the non-employee members of the Board (the “outside” directors). Communications will be forwarded to the Chair after review by the Corporate Secretary, as appropriate. Communications that are unrelated to the duties and responsibilities of the Board may not be forwarded. These include matters involving individual grievances or that are otherwise not of general concern to all shareholders, and items that are business solicitations or advertisements, resumes or other job-related inquiries, spam, and hostile, threatening, or similarly unsuitable communications, each of which will be handled by management, as appropriate. However, all shareholder and interested parties’ communications are made available to the Board of Directors upon the Board’s request. The Corporate Governance Guidelines are available on our website at www.norfolksouthern.com on the “Invest in NS” page under “Corporate Governance Documents.”

 

Leadership Transitions: Our Board elected Alan H. Shaw as our President effective December 1, 2021. At that time, the Board also elected Mr. Shaw as our CEO, effective May 1, 2022, when Mr. Squires will retire from his positions as CEO and Chairman. The transition was the culmination of a succession planning process led by our independent directors. Mr. Shaw will also join the Board upon becoming our CEO.

 

Board Leadership Structure: The Board believes that it should have the flexibility to determine whether the same person should serve as both CEO and Chairman based on what it believes will provide a leadership structure that is in the best interests of Norfolk Southern and our shareholders. In January 2022, the Board determined to separate the CEO and Chairman positions and to elect Amy E. Miles, the current Chair of the Audit Committee, as the independent Chair of the Board, effective May 1, 2022. The Board believes that this structure, with Mr. Shaw serving as both CEO and a director and Ms. Miles serving as an independent Chair of the Board, is appropriate given Mr. Shaw’s recent promotion and Ms. Miles’ extensive experience in key Board roles and leadership experience. Consistent with our Corporate Governance Guidelines, if those functions are re-combined in the future, we anticipate that a Lead Independent Director would be designated at such time.

 

Among other responsibilities, the Board Chair:

 

presides at all shareholder and Board meetings, including all meetings of outside directors;
calls Board meetings and meetings of the outside directors;
serves as a liaison between the CEO and the independent directors, conferring with the CEO on a number of topics;
develops and approves Board and committee meeting agendas, meeting schedules, and other materials to be distributed to the Board in order to ensure sufficient time for informed discussions of complex issues;
monitors the flow of information from the committee chairs to the directors;
reviews shareholder communications;
meets with significant shareholders as appropriate;
interviews potential director candidates; and
presides over our annual board self-evaluation process.

 

The Board, through its Governance and Nominating Committee, regularly reviews its leadership structure to ensure that it remains appropriate for the Corporation.

 

Board Self-Evaluation Process: Our Lead Independent Director presides over our annual board self-evaluation process. For the 2021 evaluation, the Board retained a third-party firm to facilitate the evaluation, with evaluation results sent directly to the directors without input or interpretation by management. The evaluation included an assessment of the effectiveness of the Board and its committees, director performance, board dynamics, director succession planning, the effectiveness of our Lead Independent Director and committee chairs, and the level of independence between the Lead Independent Director and our Chairman and CEO. The individual assessments were organized and summarized by the third-party firm for discussion by our Lead Independent Director with the Board. In addition, our Lead Independent Director supplemented the evaluation process with one-on-one reviews with individual directors following the evaluation as he deemed appropriate. The Board believes utilizing a third-party firm and reviewing and updating the questionnaire each year as appropriate ensures the evaluation process remains robust and that the process is free from any conflicts of interest and is truly an independent review.

 

Board Refreshment and Succession Planning Policy: Our Governance and Nominating Committee adopted a policy under our Corporate Governance Guidelines requiring that it discuss succession planning for directors, including the committee chair and lead director positions, at least annually. The Committee considers any upcoming retirements under its retirement policy for directors, desired skills and expertise for the Board, and tenure of current directors. In evaluating tenure, the Committee reviews average and median tenure and distribution of individual tenures for the

 

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Governance Framework and Practices (continued)

 

 

 

Board (that is, the number of directors having less than five years of service, five to ten years of service, and over ten years of service), with the goal of maintaining an appropriate balance of new perspectives and longer-term expertise.

 

Retirement Policy: Under our Corporate Governance Guidelines, a director must retire effective as of the date of the annual meeting that falls on or next follows the date of that director’s 75th birthday.

 

Director Education: Directors will receive continuing education from time to time through presentations about the Corporation and new legal and regulatory developments relating to directors. Directors are encouraged to participate in outside director education seminars at the Corporation’s expense. In addition, Directors periodically participate in site visits to our railroad facilities.

 

Director Elections Majority Voting Policy and Resignation Requirement: Norfolk Southern’s Bylaws require that in an uncontested election of directors, a director will be elected by a majority of votes cast. Any incumbent director who is not re-elected will promptly tender his or her resignation to the Board of Directors for consideration by our Governance and Nominating Committee. The Governance and Nominating Committee will promptly consider the resignation and recommend to the Board of Directors whether to accept or reject the tendered resignation. The Board of Directors will act on the Committee’s recommendation within 90 days following certification of the election results. Any director who tenders his or her resignation pursuant to this provision will not participate in the Governance and Nominating Committee’s recommendation or Board of Directors’ consideration regarding whether or not to accept the tendered resignation. If the resignation is accepted, the Governance and Nominating Committee will recommend to the Board whether to fill the vacancy or reduce the size of the Board. We will publicly disclose the Board of Directors’ decision within four business days, including a full explanation of the process by which the decision was reached and, if applicable, the reasons why the Board rejected the director’s resignation.

 

Proxy Access: The Corporation’s Bylaws permit a group of shareholders holding 3% of our outstanding shares for at least 3 years, and who otherwise comply with the Corporation’s Bylaws, to nominate up to 20% of the Board of Directors (with a minimum of 2 nominees). Up to 20 shareholders may aggregate their holdings to reach the 3% threshold. Our Bylaws are posted on our website on the “Invest in NS” page under “Corporate Governance Documents.”

 

Special Meetings: A special meeting will be called by the Corporate Secretary of the Corporation upon written request by one or more shareholders who in the aggregate represent at least 20% of the Corporation’s voting shares and who otherwise comply with the Corporation’s Bylaws, which are posted on our website on the “Invest in NS” page under “Corporate Governance Documents.”

 

Shareholder Engagement: Norfolk Southern 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 evolving ESG trends. During 2021, we not only continued but expanded our shareholder outreach program, reaching out to shareholders representing approximately half of our outstanding shares, ultimately engaging with shareholders representing approximately a quarter of our outstanding shares.

 

Our outreach program included meetings with members of our governance, investor relations, and sustainability teams. Feedback we received from shareholders was presented to our Board of Directors and to our Governance and Nominating Committee or Compensation Committee, as appropriate, for that committee’s consideration. Our Governance and Nominating Committee discussed both 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.

 

At our 2021 Annual Meeting of Shareholders, approximately 76% of shareholder votes received expressed support for a shareholder proposal requesting a report on if and how our direct and indirect lobbying activities aligned with the Paris Agreement. Based on this result, a particular focus of our engagement was seeking to better understand our shareholders’ concerns in this area and what they wanted to see in our report. While we engaged with the shareholder proponent before and after last year’s annual meeting, we also spoke on this topic with every other shareholder that we engaged. The response from our engagements was that shareholders wanted increased transparency through disclosure. Norfolk Southern has a long-demonstrated history of transparency for our reporting on political activity and contributions, as shown by our recognition as a trendsetter in the Center for Political Accountability’s Zicklin Index of Corporate Political Disclosure for over ten years. We believe that our recently released climate lobbying report, available on our website at www.norfolksouthern.com/content/dam/nscorp/get-to-know-ns/government- relations/Political-Activities-Report/2021/2021NSClimateLobbyingReport.pdf not only responds to last year’s shareholder proposal, but also provides the increased transparency requested during our shareholder engagements. We value continued shareholder feedback on the report.

 

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Governance Framework and Practices (continued)

 

 

 

Risk Oversight: Norfolk Southern, through its Enterprise Risk Management (“ERM”) program and disclosure procedures, considers and manages opportunities, threats, and uncertainties that may impact the Corporation’s business objectives. The ERM program supports the Corporation’s achievement of business objectives by enabling a collaborative risk management environment to proactively identify, assess, monitor, and mitigate business risk.

 

While the Board of Directors is ultimately responsible for oversight of the ERM program, the Finance and Risk Management Committee has been delegated oversight of the ERM program. The Finance and Risk Management Committee:

 

recommends ERM program procedures and processes to the Board;
oversees the ERM program and requests reports from management on its monitoring and mitigation of risks;
discusses with management the relationship between Norfolk Southern’s risk appetite and business strategies; and
collaborates with the Audit Committee to assist it in its oversight of the guidelines and policies used to govern the ERM program.

 

Other Board committees also play a role in risk oversight:

 

The Audit Committee is responsible for oversight of ERM program guidelines and policies, risks associated with financial reporting and fraud, and coordinates with the Finance and Risk Management Committee to ensure proper risk oversight.
The Compensation Committee considers major compensation-related risks when reviewing our compensation strategy, plans, and programs.

 

Management implements the ERM program through its Enterprise Risk Council. The Council comprises executive leadership and a designated chief risk officer, who coordinate with business leaders across Norfolk Southern to assess and mitigate enterprise risks. Management provides regular presentations and updates on risk management efforts to the Finance and Risk Management Committee. In addition, the Board or the Finance and Risk Management Committee may conduct additional risk assessments at any time, and the Board—and each of its committees—is empowered to engage outside advisors to assist in performing its risk oversight duties.

 

Through the ERM program and oversight by the Governance and Nominating Committee, Norfolk Southern reviews and monitors sustainability and climate change risks relating to legislative and regulatory efforts to limit greenhouse gas emissions, volatility in energy prices, and business interruptions from severe weather. Our Finance and Risk Management Committee and Board receive periodic updates on these risks, and our management works with employees to identify, assess, and mitigate these risks and any potential emerging risks associated with sustainability and climate change.

 

Similarly, management provides periodic reports to the Board on data protection and cybersecurity matters. To mitigate cybersecurity risks, our Chief Information Officer and Chief Information Security Officer lead a team responsible for establishing enterprise-wide security strategy, policy, standards, architecture, and processes, and have reported to the Board on such matters. All management employees receive mandatory periodic training on how to identify potential cybersecurity risks and protect the Corporation’s resources and information which is supplemented by company-wide testing initiatives, including periodic phishing tests. Our risk-based information security program helps ensure our defenses and resources are aligned to address the most likely and most damaging potential attacks, to provide support for our organizational mission and operational objectives, and to keep us in the best position to detect, mitigate, and recover from a wide variety of potential attacks in a timely fashion. For more information on these risks, please see our annual and quarterly reports filed with the SEC.

 

Related Persons Transactions: During 2021, Norfolk Southern did not have any related persons transactions.

 

We may occasionally participate in transactions with certain “related persons.” Related persons include our Executive Officers, directors, beneficial owners of 5% or more of our common stock, immediate family members of these persons, and entities in which one of these persons has a direct or indirect material interest. We refer to transactions with these related persons as “related persons transactions.” We have adopted a written policy to prohibit related persons transactions unless they are determined to be in Norfolk Southern’s best interests. Under this policy, the Audit Committee of our Board is responsible for the review and approval of each related persons transaction exceeding $120,000. In instances where it is not practicable or desirable to wait until the next meeting of the Audit Committee for review of a related persons transaction, the Chair of the Audit Committee has been delegated authority to act between Audit Committee meetings. The Audit Committee, or its Chair, considers all relevant factors when determining whether to approve a related persons transaction, including whether the proposed transaction is on

 

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Governance Framework and Practices (continued)

 

 

 

terms and made under circumstances that are at least as favorable to Norfolk Southern as would be available in comparable transactions with or involving unaffiliated third parties. Among other relevant factors, they consider:

 

the size of the transaction and the amount of consideration payable to the related person(s);
the nature of the interest of the applicable director, director nominee, Executive Officer, or 5% shareholder, in the transaction; and
whether we have developed an appropriate plan to monitor or otherwise manage the potential conflict of interest.

The Chair must report any action taken pursuant to this delegated authority to the Audit Committee at its next meeting. In addition, at the Audit Committee’s first meeting of each fiscal year, it reviews all previously approved related persons transactions that remain ongoing and have a remaining term or remaining amounts payable to or receivable from us of more than $120,000. Based on all relevant facts and circumstances, taking into consideration our contractual obligations, the Audit Committee determines whether it is in our and our shareholders’ best interest to continue, modify, or terminate the related persons transaction.

