 | The Board unanimously recommends a vote FOR
How many votes do I have?
You will have one vote for every share of CSX common stock you owned at the close of business on the Record Date.
How many shares must be present to hold the Annual Meeting?
The Company’s bylaws provide that a majority of the outstanding shares of stock entitled to vote constitutes a quorum at any meeting of shareholders. If a share is represented for any purpose at the Annual Meeting, it is deemed to be present for the transaction of all business. Abstentions and shares held of record by a broker, bank or other nominee that are voted on any matter are included in determining the number of shares present.
Shares held by a broker, bank or other nominee that are not voted on any matter at the Annual Meeting will not be included in determining whether a quorum is present.
Your vote is important and we urge you to vote by proxy even if you plan to attend the Annual Meeting.
What are the vote requirements for each proposal?
Election of Directors. In an uncontested election, directors are elected by a majority of votes cast for his or her election by the shares entitled to vote at a meeting at which a quorum is present. In accordance with the Company’s Corporate Governance Guidelines, in an uncontested election, any incumbent director nominated for re-election as a director who is not re-elected in accordance with the Company’s bylaws shall promptly tender his or her resignation following certification of the shareholder vote. For more information on the procedures in these circumstances, see Principles of Corporate Governance below.
Other Proposals. For the ratification of the appointment of Ernst & Young LLP as the Company’s Independent Auditors for 2016 (Item 2) and for the approval, on an advisory basis, of the compensation of the Company’s NEOs (Item 3), the proposal will be approved if the votes cast in favor of the proposal exceed the votes cast against the proposal.
Abstentions are not considered votes cast on any proposal. “Broker non-votes” are not considered votes cast on Item 1 or Item 3, and will have no effect on the outcome of the vote. Brokers will have discretionary voting power regarding Item 2 in the event that beneficial owners, who own their shares in “street name,” do not provide voting instructions regarding Item 2.
You can vote either in person at the Annual Meeting or by proxy without attending the Annual Meeting. The shares represented by a properly executed proxy will be voted as you direct.
To vote by proxy, you must do one of the following:
Vote by Telephone. If you are a shareholder of record, you can vote your shares by telephone 24 hours a day by calling 1-800-690-6903 on a touch-tone telephone. Easy-to-follow voice prompts enable you to vote your shares and confirm that your instructions have been properly recorded. If you are a beneficial owner, or you hold your shares in “street name” (that is, through a bank, broker or other nominee), please check your voting instruction card or contact your bank, broker or nominee to determine whether you will be able to vote by telephone.
Vote by Internet. If you are a shareholder of record, you can also vote via the Internet by following the instructions in the Notice. The website address for Internet voting is indicated in the Notice. Internet voting is also available 24 hours a day. If you are a beneficial owner, or you hold your shares in “street name,” please check your voting instruction card or contact your bank, broker or nominee to determine whether you will be able to vote via the Internet.
Vote by Mail. If you requested printed proxy materials and choose to vote by mail, complete, sign, date and return your proxy card in the postage-paid envelope provided if you are a registered holder or your voting instruction card if you are a beneficial owner of shares in “street name.” Please promptly mail your proxy card or voting instruction card to ensure that it is received prior to the Annual Meeting.
If you want to vote in person at the Annual Meeting, and you hold your CSX stock in “street name,” you must obtain a proxy from your bank, broker or other nominee and bring that proxy to the Annual Meeting.
Yes. If you are a shareholder of record, you may change your vote or revoke your proxy any time before it is voted by written notice delivered to CSX Corporation, Office of the Corporate Secretary, 500 Water Street, C160, Jacksonville, FL 32202, by timely receipt of a later-dated signed proxy card or written revocation, by a later vote via the Internet or by telephone, or by voting in person at the Annual Meeting. If you hold your shares in “street name,” you should follow the instructions provided by your bank, broker or other nominee if you wish to change your vote.
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Will my shares be voted if I do not provide voting instructions to my broker?
If you are the beneficial owner of shares held in “street name” by a bank, broker or other nominee, the bank, broker or other nominee as the record holder of the shares, is required to vote those shares in accordance with your instructions. If you do not give instructions to the broker, the broker will be entitled to vote the shares with respect to “discretionary” items but will not be permitted to vote the shares with respect to “non-discretionary” items (those shares are treated as “broker non-votes”).