 

Anti-Hedging and Anti-Pledging Policies: The Corporation’s anti-hedging policy, which applies to all officers and members of the Board, provides that the Corporation’s executive and non-executive officers and members of its Board of Directors are prohibited from purchasing any financial instruments (including prepaid variable forward contracts, equity swaps, collars, exchange funds) that hedge or offset, or are designed to hedge or offset, any decrease in the market value of the Corporation’s securities, whether granted by the Corporation as part of the officer’s or director’s compensation or held, directly or indirectly, by the officer or director. Corporation policy also prohibits executive officers from entering into pledging transactions or positions regarding the Corporation’s securities. The Corporation is not aware of any violation of these policies.

 

The Thoroughbred Code of Ethics: The Board has approved and adopted The Thoroughbred Code of Ethics, which applies to all directors, officers, and employees of Norfolk Southern, and a Code of Ethical Conduct for Senior Financial Officers that applies to specified financial officers. These documents and our Corporate Governance Guidelines are available on our website at www.norfolksouthern.com on the “Invest in NS” page under “Corporate Governance Documents.” Any shareholder may request printed copies of our Corporate Governance Guidelines, The Thoroughbred Code of Ethics, or Code of Ethical Conduct for Senior Financial Officers by contacting: Denise W. Hutson, Corporate Secretary, Norfolk Southern Corporation, 650 West Peachtree Street, NW, Atlanta, Georgia 30308 (Corporate_Secretary@nscorp.com or telephone 470-463-5567).

 

     

Board Composition and Attendance 

 

 

 

The Board met seven times in 2021. Each director attended not less than 75% of the aggregate number of meetings of the Board and meetings of all committees on which such director served.

 

The Corporate Governance Guidelines also describe the Board’s policy with respect to director attendance at the Annual Meeting of Shareholders, which provides that, to the extent possible, each director is expected to attend the Annual Meeting. We work hard to coordinate schedules so that all our directors can attend, but occasionally events arise that we are unable to schedule around. All directors standing for election in 2021 attended our 2021 Annual Meeting of Shareholders.

 

Committees of the Board: Our Board committees and their responsibilities are described below. Each committee operates under a charter approved by the Board of Directors that requires the committee to evaluate its performance at least annually. The committee’s evaluation includes effectiveness, size and composition, the quality of information and presentations given to the committee by management, the suitability of the committee’s duties, and other issues that the committee deems appropriate. Committee membership and copies of the committee charters are available on our website on the “Invest in NS” page under “Corporate Governance Documents.” Any shareholder may request a printed copy of one or more of the committee charters by contacting: Denise W. Hutson, Corporate Secretary, Norfolk Southern Corporation, 650 West Peachtree Street, NW, Atlanta, Georgia 30308 (Corporate_Secretary@nscorp.com or telephone 470-463-5567).

 

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Corporate Governance | 2022 Annual Meeting and Proxy Statement

 

Executive Committee1

 

Current members:             James A. Squires (Chair)

Mitchell E. Daniels, Jr.

Thomas C. Kelleher

Steven F. Leer

Michael D. Lockhart

Amy E. Miles (Chair-Elect)

John R. Thompson

 

1Effective May 1, 2022, Ms. Donadio and Mr. Shaw will join the Executive Committee and Mr. Squires and Mr. Leer will leave the Committee

 

Meetings in 2021: Two

 

When the Board is not in session, and except as otherwise provided by law, the Executive Committee has and may exercise all the authority of the Board, including the authority to declare a quarterly dividend on our common stock at the rate of the quarterly dividend most recently declared by the Board. All actions taken by the Executive Committee are reported to the Board at its next meeting and are subject to revision or alteration by the Board.

 

Audit Committee1

 

Current members:             Amy E. Miles (Chair)

Marcela E. Donadio (Chair-Elect)
Christopher T. Jones

Thomas C. Kelleher
Michael D. Lockhart

 

1Effective May 1, 2022, Ms. Donadio will serve as Audit Committee Chair and Ms. Miles will continue to serve as a member

 

Meetings in 2021: Eight

 

All members of the Audit Committee are independent (see information under “Director Independence” on page 15), satisfy all additional requirements for service on an Audit Committee, as defined by the applicable New York Stock Exchange Listing Standards and SEC rules, and qualify as “audit committee financial experts,” as that term is defined by SEC rules. No member of the Committee serves on more than three public company audit committees.

 

During 2021 the Audit Committee:

 

  assisted board oversight of the accuracy and integrity of our financial statements, financial reporting process, and internal control systems;

  engaged an independent registered public accounting firm (subject to shareholder ratification) based on an assessment of their qualifications and independence, and pre-approved all services associated with their engagement;

  evaluated the efforts and effectiveness of our independent registered public accounting firm and Audit and Compliance Department, including their independence and professionalism;

  facilitated communication among the Board, the independent registered public accounting firm, our financial and senior management, and our Audit and Compliance Department;

  assisted board oversight of our compliance with applicable legal and regulatory requirements;

  reviewed procedures established for the receipt, retention, and treatment of complaints received, including confidential, anonymous submissions by employees, or others, of concerns regarding questionable accounting or auditing matters, and significant cases of alleged employee conflict of interest, ethical violations, misconduct, or fraud, the volume and nature of calls to the “Ethics and Compliance Hotline” and other matters similar in nature;

  discussed the Corporation’s guidelines and policies with respect to risk assessment and risk management, including the Corporation’s major financial risk exposures, and the steps management has taken to monitor and control such exposures; and

  prepared the “Audit Committee Report” that SEC rules require be included in our annual proxy statement.

 

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Compensation Committee

 

Current members:             John R. Thompson (Chair)

Thomas D. Bell, Jr.
Mitchell E. Daniels, Jr.
John C. Huffard, Jr.
Steven F. Leer

Claude Mongeau
Jennifer F. Scanlon

 

Meetings in 2021: Seven

 

All members of the Compensation Committee are independent (see information under “Director Independence” on page 15) and satisfy all additional requirements for service on a Compensation Committee, as defined by the applicable New York Stock Exchange Listing Standards and the SEC rules.

During 2021 the Compensation Committee:

 

  considered and made recommendations to the Board concerning the compensation levels, plans, and programs for the directors, chief executive officer, and executive officers;

  reviewed and approved corporate goals and objectives relevant to the chief executive officer’s compensation and considered and recommended to the independent members of the Board the compensation of the chief executive officer based on an evaluation of his performance relative to those corporate goals and objectives;

  considered the results of the shareholder advisory vote on executive compensation in connection with its review of Norfolk Southern’s executive compensation strategy, plans, and programs;

  provided oversight of each management annual incentive plan, deferred compensation plan, long-term incentive plan, and other executive compensation plan that the Board has adopted and granted, established performance goals for, and recommended or approved awards under the plans;

  made compensation decisions for which it was desirable to achieve the protections afforded by Rule 16b-3, or by other laws or regulations relevant in this area and in which only disinterested directors may participate;

  oversaw the Corporation’s key human capital management strategies and programs, including with respect to diversity, equity, and inclusion; and

  oversaw disclosures included in the Compensation Discussion and Analysis (“CD&A”) and produced a Compensation Committee Report indicating that it has reviewed and discussed the CD&A with management and approved its inclusion in the annual proxy statement.

 

 

Finance and Risk Management Committee

 

Current members:             Thomas C. Kelleher (Chair)

Thomas D. Bell, Jr.
Marcela E. Donadio
John C. Huffard, Jr.
Michael D. Lockhart
Claude Mongeau

 

Meetings in 2021: Five

All members of the Finance and Risk Management Committee are independent (see information under “Director Independence” on page 15).

During 2021 the Finance and Risk Management Committee:

 

  oversaw implementation of policies concerning our capital structure, including evaluating the appropriate structure of our long-term debt, mix of long-term debt and equity, and strategies to manage our interest burden, and recommended to the Board the declaration of dividends, share repurchases, and the issuance of debt securities;

  reviewed and evaluated tax and treasury matters and financial returns of our transactions, including management of cash flows, tax planning activities, and evaluating financial returns of proposed mergers, acquisitions, and divestitures;

  provided oversight of cybersecurity and cyber incident response preparedness; and

  provided oversight of our Enterprise Risk Management program, including recommending Enterprise Risk Management procedures and processes to the Board, requesting reports from management on its monitoring and mitigation of risks, and discussing with management the relationship between Norfolk Southern’s risk appetite and business strategies.

 

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Governance and Nominating Committee

 

Current members:             Mitchell E. Daniels, Jr. (Chair)

Christopher T. Jones
Steven F. Leer
Amy E. Miles
Jennifer F. Scanlon
John R. Thompson

 

Meetings in 2021: Seven

 

All members of the Governance and Nominating Committee are independent (see information under “Director Independence” on page 15).

 

During 2021 the Governance and Nominating Committee:

 

●   recommended to the Board qualified individuals to be nominated as members of the Board;

  recommended to the Board qualified individuals to be elected as our officers;

  considered leadership transitions, including CEO and independent board chair;

  evaluated and considered whether to recommend the adoption of any amendments to our Corporate Governance Guidelines;

  monitored legislative developments relevant to us and oversaw efforts to affect legislation and other public policy;

  provided oversight of our sustainability initiatives, political contributions to candidates, committees and trade associations, lobbying, and charitable giving;

  oversaw our relations with shareholders; and

  monitored corporate governance trends and practices and made recommendations to the Board of Directors concerning corporate governance issues.

 

 

Safety Committee

 

Current members:             Michael D. Lockhart (Chair)

Claude Mongeau
Jennifer F. Scanlon
Christopher T. Jones

 

Meetings in 2021: Four

 

All members of the Safety Committee are independent (see information under “Director Independence” on page 15).

 

During 2021 the Safety Committee:

 

reviewed and evaluated the safety program and practices of the Corporation;

monitored the Corporation’s compliance with the safety program;

reviewed and evaluated the Corporation’s compliance with applicable rules and regulations;

reviewed the Corporation’s train statistics and traffic trends;

reviewed and evaluated the Corporation’s safety program data; and

reviewed and evaluated the Corporation’s process for collection and dissemination of safety data.

 

Compensation Committee Interlocks and Insider Participation: During 2021, each of John R. Thompson, Chair, Thomas D. Bell, Jr., Mitchell E. Daniels, Jr., John C. Huffard, Jr. , Steven F. Leer, Claude Mongeau, and Jennifer F. Scanlon served on our Compensation Committee. None of these members have ever been employed by Norfolk Southern, and no members had any relationship with us during 2021 requiring disclosure as a transaction with a related person, promoter, or control person under Item 404 of Regulation S-K or under the Compensation Committee Interlocks disclosure requirements of Item 407(e)(4) of Regulation S-K.

 

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Corporate Governance | 2022 Annual Meeting and Proxy Statement

 

   

Compensation of Directors

 
 

 

2021 Non-Employee Director Compensation Table1

 

Name

 

Fees
Earned
or
Paid in
Cash2
($)

Stock
Awards3
($)

Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings4
($)

All Other
Compensation5
($)

Total
($)

Thomas D. Bell, Jr. 112,500 172,620   25,000 310,120
Mitchell E. Daniels, Jr. 132,500 172,620   10,000 315,120
Marcela E. Donadio 112,500 172,620   10,500 295,620
John C. Huffard, Jr. 112,500 172,620   5,000 290,120
Christopher T. Jones 112,500 172,620   5,000 290,120
Thomas C. Kelleher 132,500 172,620   305,120
Steven F. Leer 162,500 172,620 17,826 500 353,446
Michael D. Lockhart 132,500 172,620   5,000 310,120
Amy E. Miles 132,500 172,620   5,000 310,120
Claude Mongeau 112,500 172,620   285,120
Jennifer F. Scanlon 112,500 172,620   5,000 290,120
John R. Thompson 132,500 172,620   2,000 307,120

 

1Mr. Squires received no compensation for Board or committee service in 2021. Therefore, neither this table nor the narrative that follows contains compensation information for Mr. Squires. For compensation information for Mr. Squires, see the Summary Compensation Table on page 50. Mr. Squires will receive compensation for Board or committee service following his retirement as Chairman and Chief Executive officer.
2Includes amounts elected to be received on a deferred basis pursuant to the Directors’ Deferred Fee Plan. For a discussion of this plan, as well as our other director compensation plans, see the narrative discussion below.
3Represents the full grant date fair value computed in accordance with FASB ASC Topic 718 of the restricted stock units granted to directors pursuant to our Long-Term Incentive Plan on January 28, 2021. All of the restricted stock units granted to our directors under the Long-Term Incentive Plan are vested upon grant and acceptance of the award, but are subject to a restriction period of one year and, depending on the director’s election, may be subject to a retention period that ends upon the director’s termination of service. Each director serving on the Board as of December 31, 2021, and who was elected to the Board before 2015, also held 3,000 restricted shares granted pursuant to the Directors’ Restricted Stock Plan. See below under “Non-Employee Director Compensation - Long-Term Incentive Plan” and “Non-Employee Director Compensation - Directors’ Restricted Stock Plan” for more information.
4Represents the amounts by which 2021 interest accrued on fees deferred prior to 2001 by Mr. Leer under the Directors’ Deferred Fee Plan exceeded 120% of the applicable Federal long-term rate provided in Section 1274(d) of the Internal Revenue Code.
5Represents the dollar amounts we contributed to charitable organizations on behalf of directors pursuant to our matching gift programs.

 

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Compensation of Directors (continued)

 
 

 

Narrative to Non-Employee Director Compensation: Below is a discussion of the material factors necessary to an understanding of the compensation disclosed in the above table.

 

How We Set Director Compensation. The Compensation Committee and the Board of Directors determine the annual compensation of non-employee directors each year. Directors who are executives of the Corporation 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 both a comparison to the market amount of compensation paid to directors serving on boards of similar companies and reviews the allocation of this compensation between cash retainer and equity grants. In general, the Compensation Committee and the Board seek to make any changes to non-employee director compensation in a gradual and incremental fashion.

 

The Corporation pays for or reimburses directors for expenses related to attending Board and committee meetings, director education programs, and other company business meetings.

 

Fees. In 2021, each member of the Board received a quarterly fee of $28,125 for service on the Board and its standing committees. Directors who served as committee chairpersons received an additional quarterly fee of $5,000 for such service, and our Lead Independent Director received an additional quarterly fee of $12,500.

 

Long-Term Incentive Plan. Each of our then current non-employee directors was granted restricted stock units effective January 2021. 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 based on the fair market value of our stock on the dividend payment date.

 

Under the Long-Term Incentive Plan, if a new non-employee director is appointed after the date of the Plan awards for the year, the new director will receive an award under the same terms as made to other non-employee directors for the year but with the amount of the award prorated based on the number of days remaining in the year that the individual became a director.

 

Directors’ Deferred Fee Plan. A director may elect to defer receipt of all or a portion of the director’s compensation. Amounts deferred are credited to a separate account maintained in the name of each participating director. Four directors elected to defer compensation that would have been payable in 2021 into the Directors’ Deferred Fee Plan.

 

Amounts deferred on or after January 1, 2001, are credited with variable earnings and/or losses based on the performance of hypothetical investment options selected by the director. The hypothetical investment options include NS stock units and various mutual funds as crediting indices. NS stock units are phantom units whose value is measured by the market value of shares of our common stock, but the units will be settled in cash, not in shares of stock. These amounts will be distributed in accordance with the director’s elected distribution option in one lump sum or a stream of annual cash payments over 5, 10, or 15 years.

 

Amounts deferred before January 1, 2001, earn a fixed rate of interest, which is credited to the account at the beginning of each quarter. The fixed interest rate under the plan is determined based on the director’s age at the time of the deferral, which rate was 10% for deferrals made when a director was between ages 45-54. Amounts set forth in the table above represent the extent to which this rate exceeds 120% of the applicable federal long-term rate. These amounts will be distributed in ten annual installments beginning in the year following the year in which the participant ceases to be a director.

 

Our commitment to accrue and pay interest and/or earnings on amounts deferred is facilitated by the purchase of corporate-owned life insurance. If the Board of Directors determines at any time that changes in the law affect our ability to recover the cost of providing the benefits payable under the Directors’ Deferred Fee Plan, the Board may reduce the interest and/or earnings on deferrals to a rate not less than one half the rate otherwise provided for in the Directors’ Deferred Fee Plan.

 

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Compensation of Directors (continued)

 
 

 

Directors’ Charitable Award Program. Each director who has served for one year is entitled to nominate up to five tax-exempt institutions to receive, in the aggregate, up to $500,000 from Norfolk Southern following the director’s death. Directors are entitled to designate up to $100,000 per year of service until the $500,000 cap is reached. Following the director’s death, we will distribute the donations in five equal annual installments.

 

The Directors’ Charitable Award Program supports our long-standing commitment to contribute to educational, cultural, and other appropriate charitable institutions and to encourage others to do the same. We fund some of the charitable contributions made under the program out of general corporate assets, and some of the charitable contributions with proceeds from life insurance policies we 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.

 

Because we make the charitable contributions (and are entitled to the related deduction) and are the owner and the beneficiary of the life insurance policies, directors receive no direct financial benefit from this program. In the event the proceeds from any of these policies exceed the donations we are required to make under the program, we contribute the excess proceeds to the Norfolk Southern Foundation. Amounts the Norfolk Southern Foundation receives under this program may reduce what we otherwise would contribute from general corporate resources to support the Foundation’s activities.

 

Directors’ Restricted Stock Plan. Before 2015, each non-employee director received a grant of 3,000 shares of restricted stock upon election to the Board. Restricted stock was registered in the name of the director, who has the right to vote the shares and receive dividends, but restricted stock may not be sold, pledged, or otherwise encumbered during the restriction period. The restriction period begins when the restricted stock was granted and ends on the earlier of death or the director ceasing to serve on the Board because of disability or retirement. Effective January 2015, the Board of Directors amended the Directors’ Restricted Stock Plan to provide that no additional awards will be made under the plan.

 

Share Ownership Guidelines for Directors: Our Board of Directors has established as part of our Corporate Governance Guidelines that each non-employee director should own shares of Norfolk Southern stock equal to at least five times the annual amount of quarterly fees paid for service on the Board and its standing committees. The Board of Directors believes this stock ownership guideline is reasonable and aligns director and shareholder interests. Norfolk Southern common stock, restricted stock, and deferred and restricted stock units held in Norfolk Southern’s Long-Term Incentive Plan or under the Directors’ Deferred Fee Plan count toward this guideline. Directors may acquire such holdings over a five-year period. All directors currently meet this guideline or are expected to meet the guideline within the five-year period.

 

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Audit Committee Matters

 

ITEM
2

Ratification of Appointment of Independent Registered Public Accounting Firm

 

ü The Audit Committee unanimously recommends, and the Board of Directors concurs, that shareholders vote FOR the proposal to ratify the appointment of KPMG LLP as our independent registered public accounting firm for the year ending December 31, 2022.

 

 

The Audit Committee of the Board of Directors has appointed KPMG LLP, independent registered public accounting firm, to perform the integrated audit of our consolidated financial statements and internal control over financial reporting for 2022. KPMG and its predecessors have been the Corporation’s external auditor since 1982.

 

Selection of KPMG. The Audit Committee is directly responsible for the appointment, compensation, retention, and oversight of the Corporation’s independent registered public accounting firm and consequently is involved in the selection of the lead audit partner for the engagement. In addition, the Audit Committee is responsible for negotiating and approving the fees paid to KPMG. In determining whether to reappoint KPMG this year, the Committee reviewed KPMG’s performance and independence and considered a number of factors, including:

 

·the quality of its interactions and discussion with KPMG;
·KPMG’s performance in the audit engagement;
·the qualifications of the lead audit partner and audit team;
·KPMG’s independence program and processes for maintaining independence;
·KPMG’s expertise and global reach;
·the length of time KPMG has been engaged; and
·the potential impact of changing our independent registered public accounting firm.

 

Due to KPMG’s high quality performance and strong independence, the Audit Committee and the Board of Directors believe that the continued engagement of KPMG as the Corporation’s independent registered public accounting firm is in the best interests of the Corporation and its shareholders.

 

KPMG Fees. For the years ended December 31, 2021, and December 31, 2020, KPMG billed us for the following services:

 

  2021 2020
Audit Fees1 $ 3,073,500 $ 2,939,000
Audit-Related Fees2 $ 225,500 $ 215,000
Tax Fees3 $ 140,000 $ 136,940
All Other Fees $ 0 $ 0
Total Fees $ 3,439,000 $ 3,290,940

 

1Audit Fees include fees for the audit of our consolidated financial statements and internal control over financial reporting (integrated audit), the review of our consolidated financial statements included in our 10-Q filings, and services that are normally provided in connection with statutory and regulatory filings or engagements.
2Audit-Related Fees principally include fees for employee benefit plan audits and other attestation services.
3 Tax Fees consist of tax advice, tax planning, and tax compliance services.

 

Pre-Approval Policy. The Audit Committee requires that management obtain the Committee’s prior approval for all audit and permissible non-audit services. The Committee considers and approves at each January meeting anticipated services to be provided during the year, as well as the projected fees for those services. The Committee considers and pre-approves additional services and projected fees as needed at each meeting. The Audit Committee has delegated authority to its Chair to pre-approve services between meetings, provided that the Chair reports any such pre-approval to the Audit Committee at its next meeting. The Audit Committee will not approve non-audit engagements that would violate SEC rules or impair the independence of our independent registered public accounting firm. All services rendered to us by KPMG in 2021 and 2020 were pre-approved in accordance with these procedures.

 

Representatives of KPMG are expected to attend the 2022 Annual Meeting. They will have the opportunity to make a statement, if they so desire, and be available to respond to appropriate questions.

 

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Audit Committee Matters | 2022 Annual Meeting and Proxy Statement

 

   

Audit Committee Report

 
 

 

Before our Annual Report on Form 10-K for the year ended December 31, 2021, was filed with the SEC, the Audit Committee of the Board of Directors reviewed and discussed with management our audited financial statements for the year ended December 31, 2021.

 

The Audit Committee has discussed with KPMG LLP, our independent registered public accounting firm, the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board (PCAOB) and the SEC.

 

The Audit Committee also has received and reviewed the written disclosures and the letter from KPMG LLP required by applicable requirements of the PCAOB regarding KPMG LLP’s communications with the Audit Committee concerning independence, and has discussed with KPMG LLP their independence.

 

Based on the review and discussions referred to above, the Audit Committee recommended to the Board of Directors that the financial statements referred to above be included in our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC.

 

MEMBERS OF THE AUDIT COMMITTEE

 

Amy E. Miles, Chair
Marcela E. Donadio
Christopher T. Jones
Thomas C. Kelleher
Michael D. Lockhart

 

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Executive Compensation

 

ITEM
3

Approval of Advisory Resolution on Executive Compensation

 

ü The Board of Directors recommends that shareholders vote FOR the advisory resolution approving the compensation of our Named Executive Officers.

 

 

We are asking our shareholders to vote to support the compensation of our Named Executive Officers, as disclosed in this Proxy Statement. Our executive compensation program is described in detail in the “Compensation Discussion and Analysis” beginning on page 31 and our “Executive Compensation Tables” beginning on page 50. An executive summary of the Compensation Discussion and Analysis is provided beginning on page 32.

 

This vote is not intended to address any specific item of compensation, but rather the overall compensation of our Named Executive Officers and the philosophy, policies, and practices described in this Proxy Statement. While this “Say-on-Pay” vote is advisory, and therefore not binding on the Board, the Compensation Committee will consider the results of the vote in evaluating our executive compensation program in the future.

 

As more fully described in our Compensation Discussion and Analysis, our executive compensation program is designed to align executives’ compensation with the Corporation’s overall business strategies, to attract and retain highly qualified executives, and to provide incentives that drive shareholder value. A significant portion of our executives’ compensation is variable, at risk, and tied to meeting performance goals.

 

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Executive Compensation | 2022 Annual Meeting and Proxy Statement

 

   

Shareholder Support for Norfolk Southern’s Executive Compensation Program

 
 

 

Shareholders have repeatedly expressed strong support for Norfolk Southern’s executive compensation program. We regularly engage in a shareholder outreach program to solicit feedback concerning our executive compensation program. This process allows shareholders to provide more detailed input to the Committee on our executive compensation program and related disclosure beyond the annual advisory vote on compensation. In the meetings held during 2021, shareholders generally expressed satisfaction with Norfolk Southern’s executive compensation program and with our disclosures related to the program in the proxy statement.

 

The Board of Directors and its Compensation Committee believe the compensation program for the Named Executive Officers is appropriately designed to support our goals. Since this advisory vote was first held in 2011, shareholders have agreed, as they have strongly supported our executive compensation program with 93% or more of the votes cast each year, including 93% in 2021, in favor of our executive compensation program. We expect to continue holding this advisory vote annually, consistent with the preference expressed by our shareholders in an advisory vote last held in 2017.

 

Historical “Say-on-Pay” Voting Results (FOR)

 

 

We therefore ask that you express your support by voting FOR the following advisory resolution:

 

RESOLVED, that the shareholders of Norfolk Southern Corporation approve, on an advisory basis, the compensation of the individuals identified in the Summary Compensation Table, as disclosed in the Proxy Statement for the 2022 Annual Meeting of Shareholders pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, the 2021 Summary Compensation Table, and the other related tables and disclosures.

 

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Compensation Committee Report

 
 

 

The Compensation Committee of our Board of Directors oversees the executive compensation program on behalf of the Board. In fulfilling our oversight responsibilities, we reviewed and discussed with management the “Compensation Discussion and Analysis” set forth in this Proxy Statement.