The proposal to ratify the appointment of Ernst & Young LLP as CSX’s Independent Auditors for 2016 is considered a discretionary item for which a broker will have discretionary voting power if you do not give instructions with respect to this proposal. The proposals to: (i) elect directors; and (ii) vote on an advisory (non-binding) resolution on executive compensation are non-routine matters for which a broker will not have discretionary voting power and for which specific instructions from beneficial owners are required in order for a broker to vote your shares.
What happens if I return my proxy card but do not give voting instructions?
If you are a shareholder of record and sign and return your proxy card but do not give voting instructions, the shares represented by that proxy will be voted as recommended by the Board.
The Board of Directors unanimously recommends a vote:
| | | FORthe election of the 12 director nominees named in this Proxy Statement;following nominees.
|
 Age 72 Director since2006 CSX Committees
Audit/Compensation and Talent Management Other Public Directorships • CoreCivic, Inc. • Park National Corporation | | Donna M. Alvarado INDEPENDENT DIRECTOR NOMINEE | | FOR the ratification of the appointment of Ernst & Young LLP as CSX’s Independent Auditors for 2016; andBiographical Information
| | FOR the approval, on an advisory (non-binding) basis, of the compensation of the Named Executive Officers.
|
What happens if other matters are properly presented at the Annual Meeting?
If any other matters are properly presented for consideration at the Annual Meeting, the persons named as proxies on the enclosed proxy card will have discretion to vote on those matters for you. On the date we filed this Proxy Statement with the SEC, the Board did not know of any other matters to be brought before the Annual Meeting.
Votes are counted by an independent inspector of elections appointed by the Company.
What happens if the Annual Meeting is postponed or adjourned?
Unless a new record date has been fixed, your proxy will still be in effect and may be voted at the reconvened meeting. You will still be able to change your vote or revoke your proxy with respect to any item until the polls have closed for voting on such item.
How do I obtain admission to the Annual Meeting?
You will be issued an admission ticket at the Shareholder Registration Desk at the Annual Meeting. If you hold shares in your name, please be prepared to provide proper identification, such as a driver’s license or other government-issued identification. If you hold your shares through a broker, bank or other nominee, you will need proof of ownership, such as a recent account statement or letter from your broker, bank or other nominee along with proper identification. If you are a duly appointed proxy for a shareholder, you must provide proof of your proxy power and proof of share ownership for the shareholder for whom you are a proxy. In addition, if you are authorized to represent a corporate or institutional shareholder, you must also present proof that you are the authorized representative of such shareholder.
For security reasons, attendees will not be permitted to bring any packages, briefcases, large pocketbooks or bags into the meeting. Also, audio tape recorders, video and still cameras, laptops and other portable electronic devices will not be permitted into the meeting. We thank you in advance for your patience and cooperation with these rules.
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What is the deadline for consideration of shareholder proposals for the 2017 Annual Meeting of Shareholders?
A shareholder who wants to submit a proposal to be included in the proxy statement for the 2017 Annual Meeting of Shareholders (the “2017 Meeting”) must send the proposal to CSX Corporation, Office of the Corporate Secretary, 500 Water Street, C160, Jacksonville, FL, 32202, so that it is received on or before November 28, 2016, unless the date of the 2017 Meeting is changed by more than 30 days from May 11, 2017, in which case the proposal must be received a reasonable time before the Company begins to print and mail its proxy materials for the 2017 Meeting.
A shareholder who wants to nominate a director or submit a proposal that will not be in the proxy statement but will be considered at the 2017 Meeting, pursuant to the CSX bylaws, must send it to the principal office of CSX so that it is received not earlier than the close of business on January 11, 2017, nor later than the close of business on February 10, 2017 unless the date of the 2017 Meeting is more than 30 days before or more than 70 days after May 11, 2017, in which case the nomination or proposal must be received not earlier than the 120th day prior to the date of the 2017 Meeting and not later than the close of business on the later of the 90th day prior to the date of the 2017 Meeting or the 10th day following the day on which the Company first publicly announces the date of the 2017 Meeting.