 

The Compensation Discussion and Analysis discloses the material elements of Norfolk Southern’s executive compensation program. We are committed to a compensation program that is designed to align executives’ compensation with Norfolk Southern’s overall business strategies, attract and retain highly qualified executives, and provide incentives that drive shareholder value. The Compensation Discussion and Analysis describes how our decisions regarding Norfolk Southern’s executive compensation program for 2021 implemented these design elements.

 

In reliance on the review and discussions with management referenced above, we recommended to the Board that the Compensation Discussion and Analysis be included in Norfolk Southern’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, and this Proxy Statement.

 

MEMBERS OF THE COMPENSATION COMMITTEE

 

John R. Thompson, Chair
Thomas D. Bell, Jr.
Mitchell E. Daniels, Jr.
John C. Huffard, Jr.
Steven F. Leer
Claude Mongeau
Jennifer F. Scanlon

 

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Compensation Discussion and Analysis

 
 

 

This Compensation Discussion and Analysis describes the objectives, governance, and policies that guide our executive compensation program, the compensation components that made up that program during 2021, and the performance goals and results.

 

Our 2021 Named Executive Officers

 

Name   Position
James A. Squires Chairman and Chief Executive Officer1
Alan H. Shaw President2
Mark R. George Executive Vice President and Chief Financial Officer
Ann A. Adams Executive Vice President and Chief Transformation Officer
Cynthia M. Sanborn Executive Vice President and Chief Operating Officer

 

1Mr. Squires also served as President from January 1 through November 30, 2021.
2Effective December 1, 2021, Mr. Shaw was appointed to the position of President of the Corporation. Mr. Shaw previously served as Executive Vice President and Chief Marketing Officer from January 1 through November 30, 2021.

 

   

Leadership Transition

 
 

 

As part of the Corporation’s planned succession process, the Board elected Mr. Shaw our President effective December 1, 2021. At that time, the Board also elected Mr. Shaw as our CEO effective May 1, 2022, when Mr. Squires will retire from that position. In connection with this leadership transition, after considering market data, internal equity, advice from its independent compensation consultant and other factors, the Compensation Committee in December 2021 established Mr. Shaw’s salary and annual incentive opportunity for the President role, and then in January 2022 established the compensation that will be paid for all of our executive officers for 2022. In addition, as disclosed in a Form 8-K filed on January 26, 2022, a portion of the long-term equity incentive award that the Committee granted to Mr. Shaw in January 2022 was related to his service as President for the month of December 2021. The portion of Mr. Shaw’s 2022 long-term incentive award that related to his 2021 service consisted of non- qualified stock options, performance share units, and restricted stock units, and is distinct from the compensation that the Committee granted to Mr. Shaw for his 2022 service.

 

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Executive Summary

 
 

 

Our 2021 Executive Compensation Program: Under the direction of our Compensation Committee, our executive compensation program strongly emphasizes performance-based compensation, including compensation that is contingent upon achieving performance conditions or subsequent stock price appreciation. The following chart summarizes the key characteristics and performance metrics that apply to the compensation program for our Named Executive Officers for 2021:

 

Element Form Key Characteristics & Performance Metrics

Base Salary

Fixed Cash

·   Reviewed annually and periodically adjusted based on market data, individual performance and experience, changes in position or duties, or other circumstances

Annual Incentive

Performance-
Based Cash

·   Designed to compensate executives based on achievement of annual corporate performance goals

·   Performance metrics chosen to encourage employees to do all they can individually and as a team to increase revenue, reduce expenses, improve operating performance, and achieve our strategic objectives

Performance metrics for 2021:

 

 

 

 

 

 

Long-Term Incentive Awards

 

Performance
Share Units
(60% CEO, 50%
other NEOs)

·   Performance metric chosen to promote efficient utilization of corporate assets and enhancement of shareholder value

·   The performance metric is return on average invested capital (ROAIC), with total shareholder return versus publicly-traded North American Class I railroads as a modifier that may reduce or increase payout (if any) by up to 25%

·   Vest at the end of a 3-year period if ROAIC performance goal is achieved

Restricted
Stock Units
(25% CEO,
30% Other
NEOs)

 

·   Align executives’ interests with shareholders, serve as a retention tool for valued members of management

·   Vest ratably in four installments beginning on the first anniversary of the date of grant

Stock Options
(15%)

 

·   Provide the ability to reward increased shareholder value and retain key employees

·   Vest on the fourth anniversary of the date of grant

 

The Committee considers the annual incentive, long-term performance share units, and stock options to be performance-based awards. The annual incentive and performance share units are at risk of having no value unless threshold goals are achieved, and the stock options are at risk of having no value unless our stock price appreciates. The Committee believes such performance-based compensation creates a strong alignment between the interests of our executive officers and our shareholders.

 

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Long-Term Incentive Awards  

Annual Incentive

  Salary
         

  Target longer-term achievement of corporate objectives by aligning interest of executives with shareholders

 

  Include performance shares that are earned over a 3-year performance cycle, stock options, and time-based restricted stock units

 

  See page 44 for further details

 

  Compensate executives based on achievement of annual corporate goals

 

  Earn based on performance against financial and operating metrics

 

  See page 41 for further details

 

  Help attract and retain executives

 

  Provide a fixed level of compensation

 

  See page 41 for further details

         

 

* Average for Ms. Adams, Mr. George, Ms. Sanborn, and Mr. Shaw.

 

2021 Pay and Performance Alignment

 

The Compensation Committee aligns compensation to performance by emphasizing performance-based compensation components. These components include an annual cash incentive, long-term performance share units with a three-year cycle, and stock options. A summary of our 2021 performance can be found in the Business Highlights section on page 3, and for complete information regarding our 2021 performance, please refer to our 2021 Annual Report. Our performance relative to our goals established for the annual incentive and long-term performance share units are presented below:

 

Annual Incentive. The corporate performance achieved was 140.0%, resulting from above-target performance for the operating ratio metric, exceeding the performance for a maximum earnout for the operating income metric, and the Committee’s determination that the Corporation’s progress toward its strategic objectives earned 100% of the portion of the incentive based on our strategic objectives.

 

Performance Share Units. Our Named Executive Officers earned a payout at 99.7% of target for the performance share units for the three-year cycle ending in 2021, based on after-tax return on average invested capital (ROAIC) and our total shareholder return (TSR) relative to the other North American class I railroads.

 

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Leading Compensation Governance Practices

 
 

 

Embedded in our overall executive compensation program are features that reflect leading governance principles and demonstrate our commitment to best practices in executive compensation:

 

 

   

Key 2021 Compensation Decisions

 
 

 

As the Committee continues its focus on aligning executives’ compensation with our strategic plan objectives, attracting and retaining highly qualified executives, and providing incentives that drive shareholder value, the Committee made the following key decisions with respect to executive compensation for 2021:

 

Established Challenging 2021 Annual Incentive Performance Targets Aligned to Our Strategic Objectives. The Committee selected operating ratio, operating income, and progress toward our strategic objectives as performance criteria for the 2021 annual incentive, as these measures reflect our operational efficiency, financial profitability, and strategic focus. The Committee added progress toward achieving the Corporation’s strategic objectives as a new annual incentive goal for 2021, and determined that it would evaluate the performance based on the Corporation’s progress toward its objectives of driving productivity and efficiency, achieving operational excellence, propelling smart growth, accelerating digital transformation, and aligning, engaging and developing talent.

The Committee determined that the weighting of the three criteria would be 60% operating ratio to emphasize the importance of achieving an operating ratio of 60% or better in 2021, 20% operating income, and 20% based on the Committee’s assessment of our achievements toward our strategic objectives.

In January 2021, the Committee set challenging financial targets. In establishing performance targets for operating ratio and operating income for 2021, the Committee considered:

our financial objectives, with a particular focus on the 2021 goal of an operating ratio of 60%;
the forecasted business environment for 2021, including the impacts of the pandemic resulting in lower volume expectations, and the need to promote continued operating efficiency improvements.; and
our continued focus on service while improving productivity and efficiency.

The Committee thus:

increased the performance necessary to achieve the threshold, target, and maximum payout levels for operating ratio and increased the maximum payout for operating ratio performance; and
decreased the performance necessary to achieve the threshold, target, and maximum payout for operating income, reduced the maximum payout for operating income performance, and reduced the portion of annual incentives tied to operating income to allocate a portion of the annual incentive toward achievement of strategic objectives.

 

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Key 2021 Compensation Decisions (continued)

 
 

 

Against these challenging performance measures, we achieved an above-target 140.0% payout based on the performance measures for our 2021 annual incentive and the Committee’s assessment of progress toward our strategic objectives.

 

Established Compensation for the CEO that is 71% Performance-Based. The Committee established Mr. Squires’ 2021 compensation, which provided 76% of his targeted compensation in the form of equity-based awards that are aligned with shareholder interests, and 71% as performance-based compensation.
Established Compensation for the President that is 68% Performance-Based. Mr. Shaw was appointed as the new President in December 2021 and at that time the Board also elected him as President and CEO effective May 1, 2022. The Committee’s compensation award for Mr. Shaw as President provides 71% of his targeted compensation in the form of equity-based awards that are aligned with shareholder interests, and 68% as performance-based compensation.
Granted Long-Term Incentive Awards that are Performance-Based. The Committee continued to make annual grants of long-term incentive awards, the majority of which consist of performance share units and of stock options whose ultimate value is based on shareholder return and which may not have any value at the end of the vesting period.
Adopted a Second Peer Group for use in Assessing Executive Compensation Levels. In September 2021, the Committee, with the assistance of its independent compensation consultant, adopted a peer group of comparable industrial companies to supplement the existing Class I railroad company peer group that the Committee uses to assess competitive market levels for our executive compensation program. The Committee considered compensation data for the new peer group when it established Mr. Shaw’s compensation for the President position, and it expects to continue to use both the Class I railroad and Industrial peer groups in establishing executive compensation in 2022.

 

   

Objectives of Compensation Program

 
 

 

Our executive compensation program is primarily designed to:

 

Align executives’ compensation with overall business strategies.
Provide incentives that drive shareholder value.
Attract and retain highly qualified executives.

 

   

Compensation Governance

 
 

 

Role of Compensation Committee: The Committee, pursuant to its charter, reviews the Corporation’s overall compensation strategy and executive compensation programs and levels, and makes decisions on the compensation paid to our Named Executive Officers. The details of the Committee’s processes involved in establishing each of the components of our executive compensation program are described below. The Committee works closely with its independent compensation consultant throughout the year to develop the executive compensation program and to align pay with performance and with pay at comparable companies. While the Committee discusses current and proposed compensation structures with management, the Committee acts independently of management and has the full authority to retain any advisors it deems appropriate to assist it in making these decisions.

 

Role of Independent Compensation Consultant: The Committee engaged an independent compensation consultant, Pay Governance LLC, to provide executive compensation consulting services during 2021. Pay Governance does not provide services to Norfolk Southern other than those provided at the request of the Committee.

 

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Compensation Governance (continued)

 
 

 

At the Committee’s request, Pay Governance compiled compensation data for the peer groups selected by the Committee. Pay Governance also provided requested reports and information to the Committee, including at the Committee’s request, recommendations regarding individual pay and compensation program design. Pay Governance attended Committee meetings as requested by the Committee. The Committee used the information provided by Pay Governance, and considers Pay Governance’s analysis and recommendations, as a starting point for its compensation decisions.

 

More specifically, in 2021, Pay Governance:

 

advised the Committee on the peer groups to be used in assessing market levels of compensation for key executive positions;
conducted a market pay assessment of our compensation levels relative to both the competitive market and our compensation philosophy, including identifying and reviewing available market benchmark positions and pay data;
assisted with the development of long-term incentive grant guidelines for the officer and management groups, based on Pay Governance’s competitive pay assessment;
reviewed emerging trends and issues in executive compensation with the Committee;
advised the Committee on the development of a compensation program for the new President position; and
provided an analysis of the difficulty of achieving the threshold, target, and maximum performance goals for the annual incentive and the performance share units, and of the current plans’ effectiveness in driving achievement of threshold, target, and maximum payouts.

 

For 2021 and 2022, following a review of its records and policies, Pay Governance provided the Committee with a report regarding its conformance with independence factors under applicable SEC rules and the listing standards of the New York Stock Exchange. The Committee considered the independence factors and determined that Pay Governance is independent and free from potential conflicts of interest.

 

Performance Reviews: The Committee annually reviews the performance of the Chief Executive Officer and considers this performance when establishing his compensation package. The Committee also reviews the performance of the other Named Executive Officers with the assistance of the Chief Executive Officer, and considers both its own assessment of the executives’ performance and the assessment of the CEO in establishing a compensation package for the other Named Executive Officers.

 

Committee Consideration of Management Recommendations: Management does not make recommendations on the compensation of the Chief Executive Officer. Pay Governance makes recommendations to the Committee on any adjustments to compensation for the Chief Executive Officer, and the Chief Executive Officer is not present when the Committee makes decisions on his compensation package.

 

The Chief Executive Officer provided recommendations to the Committee on any adjustments to compensation for the Named Executive Officers, other than the Chief Executive Officer. Any adjustments were based on each individual’s performance, level of responsibility, time in position, and internal pay equity.

 

In addition to individual adjustments, the Chief Executive Officer provides recommendations to the Committee on adjustments to compensation to address hiring or retention needs, performance goals, market pay equity, overall corporate performance, and general economic conditions. While the Committee considers the recommendations of management in these areas, it makes all compensation decisions independently after considering Pay Governance’s recommendations.

 

Consideration of Shareholder Advisory Vote on Compensation and Shareholder Engagement: At Norfolk Southern’s 2021 Annual Meeting of Shareholders, approximately 93% of the votes cast supported the advisory resolution on the compensation of our Named Executive Officers. The Committee compared the results of the advisory vote to our peer group average results and the average results amongst the Russell 3000 companies.

 

The Committee viewed the results of the advisory vote as demonstrating broad shareholder support for our current executive compensation program. Given the results of the shareholder advisory vote and the Committee’s ongoing review of our compensation programs, the Committee believes that our existing compensation program effectively aligns the interests of the Named Executive Officers with our long-term goals. While the shareholder vote on compensation is advisory in nature, the Board and the Committee carefully consider the results of any such vote in future compensation decisions.

 

We engage in a shareholder outreach program with our institutional investors to solicit feedback concerning our executive compensation program, and this shareholder feedback is reported to the Committee and the Board for consideration. This process allows shareholders to provide input to the Committee on our executive compensation

 

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Compensation Governance (continued)

 
 

 

program and disclosure beyond the annual advisory vote on compensation. In response to specific concerns expressed by shareholders during these discussions, the Committee has taken several actions over the past years to enhance the design of our executive compensation program.

 

In setting compensation for the Named Executive Officers, our Compensation Committee considers:

 

each officer’s performance, experience, qualifications, responsibilities, and tenure;
current and historical salary levels, targeted annual incentive opportunities, and long-term incentive awards;
expected corporate performance and general economic conditions;
general industry compensation survey data; and
comparative market data, provided by the independent compensation consultant, as a guideline. The Committee considers total direct compensation (salary plus target annual incentive plus the expected value of long-term incentive awards) relative to the 50th percentile for the Chief Executive Officer and the other Named Executive Officers as compared to the peer group.

 

The Committee does not consider amounts realized from prior performance-based or stock-based compensation awards when setting the current year’s target total direct compensation, regardless of whether such realized amounts may have resulted in a higher or lower payout than targeted in prior years. Since the nature and purpose of performance-based and stock-based compensation is to tie executives’ compensation to future performance, the Committee believes that considering amounts realized from prior compensation awards in making current compensation decisions is inconsistent with this purpose.

 

   

Compensation Policies

 
 

 

Peer Groups: Our Compensation Committee monitors the continuing appropriateness of its selection of the peer group companies. The Committee continues to believe that it is important to focus on a peer group of the other North American Class I railroads or their holding companies (“Class I railroads”) because we are in competition with those companies for key executive talent. The companies that make up the Class I railroads peer group for 2021 (the “Class I Railroads Peer Group”) are:

 

BNSF Railway Company                                CSX Corporation

 

Canadian National Railway Company         Kansas City Southern

 

Canadian Pacific Railway Limited                Union Pacific Corporation

 

The Committee also recognizes that the market in which we compete for many key executive positions extends beyond the railroad industry to include other industrial companies of comparable size to Norfolk Southern. As a result, the Committee determined that it is relevant to reference the pay levels at both the other Class I railroads and in a peer group of comparable industrial companies for the Named Executive Officers. In September 2021, with the assistance of Pay Governance, the Committee selected an additional peer group of 20 companies in the industrials sector that are within a comparable size range to Norfolk Southern. At the time that the Committee adopted the new peer group, Norfolk Southern ranked at the 26th percentile of this group in annual revenue, at the 84th percentile in market capitalization, and at the 87th percentile in total assets. The companies in this peer group (the “Industrials Peer Group”) are:

 

BNSF Railway Company Fortive Corporation Textron Inc.
Carrier Global Corporation Illinois Tool Works Inc. Trane Technologies, Inc.
Canadian National Railway Company Johnson Controls International plc Waste Management, Inc.
Canadian Pacific Railway Limited L3Harris Technologies, Inc. Westinghouse Air Brake
CSX Corporation Otis Worldwide Corporation Technologies Corporation
Dover Corporation Parker-Hannifin Corporation XPO Logistics, Inc.
Eaton Corporation plc Republic Services, Inc. Xylem Inc.

 

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Compensation Policies (continued)

 
 

 

In November 2021, the Committee reviewed compensation data provided by Pay Governance for the Industrials Peer Group, as well as for the Class I Railroads Peer Group as part of its annual review of benchmark compensation data, and in preparation for its decisions on officer compensation to be made in January 2022. The Committee also reviewed available compensation data for both of these peer groups in establishing Mr. Shaw’s compensation as President in December 2021. The Committee believes that this broader Industrials Peer Group will provide a sustainable set of companies for compensation market comparison.

 

Our Committee applies its executive compensation policies consistently to all Named Executive Officers, and the application of these policies produces differing amounts of compensation for each officer based on his or her responsibilities and tenure as compared to the compensation set for comparable positions by comparable companies. In setting the Chief Executive Officer’s compensation, the Committee strives to balance comparative market data for chief executive officers of Peer Group Companies with its goal to provide incentive opportunities that are significantly performance-based and thus designed to drive shareholder value. Because the Chief Executive Officer’s job carries the highest level of responsibility and has the greatest ability to drive shareholder value, his total compensation contains a higher performance-based component than that of the other Named Executive Officers.

 

   

Compensation Components

 
 

 

Overview: Our Compensation Committee has designed a balanced compensation program that provides our Named Executive Officers with an appropriate base salary along with competitive annual and long-term incentive compensation.

 

The program provides a significant portion of compensation in the form of equity and directly links executives’ compensation to our strategic goals and financial performance, and thus aligns their interests with those of our shareholders. Our total compensation for our Named Executive Officers is weighted heavily toward performance- based incentive compensation, rather than base salary, so that a substantial portion of targeted executive compensation aligns with shareholder interests.

 

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Compensation Components (continued)

 
 

 

 

2021 CEO Target Total Compensation Mix*

 

 

 

2021 Average Target Total Compensation Mix for Other NEOs**

 

*Compensation mix percentages for individual components may not sum to totals shown due to rounding.
**Average for Ms. Adams, Mr. George, Ms. Sanborn, and Mr. Shaw.

 

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Compensation Components (continued)

 
 

 

In setting executives’ total direct compensation and the compensation component mix, the Committee considers the advice of its independent compensation consultant and then makes its own judgments to determine appropriate compensation levels and mix. The Committee considers each executive’s performance, responsibilities, time in position, and internal pay equity. With respect to newly hired executives, the Committee considers the executive’s responsibilities and competitive pay, including pay appropriate to encourage the executive to accept our offer of employment.

 

In addition, the Committee uses market data of the Peer Group Companies when available as a reference point for determining the appropriate compensation, considering where target total direct compensation for the upcoming year falls relative to the 50th percentile for the Chief Executive Officer and the other Named Executive Officers.

 

At the beginning of 2021, the Committee maintained the total direct compensation targets for each of the Named Executive Officers as the Committee determined that each officer’s compensation was positioned within a competitive range of median compensation for comparable positions at the Peer Group Companies. The Committee increased the total direct compensation target for Mr. Shaw in December 2021, upon his promotion to the President position.

 

For 2021, the portion of total direct compensation awarded as total cash compensation versus long-term incentive compensation for the NEOs was approximately:

 

 

 

The Committee further considers the portion of total direct compensation to be awarded as long-term compensation and how the long-term portion should be allocated among performance share units, restricted stock units, and stock options. This allocation is based on general market practices, compensation trends, governance practices, and business issues. In making this determination, the Committee takes into account the potential dilutive effect of stock-based awards, including guidance on these measures from proxy advisory services, and further considers the purpose behind each element of long-term compensation and how the allocation among these elements will support its overall compensation objectives.

 

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Compensation Components (continued)

 
 

 

 

Salaries: The Board establishes competitive base salaries for our executive officers to attract and retain key executive talent. Our Compensation Committee reviews the Named Executive Officers’ base salaries annually and periodically makes recommendations to our Board of Directors to adjust salaries based on market data, individual performance and experience, changes in position or responsibilities, or for other circumstances.

 

After the Committee’s annual salary review in January 2021, the Committee did not recommend any adjustments to the salaries for 2021 for the Named Executive Officers, as the Committee determined that those salaries were appropriate based on comparisons for total direct compensation among peers at the Peer Group Companies.

 

In December, upon Mr. Shaw’s appointment as President, the Committee recommended an annual salary of $800,000 for the President position, placing the salary for this position between those of the Executive Vice Presidents and the CEO, and the Board approved this salary. In 2021, Mr. Shaw’s increased salary was in effect only for the month of December.

 

Annual Incentive: Each of our Named Executive Officers participates in our Executive Management Incentive Plan (“EMIP”), which is designed to compensate executives based on achievement of annual corporate performance goals. For 2021, 80% of the target annual incentive awards for EMIP participants was based on achieving financial performance goals, and 20% was based on the Committee’s assessment of our progress toward our strategic objectives, including driving productivity and efficiency, achieving operational excellence, propelling smart growth, accelerating digital transformation, and aligning, engaging and developing talent. The Committee also established performance levels, including threshold, target, and maximum performance levels, and incentive award levels for each performance level, as shown below. The financial goals are weighted 60% toward operating ratio and 20% toward operating income.

 

 

Each year, the Committee establishes an annual incentive opportunity for each Executive Officer at the level of Executive Vice President or above. The opportunity is determined using relevant market data and internal pay equity, and is expressed as a percentage of base salary.

 

For 2021, the Committee established annual incentive opportunities of 225% of base salary for the Chief Executive Officer, 150% for the President upon Mr. Shaw’s promotion, prorated for the portion of the year that he served in the President position, and 135% for the Executive Vice President positions. The Committee established goals to produce an overall 67% targeted corporate performance payout which, if met, would result in annual incentive payouts of the following percentages of each officer’s salary:

 

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Compensation Components (continued)

 
 

 

 

 

 

Position

 

Annual
Incentive
Opportunity

 

 

Target
Performance

Level

Percent of Salary Paid
as Annual Incentive at
Target Performance
Chief Executive Officer 225% x 67% = 151%
President1 150% x 67% = 101%
Executive Vice Presidents 135% x 67% = 90%

 

1  Applicable for the month of December 2021 when Mr. Shaw served as President.

 

After the end of the year, the Committee determines the extent to which the corporate performance goals were met. The performance-based annual incentive paid to each officer is then calculated by multiplying the officer’s salary paid in the prior year by that officer’s annual incentive opportunity and percentage achievement of the corporate performance goals. The Committee may reduce the annual incentive paid to any executive based on individual performance. For 2021, the Committee did not make any adjustments to the annual incentive payout based on individual performance.

 

2021 Performance Metrics

For 2021, the Committee selected operating ratio, or operating expenses as a percentage of revenue, and operating income, or operating revenue less operating expenses, as the financial performance measures to be used in the EMIP. These financial metrics were selected to motivate and reward executives for increasing revenue, improving operating efficiency, and reducing expenses. The Committee based part of EMIP awards on its assessment of our progress toward our strategic objectives because they are critical to achieving our long-term business strategy. Approximately 20% of our management workforce had an annual incentive opportunity in 2021 based on the achievement of the same performance goals that the Committee established under EMIP.

 

The portions of the annual incentive based on operating ratio, operating income, and strategic objectives are calculated independently, so it is possible to earn an annual incentive by achieving the threshold on only one of these metrics. If Norfolk Southern achieved threshold performance for only the operating ratio measure, a threshold payout of 15% would result. If Norfolk Southern achieved threshold performance for only the operating income measure, a threshold payout of 5% would result. There was no threshold performance level established for the strategic objectives. If the maximum or higher performance for all the three criteria were achieved, a maximum payout of 150% would result. The dollar amounts corresponding to the above-listed threshold, target, and maximum opportunities for each of the Named Executive Officers can be found under Grants of Plan-Based Awards on page 52.

 

Performance Goals for 2021 Metrics

Financial Metrics – The Committee sets target performance for operating ratio and operating income at levels considered challenging with a reasonable likelihood of being achieved and that represent strong levels of performance based on our overall business outlook, general economic conditions expected during the performance year, and our long-term strategic plan. The Committee established the goals for the maximum annual incentive opportunity at a level so that the full amount would be earned only if actual performance significantly exceeded forecasted performance. The Committee also set performance levels and resulting payouts at intervals between the threshold, target, and maximum.

 

Performance levels for the operating ratio and operating income metrics were set based on the annual financial plan established at the beginning of the year, including the impacts of the pandemic resulting in lower volume expectations, and the need to promote continued operating efficiency improvements. As a result, the Committee increased the performance necessary to achieve the threshold, target, and maximum payout levels for operating ratio as compared with 2020 and increased the maximum payout for operating ratio performance to 175%. The Committee also decreased the performance necessary to achieve each payout level for operating income as compared with 2020, and reduced the maximum payout for operating income performance to 125%.

 

Strategic Objectives – To motivate continued focus on and progress toward all of our strategic objectives, the Committee determined in January of 2021 that the earnout of the 20% of annual incentive opportunity would be based on the Committee’s evaluation of the Corporation’s progress in continuing our transformation into a more productive and efficient organization; efforts to achieve operational excellence and propel smart growth; leveraging technology as a catalyst to drive the productivity of our people, enhance the safety and efficiency of our operation, and enrich the experience of our customers; and aligning, engaging and developing our talent by promoting diversity, equity, and inclusion, and ensuring that employees understand how their work contributes to Norfolk Southern’s success.

 

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Compensation Components (continued)

 
 

 

The earnout level for strategic objectives performance can range from 0% to 100%, but not higher than 100%, based on the Committee’s evaluation.

 

The performance metrics that the Committee established in January 2021 for operating ratio and operating income, and the corresponding payouts, as well as the potential earnout for strategic objectives performance are shown in the illustration below, along with the weighting of each of these criteria in calculating the corporate performance percentage.

 

 

 

The payout for the annual incentive is calculated using a weighted average of the payouts for each performance area as illustrated above.

 

Corporate Performance Results for 2021

 

The corporate performance for the 2021 award, determined under the EMIP’s terms, including the Compensation Committee’s evaluation of our strategic objectives performance, is detailed below.

 

In 2021, the Corporation achieved record performance for train length and weight, gross ton-miles per employee, and fuel efficiency. In addition, management created a safer organization with a reduction in both mainline train accidents per million train miles and serious injuries per 200,000 workhours. Management also developed alternative container storage solutions and added chassis capacity for intermodal customers, and enhanced online self-service capabilities for customers.

 

The Committee further considered management’s deployment of NSites, a digital tool to allow rail shippers to access and explore our industrial sites and rail-to-truck transload facilities, and implementation of Thoroughbred Freight Transfer, an innovative door-to-door service combining the efficiency of our intermodal trains, the capacity of our boxcar assets, and the last-mile flexibility of trucks.

 

Management effectively continued its acceleration of the Corporation’s digital transformation by developing cutting- edge algorithms to assist with processes like car inspections to improve operational efficiency and safety. In addition, 8,000 iPhones were deployed with state-of-the-art applications for our conductor and engineer workforces to increase efficiency, safety, and customer service and leverage technologies like mobile track authorities to reduce the time required to complete routine processes while also increasing safety.

 

In evaluating progress against talent development and engagement, the Committee found that management had prioritized diversity, equity, and inclusion by appointing a senior executive to directly oversee these efforts, expanded the Corporation’s Inclusion Leadership Council, completed construction of a new headquarters building to enhance efforts to attract and retain top talent, and launched a new leadership development program for frontline managers.

 

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Compensation Components (continued)

 
 

 

Given these achievements, the Committee concluded that actions of management supported a 100% payout of the incentive award tied to progress against the Corporation’s strategic objectives. The corporate performance results for the 2021 annual incentive are detailed below:

 

Performance Metric Performance % of Award Earned Component Weighting Subtotal
Operating Ratio 60.1% 158.3% 60% 95.0%
Operating Income ($ in billions) $4,447    125% 20% 25.0%
Strategic Objectives Progress   100% 20% 20.0%
Total Corporate Performance (rounded)       140.0%

 

The Committee did not use any discretionary authority to increase the resulting corporate performance for the 2021 annual incentive.

 

Annual incentive award targets and payout ranges for 2021, as well as the actual annual incentive award payouts for each of the Named Executive Officers for 2021, are:

 

 

Named Executive Officer

 

67% Target Incentive

Range of Potential

Payouts

Award Actually

Earned

James A. Squires $1,658,250 $0 - $3,712,500 $3,465,000
Alan H. Shaw1 $   564,475 $0 - $1,263,750 $1,179,500
Each of Mark R. George, Ann A. Adams, and Cynthia M. Sanborn $   542,700 $0 - $1,215,000 $1,134,000

 

1Based on Mr. Shaw’s salary and incentive opportunity as President for December 2021, and as Executive Vice President and Chief Marketing Officer from January through November 2021.

 

Under the terms of the Executive Management Incentive Plan, the annual incentive paid to any individual executive under the plan will not exceed the lesser of three-tenths of one percent of Norfolk Southern’s income from railway operations for the incentive year or ten million dollars.

 

Long-Term Incentive Awards: We believe the most effective means to achieve long-term corporate performance is to align the interests of our Named Executive Officers with those of our shareholders. The Committee achieves this alignment by granting equity-based awards that are earned based on continued employment, and at least half of which vest on achievement of predetermined performance goals. The Committee believes that the use of long-term incentive compensation for executives reinforces their focus on the importance of returns to shareholders, promotes achievement of long-term performance goals, and encourages executive retention.

 

For 2021, the Committee allocated the annual long-term incentive award to the Chief Executive Officer 60% as performance share units, 15% as stock options, and 25% as restricted stock units, and to the other Named Executive Officers 50% as performance share units, 15% as stock options, and 35% as restricted stock units. Executives were required to enter into an agreement not to engage in competing employment as a condition of receiving the 2021 award.

 

Performance Share Units. We use performance share units to reward the achievement of performance goals over a three-year period. Performance share units settle in shares of Norfolk Southern common stock after the Committee certifies the extent to which the performance goals were attained.

 

For 2021, the Committee again established performance goals based directly on return on average invested capital (ROAIC), with total shareholder return (TSR) serving as a modifier. The Committee believes ROAIC is an important performance indicator to shareholders of a capital-intensive company such as Norfolk Southern. No payout will be made unless the threshold is achieved for the three-year ROAIC metric. For the 2021 awards, if a threshold or higher payout is met for the ROAIC measure, then the payout may be modified based on our TSR as compared with the shareholder return of the other publicly-traded North American Class I railroads reflecting the return over the entire three-year period, as follows:

 

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Compensation Components (continued)

 
 

 

Modifier for 2021–2023 Performance Share Units
Ranking of NS 3-Year Total Shareholder Return vs. Class I Railroads Performance Share Unit Multiplier
1st 1.250
2nd 1.125
3rd or 4th No change to the award
5th 0.875
6th 0.750

 

Using TSR as a modifier ensures that the final payout is reflective of our performance relative to our peers while placing primary focus on making profitable use of our assets. Overall, the Committee believes that the use of the ROAIC measure, with the TSR modifier, promotes the enhancement of shareholder value and efficient utilization of corporate assets.

 

To allow shareholders to assess the link between corporate performance and compensation, the Committee is committed to disclosing in this Compensation Discussion and Analysis the achievements for our performance share units at the end of each performance period. The Committee believes, however, that disclosing our long-term targets for ROAIC would give substantial insight into the Corporation’s confidential, forward-looking strategies, and could therefore place the Corporation and our shareholders at a competitive disadvantage.

 

Completed 2019-2021 Performance Share Unit Cycle. For the 2019-2021 performance cycle, the performance criterion was based on ROAIC as shown in the table below, with TSR being used as a modifier consistent with the criteria in the above table.

 

Three-Year Average ROAIC 2019-2021   PSUs Earned Out

14.6%

 

200%

  14.3%

  140%

  13.6%

  100% Target Performance
  10.6%   60%
  10.3%   30%
<10.3%   0%

 

The three-year average ROAIC for the 2019-2021 performance cycle was 11.6%, resulting in an earnout at 88.6% of target. Our TSR for the period ranked second out of the five North American Class I railroads that remain publicly traded following the acquisition of Kansas City Southern so, as reflected in the chart above, that earnout was increased by 12.5%, to 99.7%, based on our TSR performance.

 

Based on the final earnout of 99.7% for the 2019-2021 performance share units, the Named Executive Officers received the following number of shares of stock of Norfolk Southern Corporation in early 2022, with the earned award reduced upon distribution as required for tax withholding*:

 

Named Executive Officer PSU Award Granted (#) PSU Earned Award (#)
James A. Squires 29,570 29,481
Alan H. Shaw 5,840 5,822
Mark R. George 3,390 3,380
Ann A. Adams 3,160 3,151

 

*Ms. Sanborn did not receive an earnout from the 2019-2021 performance share units as she was not employed by the Corporation in 2019.

 

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Compensation Components (continued)

 
 

 

Stock Options. We believe that use of stock options provides us with the ability to retain key employees and at the same time increase shareholder value since the value of the options is only realized if our stock price increases from the date on which the options are granted. For 2021, the Committee maintained a four-year cliff-vesting period to encourage retention of key employees and awarded dividend equivalent payments on options during the vesting period. The value of the option awarded is adjusted to recognize the effect of the dividend equivalents.

 

The Committee has never issued backdated option grants. Options are priced on the effective date of the grant at the higher of (i) the closing price or (ii) the average of the high and low price on the effective date of the grant. In addition, the Long-Term Incentive Plan prohibits repricing of outstanding stock options without the approval of shareholders.

 

Under the terms of the Long-Term Incentive Plan, the effective date of a stock option grant is the date on which the Committee makes the grant or, if granted during a blackout period that precedes the release of our financial information for the prior calendar quarter, the first day on which the Corporation’s common stock is traded after a full trading day has elapsed following the release of the prior quarter’s financial information. This establishes a prospective effective date to price the options.

 

Restricted Stock Units. We believe that the use of time-based restricted stock units serves as a retention tool for valued members of management. For 2021, the Committee granted restricted stock units that vest ratably over four years beginning on the first anniversary of the date of grant and which settle in shares of Norfolk Southern common stock.

 

Retirement Plans and Programs: We believe that our Retirement Plan and Supplemental Benefit Plan provide us with the ability to retain key employees over a longer period. Our officers, including our Named Executive Officers, participate in the Retirement Plan, a tax-qualified defined benefit pension plan that is generally provided to all our employees who are not subject to a collective bargaining agreement. The Retirement Plan provides a benefit based on age, service, and a percentage of final average compensation. We also sponsor the Supplemental Benefit Plan, a non- qualified plan that restores the retirement benefit for amounts in excess of the Internal Revenue Code limitations for tax-qualified retirement plans, and provides a retirement benefit for salary or annual incentive that is deferred under our deferred compensation plans. In addition to supporting the goal to retain key employees, the Committee believes the Supplemental Benefit Plan maintains internal equity by ensuring that pension benefit levels are based on relative compensation levels of each participant. Further information on the Retirement Plan and Supplemental Benefit Plan may be found in the Narrative to the Pension Benefits Table.

 

We maintain the Executives’ Deferred Compensation Plan (the “EDCP”) for the benefit of the Named Executive Officers and certain other employees. The purpose of the EDCP is to provide executives with the opportunity to defer compensation, as adjusted for earnings or losses, until retirement or another specified date or event. We do not make any company or matching contributions to the EDCP. Further information on the EDCP may be found in the Narrative to the Nonqualified Deferred Compensation Table.

 

Other Benefits and Perquisites: We provide the Named Executive Officers with certain health and welfare benefits, relocation program benefits, and a tax-qualified 401(k) plan in the same manner that such benefits have been made available to other salaried employees of the Corporation. However, an Executive Officer is not eligible for an equity advance against the value of his or her residence in the event of relocation, which is a benefit that is available to all other salaried employees of the Corporation under our relocation program.

 

The Named Executive Officers receive limited perquisites that the Committee believes are necessary to retain Executive Officers and to enhance their productivity.

 

Our Board of Directors has specifically directed and requires the Chief Executive Officer, and his family and guests when appropriate, to use Norfolk Southern’s aircraft whenever reasonably possible for air travel. The Board believes that such use of the corporate aircraft promotes the best interests of Norfolk Southern by generally ensuring the immediate availability of the Chief Executive Officer and by providing a prompt, efficient means of travel in view of the need for security in such travel. For the same reasons, our Board of Directors has determined that the Chief Executive Officer may authorize employees and their guests to use the corporate aircraft for purposes that further our business interests and when the aircraft is not otherwise needed for business use. Non-business use by our other Named Executive Officers is infrequent and is disclosed as necessary in the Summary Compensation Table.

 

Other perquisites may include executive physicals and certain approved spousal travel. We do not make tax gross-up payments on perquisites for the Named Executive Officers employed at the Executive Vice President level or above, except for tax gross-ups on certain relocation expenses and benefits consistent with our relocation programs for all management employees.

 

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Severance Arrangements and Change-in-Control Agreements

 
 

 

The Committee reviews perquisites periodically for both appropriateness and effectiveness. However, the value of any perquisites provided to any of the Named Executive Officers is a limited portion of any officer’s compensation. As such, the Committee does not consider perquisites in its analysis of the total compensation package granted to the Named Executive Officers.

 

We believe that the benefits and perquisites described above are appropriate to remain competitive compared to other companies and to promote retention of these officers.

 

Executive Severance Plan: The Board in 2020 adopted the Executive Severance Plan to meet the needs of the Corporation, 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. Executive vice presidents and selected senior vice presidents are eligible for benefits under the plan.

 

Benefits under the Executive Severance Plan include:

 

a payment equal to two times the executive’s salary, paid as a lump sum,
a prorated annual incentive for time worked during the year in which the employee was severed if the employee was not retirement eligible,
either (i) for a retirement-eligible employee, favorable treatment of long-term incentives in accordance with the terms of the Norfolk Southern Long-Term Incentive Plan, or (ii) for an employee who is not retirement eligible, cash payment for the full value of restricted share units and stock options, and a prorated cash payment for the value of performance share units,
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 Corporation, 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: We entered into an offer letter with Mr. George prior to his hire that provides certain benefits if Mr. George is terminated without “Cause” within sixty months following his November 1, 2019 hire date, as we disclosed in the Form 8-K filed on August 28, 2019. The Committee determined that it was appropriate to include this term in the offer letter to attract Mr. George to join us as our Executive Vice President and Chief Financial Officer and leave his prior employment. For a summary of the material terms of this offer letter, see the discussion in the Narrative to the Summary Compensation Table and the Grants of Plan-Based Awards Table section of this Proxy Statement, under the heading “Employment and Other Agreements.”

 

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 65.

 

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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.

 

     

Share Ownership Guidelines for Officers

 

 

 

Our Board of Directors has established as part of its Corporate Governance Guidelines the following ownership guidelines for shares of Norfolk Southern stock for its officers:

 

Position Minimum Value
Chairman, President and Chief Executive Officer 5 times annual salary
Executive Vice Presidents 3 times annual salary
Senior Vice Presidents, Vice Presidents 1 times annual salary

 

Norfolk Southern common stock, stock equivalents held in Norfolk Southern’s 401(k) plan, and restricted stock units held in our Long-Term Incentive Plan are counted toward these holdings, but unexercised stock options or unvested performance share units are not counted. Officers may acquire such holdings over a five-year period. All officers currently meet this guideline or are expected to meet the guideline within the five-year period.

 

Please refer to the Beneficial Ownership of Stock table on page 74 for a summary of the number of common shares owned by our directors and Named Executive Officers as of March 1, 2022.

 

All Executive Officers of Norfolk Southern are required to clear any transaction involving its common stock with Norfolk Southern’s Corporate Secretary prior to engaging in the transaction, and pledging or hedging transactions will not be approved.

 

Anti-Pledging/Anti-Hedging Policy. All of our Executive Officers are prohibited from entering into pledging transactions or positions regarding the Corporation’s securities.

 

All of our officers (including Executive Officers) and directors are prohibited from purchasing any financial instruments (including prepaid variable forward contracts, equity swaps, collars, exchange funds) that hedge or offset, or are designed to hedge or offset, any decrease in the market value of the Corporation’s securities, whether granted as part of the officer’s or director’s compensation or held, directly or indirectly, by the officer or director.

 

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Policies and Decisions Regarding the Adjustment or Recovery of Awards

 
 

While we do not anticipate there would ever be circumstances where a restatement of earnings upon which incentive plan award decisions were based would occur, should such an unlikely event take place, the Committee has the discretion to take all actions necessary to protect the interests of shareholders up to and including actions to recover such incentive awards. The performance share awards include a clawback provision to permit the recovery of performance share awards following a material restatement of Norfolk Southern’s financial results. Similarly, the Executive Management Incentive Plan includes a clawback provision to permit recovery of annual incentives as a result of any material noncompliance with any financial reporting requirement under the securities laws. The long- term incentive award agreements further provide for forfeiture of awards, including after retirement, if the recipient engages in certain competing employment, or if it is determined that the recipient has committed fraud or theft in the course of the recipient’s employment with Norfolk Southern, or if the recipient discloses certain confidential information. Both the Long-Term Incentive Plan and the Executive Management Incentive Plan further allow for the reduction, forfeiture, or recoupment of any award as may be required by law.

 

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Executive Compensation Tables

 

   

Summary Compensation Table

 

 

 

The following table shows the total compensation awarded to, earned by, or paid to each Named Executive Officer during 2021 for service in all capacities to Norfolk Southern and our subsidiaries for the fiscal year ended December 31, 2021. The table also sets forth information regarding fiscal 2020 and 2019 compensation.

 

 

 

 

 

 

Name and
Principal Position
(a)

 

 

 

 

 

 

Year
(b)

 

 

 

 

 

Salary

($)

(c)

 

 

 

 

 

Bonus

($)

(d)

 

 

 

 

Stock
Awards

($)

(e)

 

 

 

 

Option
Awards

($)

(f)

 

 

 

Non-Equity
Incentive

Plan
Compensation

($)

(g)

Change in
Pension
Value and
Nonqualified

Deferred
Compensation

Earnings

($)

(h)

 

 

 

 

All Other
Compensation

($)

(i)

 

 

 

 

 

Total
($)

(j)

James A. Squires1 2021 1,100,000 7,338,120 1,295,418 3,465,000 755,664 62,740 14,016,942
Chairman and 2020 1,100,000 272,250 6,672,645 1,177,278 507,375 4,330,908 64,823 14,125,279
Chief Executive Officer 2019 1,100,000 6,671,681 1,177,650 1,200,375 6,184,152 302,816 16,636,674
Alan H. Shaw2 2021 616,667 1,448,348 255,584 1,179,500 585,000 277,702 4,362,801
President 2020 600,000 89,100 1,394,242 155,015 166,050 1,919,112 18,266 4,341,785

2019 600,000 1,395,560 155,074 392,850 2,182,500 18,694 4,744,678
Mark R. George 2021 600,000 1,635,698 288,704 1,134,000 84,216 32,360 3,774,978
Executive Vice President and 2020 600,000 89,100 1,575,728 174,916 166,050 98,436 33,167 2,737,397
Chief Financial Officer 2019 100,000 400,000 900,298 100,170 65,475 10,296 8,222 1,584,461
Ann A. Adams 2021 600,000 1,448,348 255,584 1,134,000 568,692 32,524 4,039,148

Executive Vice President and

Chief Transformation Officer

2020 600,000 89,100 1,394,242 155,015 166,050 927,816 9,975 3,342,198
Cynthia M. Sanborn 2021 600,000 1,823,048 321,824 1,134,000 172,236 10,881 4,061,989
Executive Vice President and 2020 200,000 529,700 2,000,660 55,350 16,248 87,670 2,889,628
Chief Operating Officer
                   

 

1Mr. Squires also served as President from January 1 through November 30, 2021.
2Effective December 1, 2021, Mr. Shaw was appointed to the position of President of the Corporation. Mr. Shaw previously served as Executive Vice President and Chief Marketing Officer from January 1 through November 30, 2021.

 

Salary (Column (c))

Reflects salary payable before reduction for elective deferrals to our 401(k) plan, non-qualified deferred compensation plan, or our other plans.

 

Stock Awards (Column (e))

The amounts reported for Stock Awards are the full grant date fair values of the awards computed in accordance with FASB ASC Topic 718 "Compensation - Stock Compensation." This column includes Performance Share Units and Restricted Stock Units.

 

For Performance Share Units, the full grant date fair value is determined consistent with the estimated full accounting cost to be recognized over the three-year performance period, determined as of the end of the month following the grant date under FASB ASC Topic 718. For discussions of the relevant assumptions made in calculating these amounts, see note 12 to our consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021. For the grant date fair value of only those awards granted to the Named Executive Officers in 2021, see the Grants of Plan-Based Awards Table .

 

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Summary Compensation Table (continued)

 
 

 

The value of the Stock Awards reported in column (e), calculated in accordance with FASB ASC Topic 718 but assuming the highest level of performance would be achieved is as follows:

 

Year J. A. Squires A. H. Shaw M. R. George A. A. Adams C. M. Sanborn
2021 $15,108,675 $2,725,403 $3,078,698 $2,725,403 $3,431,993
2020 $13,737,795 $2,788,047 $3,152,170 $2,788,047 $2,000,660
2019 $13,736,544 $2,790,853 $1,800,446    

 

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, 2021.

 

Non-Equity Incentive Plan Compensation (Column (g))

The amounts reported as Non-Equity Incentive Plan Compensation were paid under the Executive Management Incentive Plan, as more fully described in the Compensation Discussion and Analysis. Amounts reported in this column were earned in the indicated year, and may have been received on a current basis or deferred in accordance with our deferred compensation plans.

 

Change in Pension Value and Nonqualified Deferred Compensation Earnings (Column (h))

For all the Named Executive Officers, 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 2021. In accordance with SEC rules, any increase or decrease in the present value of the benefits under our Retirement Plan is aggregated with any increase or decrease in the present value of the benefits under our Supplemental Benefit Plan.

 

Pension values may fluctuate significantly from year to year depending on a number of factors, including age, years of service, average annual compensation, and the assumptions used to determine the present value, such as the discount rate and mortality assumptions. For 2021, each of the Named Executive Officers had an increase in the present value of his or her Retirement Plan and Supplemental Plan benefit as a result from increases in each individual's years of service, final average compensation calculation, and age, and from a decrease in the discount rate assumptions.

 

All Other Compensation (Column (i))

The amounts reported as All Other Compensation for 2021 include: (i) matching contributions to our Thrift and Investment Plan as follows: $10,150 for each of Mr. Squires, Ms. Adams, Mr. Shaw, Ms. Sanborn; and $8,750 for Mr. George, (ii) premiums paid on individually owned executive life insurance policies under our Executive Life Insurance Plan as follows: Mr. Squires, $14,264; and Mr. Shaw, $11,086, and (iii) the cost for an annual physical for Mr. Squires.

 

Norfolk Southern has different relocation programs that offer benefits on a uniform basis to similarly situated management employees who are required to relocate for their employment. Two of our Named Executive Officers received benefits under these programs in 2021, and these amounts are included in the amounts reported as All Other Compensation for 2021:

 

In conjunction with Norfolk Southern’s relocation of its corporate headquarters to Atlanta, Georgia, Mr. Shaw received relocation benefits in 2021 under the Corporation’s Corporate Consolidation Relocation Program. Mr. Shaw was subject to the same relocation policy as all other management employees who relocated in connection with the corporate headquarters move. The value of allowances, reimbursements, and benefits provided in connection with Mr. Shaw’s relocation was $126,441.

 

Ms. Adams elected to receive Norfolk Southern's Nonagreement Allowance in Lieu of Relocation Benefits, which the Corporation offers to all similarly situated employees as an alternative to the Corporate Consolidation Relocation Program. The program provides certain allowances for up to one year following the date of the employee's relocation. The value of allowances and reimbursements provided to Ms. Adams in connection with her position transfer to Atlanta was $7,500 in 2021.

 

The relocation programs provide tax gross-ups that are designed to partially offset the taxes an employee incurs on certain relocation benefits that are considered ordinary income under federal and state laws, and the amounts reported as All Other Compensation for 2021 include $98,861 in such tax gross-ups for Mr. Shaw.

 

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Summary Compensation Table (continued)

 

 

 

 

The values in this column also include amounts for personal use of the corporate aircraft, as follows: Mr. Squires, $33,526, Mr. Shaw, $31,165, Mr. George, $23,610, and Ms. Adams, $14,874. With regard to personal use of corporate aircraft, aggregate incremental cost is calculated as the weighted-average cost of fuel, aircraft maintenance, parts and supplies, landing fees, ground services, catering, and crew expenses associated with such use, including those associated with "deadhead" flights related to such use. Use of corporate aircraft includes use by the Named Executive Officers as permitted by resolution of the Board of Directors. The aggregate incremental cost for personal use of corporate aircraft by our Named Executive Officers is allocated entirely to the highest-ranking Named Executive Officer on the flight. Because corporate aircraft are used primarily for business travel, this calculation excludes fixed costs that do not change based on usage. Fixed costs include pilot salaries, the purchase or lease costs of the airplane, and the cost of maintenance not related to such personal travel.

 

All perquisites are valued on the basis of aggregate incremental cost to us. All the Named Executive Officers also participated in the Executive Accident Plan, for which there was no aggregate incremental cost.

 

     

2021 Grants of Plan-Based Awards

 

 

 

Name
(a)
Grant
Date
(b)
Committee
Action
Date2
Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards1
  Estimated Future Payouts
Under Equity Incentive Plan
Awards
All
Other
Stock
Awards:
Number
of Shares
of Stock
or Units
(#)
(i)
All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)
(j)
Exercise
or Base
Price of
Option
Awards
($/Sh)
(k)
Grant
Date Fair
Value of
Stock
and
Option
Awards
($)
(l)
Threshold
($)
(c)
Target
($)
(d)
Maximum
($)
(e)
  Threshold
(#)
(f)
Target
(#)
(g)
Maximum
(#)
(h)
James A. Squires 1/25/2021 1/25/2021 123,750  1,658,250  3,712,500                 
1/28/2021 1/25/2021         4,847  21,540  53,850        5,180,370 
1/28/2021 1/25/2021               9,000      2,157,750 
1/28/2021 1/25/2021                 20,730  241.79 1,295,418 
Alan H. Shaw 1/25/2021 1/25/2021 40,500  542,700  1,215,000                 
12/1/2021 12/1/2021 1,625  21,775  48,750                 
1/28/2021 1/25/2021         797  3,540  8,850        851,370 
1/28/2021 1/25/2021               2,490      596,978 
  1/28/2021 1/25/2021                 4,090  241.79 255,584 
Mark R. George 1/25/2021 1/25/2021 40,500  542,700  1,215,000                 
1/28/2021 1/25/2021         900  4,000  10,000        962,000 
1/28/2021 1/25/2021               2,810      673,698 
1/28/2021 1/25/2021                 4,620  241.79 288,704 
Ann A. Adams 1/25/2021 1/25/2021 40,500  542,700  1,215,000                 
1/28/2021 1/25/2021         797  3,540  8,850        851,370 
1/28/2021 1/25/2021               2,490      596,978 
1/28/2021 1/25/2021                 4,090  241.79 255,584 
Cynthia M. Sanborn 1/25/2021 1/25/2021 40,500  542,700  542,700                 
1/28/2021 1/25/2021         1,004  4,460  11,150        1,072,630 
1/28/2021 1/25/2021               3,130      750,418 
1/28/2021 1/25/2021                 5,150  241.79 321,824 

 

1The amounts shown represent the full-year threshold, target, and maximum opportunity payable for the annual incentive under the EMIP, as determined at the time that the Compensation Committee made the awards. The amount actually paid as an annual incentive under the EMIP is reported in the Non-Equity Incentive Plan Compensation (column (g)) of the Summary Compensation Table.
2Consistent with past practice and the terms of LTIP, the Committee made all January 2021 equity awards to directors and executive officers effective on the day after a full trading day had elapsed following the release of our fiscal year financial results. Because the Committee meetings at which these awards were made occurred prior to the effective date of the awards, we have provided both dates in accordance with SEC rules. See our "Compensation Discussion and Analysis" section for further discussion of our equity award grant practices.

 

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Executive Compensation | 2022 Annual Meeting and Proxy Statement

 

     

Executive Compensation Tables

 
 

Estimated Future Payouts Under Non-Equity Incentive Plan Awards (EMIP) (Columns (c), (d), and (e))

These awards were made pursuant to our Executive Management Incentive Plan ("EMIP") and had the potential to be earned upon the achievement of certain performance goals established by the Committee for the fiscal year ended December 31, 2021. For a discussion of the performance goals established by the Committee, see our “Compensation Discussion and Analysis” section beginning on page 31. The Committee targeted a payout of 67% in 2021 in setting the annual performance goals for EMIP incentive awards, and using an annual incentive opportunity equal to 225% of salary for the Chief Executive Officer, 135% of salary for an Executive Vice President, and at 150% of Salary for the President for the month of December 2021. Consequently, the target amounts in column (d) assume that the Named Executive Officers earned 67% of the potential EMIP awards that they could have earned using these annual incentive opportunities. The threshold amounts in column (c) assume that the Named Executive Officers earned the minimum EMIP awards based on performance required to trigger any level of payment; if performance fell below performance goals required to earn the threshold amount, they would not have been entitled to any EMIP awards. The Named Executive Officers earned 140% of these EMIP awards based on our performance during 2021, and these incentive amounts are also included under "Non-Equity Incentive Compensation" in the Summary Compensation Table.

 

Estimated Future Payouts Under Equity Incentive Plan Awards (PSUs) (Columns (f), (g), and (h))

These amounts represent grants of performance share units made pursuant to our Long-Term Incentive Plan ("LTIP"). These performance share units will be earned over the performance cycle ending December 31, 2023. For a discussion of the other material terms of these awards, see the narrative discussion which follows this table. LTIP does not provide a performance target for earning performance share units under this feature of the plan; however, the Committee targeted a payout of 100% in setting the performance goals for performance share unit awards. Consequently, the target amounts in column (g) assume that the Named Executive Officers will earn 100% of the maximum potential number of performance share units that can be earned under the awards. The threshold amounts in column (f) assume that the Named Executive Officers will earn the minimum number of performance share units based on performance required to trigger any level of payment; if the Corporation's performance fell below performance goals required to earn the threshold amount, they would not receive any performance share units.

 

All Other Stock Awards (RSUs) (Column (i))

These amounts represent grants of restricted stock units made under LTIP. For a discussion of the material terms of these restricted stock unit awards, see the narrative discussion which follows this table.

 

All Other Option Awards (Stock Options) (Columns (j) and (k))

These non-qualified stock options are exercisable as of January 28, 2025. The Committee granted these options at an exercise price equal to the higher of the closing market price or the average of the high and low prices of our common stock on the effective date of the grant. The closing price was higher than the average price on the date of grant, so the exercise price shown is the closing price on the date of grant. The exercise price may be paid in cash or in shares of our common stock (previously owned by the participant for at least six months preceding the date of exercise) valued on the date of exercise. For a discussion of the other material terms of these option awards, see the narrative discussion which follows this table.

 

Grant Date Fair Value of Stock and Option Awards (Column (l))

The amounts reported in Column (l) represent the full grant date fair value of each equity award computed in accordance with FASB ASC Topic 718. For awards that entitle the Named Executive Officers to dividends or dividend equivalents, those amounts are also computed in accordance with FASB ASC Topic 718.

 

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Executive Compensation | 2022 Annual Meeting and Proxy Statement

 

     

Narrative to Summary Compensation Table and Grants of Plan-Based Awards Table

 
 

Awards: Our Long-Term Incentive Plan ("LTIP"), as last approved by shareholders in 2015, allows for the award of equity-based awards, including nonqualified stock options, restricted stock units, and performance share units to non-employee directors, officers, and other employees of the Corporation.

 

Performance share units entitle a recipient to receive performance-based compensation at the end of a three-year performance cycle based on our performance during that three-year period. For awards made in 2021, the award cycle began on January 1, 2021, and ends December 31, 2023. Under the performance share unit awards granted in 2021, corporate performance is measured using three-year average ROAIC for 2021, 2022, and 2023. ROAIC for this purpose is calculated by dividing Norfolk Southern's net operating profit after-tax (defined as net income excluding interest expense, and adjusted for the effect of capitalizing Norfolk Southern's operating lease obligations) by the average invested capital (defined as the average of the current and prior year-end shareholders' equity and total debt balances, which is then adjusted for the effect of capitalizing Norfolk Southern's operating lease obligations). Target performance for the ROAIC measure translates into a 100% payout factor, while threshold performance for ROAIC results in a 30% payout factor and the maximum performance for ROAIC results in a 200% payout factor; however, if at least the threshold is achieved for the ROAIC measure, the number of units earned will be multiplied by a modifier between 0.75 and 1.25 based on the ranking of the three-year total return to the Corporation's shareholders as compared with the total shareholder return on the publicly traded stocks of the other North American Class I railroads, with the shareholder return measurement reflecting the return over the entire three-year period and using a 20-day average to measure performance at the beginning and the end of the period. Additional discussion of the performance share units can be found in our “Compensation Discussion and Analysis” section beginning on page 31. Performance share units that are earned are distributed in shares of our common stock.

 

The Compensation Committee met on January 25, 2021, to approve the option grants to be awarded in January 2021. In order to permit thorough dissemination of our financial results for the fiscal year ended December 31, 2020, the Committee made these grants effective January 28, 2021. See our "Compensation Discussion and Analysis" section for further discussion of our equity award grant practices.

 

These options become exercisable January 28, 2025, or if the Named Executive Officer retires or dies before that date, the later of one year after the grant date or the participant's retirement or death. Dividend equivalent payments are paid in cash to active employees on unvested options until the option vesting date in an amount equal to, and commensurate with, regular quarterly dividends paid on our common stock. The exercise price may be paid in cash or in shares of our common stock valued at fair market value on the date of exercise. Except for capital adjustments such as stock splits, the exercise price of a stock option granted under LTIP may not be decreased after the option is granted, nor may any outstanding option be modified or replaced through cancellation if the effect would be to reduce the price of the option, unless the repricing, modification, or replacement is approved by our shareholders.

 

The restricted stock units awarded in January 2021 are distributable ratably over a four-year period beginning on the first anniversary of the grant date, and are settled in shares of our common stock. Dividend equivalent payments are paid in cash on restricted stock units in an amount equal to, and commensurate with, regular quarterly dividends paid on our common stock. During the restriction period, the holder of restricted stock units has no voting or investment power over the underlying common stock.

 

Receipt of an award under LTIP in 2021 was made contingent upon the participant's execution of a non-competition agreement, and all awards are subject to forfeiture in the event the participant "engages in competing employment" within two years following retirement.

 

For 2021, awards to our Named Executive Officers under the Executive Management Incentive Plan ("EMIP") were payable based on our performance relative to pre-determined performance measures established by the Committee in January 2021. Additional discussion of the performance share units can be found in our “Compensation Discussion and Analysis” section beginning on page 31.

 

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Executive Compensation | 2022 Annual Meeting and Proxy Statement

 

     

Narrative to Summary Compensation Table and Grants of Plan-Based Awards Table (continued)

 
 

The Committee set Mr. Squires' 2021 incentive opportunity at 225% of his 2021 base salary and the Executive Vice Presidents at 135% of their 2021 base salaries. The Committee subsequently set Mr. Shaw's opportunity at 150% of his base salary solely for the month of December 2021, after he was promoted to President. The 2021 corporate performance for the EMIP was 140%, which when multiplied by each officer's incentive opportunity results in the amounts reported as "Non-Equity Incentive Plan Compensation" in the Summary Compensation Table.

 

For further discussion of our plans and how these LTIP and EMIP awards fit into our executive compensation program, see the "Compensation Discussion and Analysis" section.

 

Employment and Other Agreements: Mr. George was hired pursuant to an offer letter agreement dated August 26, 2019, which was filed in a Form 8-K on August 28, 2019, and which set forth his compensation and certain other benefits effective upon his appointment as Executive Vice President Finance and Chief Financial Officer ("George Offer Letter"). The George Offer Letter provides that although his employment is "at will," if the Corporation terminates his employment without "Cause" (as defined below) within the first sixty months of his employment, he will receive the following, subject to his execution of a general release of claims against the Corporation:

 

All compensation due as of his termination date, including any applicable annual incentive awards, which awards would be prorated based on his actual employment during the year of termination (payable prior to March 1 of the year following termination); and

 

A waiver of the LTIP provision for termination of awards such that his outstanding LTIP awards would be treated as if he retired, with continued vesting of all unvested shares of LTIP previously granted as of his termination date.

 

For purposes of the George Offer Letter, "Cause" is defined to mean George's (a) indictment, conviction or plea of nolo contendere to any felony, (b) theft, fraud, or embezzlement resulting in his gain or personal enrichment, or (c) his failure or refusal to substantially perform his duties for the Corporation.

 

We have no employment agreements or other employment arrangement with our Named Executive Officers.

 

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Executive Compensation | 2022 Annual Meeting and Proxy Statement

 

     

Outstanding Equity Awards at Fiscal Year-End 2021

 
 

Name Option Awards   Stock Awards
Number of
Securities
Underlying
Unexercised
Options
Number of
Securities
Underlying
Unexercised
Options
Option
Exercise
Price
Option
Expiration
Date7
  Number
of Shares
or Units
of Stock
That Have
Not Vested
(#)8
Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
($)9
Equity
Incentive
Plan Awards:
Number of
Unearned
Shares,
Units, or
Other Rights
That Have
Not Vested
(#)8,10
Equity
Incentive