Does the Board consider director nominees recommended by shareholders?
Yes. The Governance Committee of the Board will review recommendations as to possible nominees received from shareholders and other qualified sources. Shareholder recommendations should be submitted in writing addressed to the Chair of the Governance Committee, CSX Corporation, 500 Water Street, C160, Jacksonville, FL 32202, and should include a statement about the qualifications and experience of the proposed nominee, as discussed further below in the Board Leadership and Committee Structure section. Shareholders who wish to nominate a director nominee should do so in accordance with the nomination provisions of the Company’s bylaws. In general, a shareholder nomination for the 2017 Annual Meeting must be delivered to the Company within the time periods described above and set forth in the Company’s bylaws.
Can shareholders include their director nominees in the Company’s proxy statement?
Yes. The Company recently amended its bylaws to allow “proxy access.” Under the bylaws, a shareholder, or a group of up to 20 shareholders, owning 3% or more of the Company’s outstanding common stock continuously for at least three years may submit director nominees (up to the greater of two or 20% of the Board) for inclusion in the Company’s proxy statement, provided: (i) there are no other shareholder nominations pursuant to the advance notice provision of the bylaws; and (ii) the shareholder(s) and the nominee(s) satisfy the other requirements set forth in the bylaws.
Determining Ownership.Shareholder(s) must have full voting and economic interest of the shares to satisfy the 3% ownership threshold. Loaned shares are considered “owned” if such shares can be recalled on not more than three business days’ notice. Additionally, the shareholder(s) must own the requisite number of shares through the meeting date.
When and Where to Send These Proposals.To include a director nominee in the Company’s 2017 proxy statement, the proposing shareholder(s) must send notice and the required information to CSX Corporation, Office of the Corporate Secretary, 500 Water Street, C160, Jacksonville, FL, 32202, so that it is received by November 28, 2016.
Certain Disclosures.Among other things, director nominees must disclose to the Company any agreement, arrangement or understanding regarding how they would vote if elected as a director, or any direct or indirect compensation they would receive in connection with their service or action as a director.
Prior Nominees.A director nominee pursuant to proxy access who receives less than 25% of the votes cast may not be nominated for election at the next two annual meetings of shareholders.
A shareholder or group of shareholders wishing to nominate a candidate for director through proxy access should review carefully the procedures and requirements described in the Company’s bylaws. These procedures and requirements must be followed precisely by both the proposing shareholder(s) and the director nominee(s) in order to use proxy access.
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▸ITEM 1: ELECTION OF DIRECTORS
| | Twelve directors are to be elected to hold office until the 2017 Annual Meeting and their successors are elected and qualified. Unless otherwise specified, the proxy holders will cast votes FOR the election of the nominees named below. Each of the nominees was elected at the Company’s 2015 Annual Meeting of Shareholders.
As of the date of this Proxy Statement, the Board has no reason to believe that any of the nominees named will be unable or unwilling to serve. There are no family relationships among any of these nominees or among any of these nominees and any executive officer of the Company, nor is there any arrangement or understanding between any nominee and any other person pursuant to which the nominee was selected.
Nominees for Board membership are expected to be prominent individuals who demonstrate leadership and possess outstanding integrity, values and judgment. Directors and nominees must be willing to devote the substantial time required to carry out the duties and responsibilities of directors. In addition, each Board member is expected to represent the broad interests of the Company and its shareholders as a group, and not any particular constituency.
The Governance Committee has recommended to the Board, and the Board has approved, the persons named below as director nominees. The Board believes that each of the director nominees adds to the overall diversity of the Board. The director nominees bring a wide range of experience and expertise in management, railroad operations, financial markets, and public policy. In addition, several of the director nominees are able to provide valuable perspective into the political and regulatory environments, as well as certain key markets.
Information regarding each director nominee follows. Each nominee has consented to being named in this Proxy Statement and to serve if elected.
| | CSX strives to cultivate an environment that embraces teamwork and capitalizes on the value of diversity.
| Although the Board does not have a formal written diversity policy, the Governance Committee has a long-standing commitment to diversity and is guided by the Company’s diversity philosophy when considering director nominees. The Committee recognizes the importance of maintaining a Board with a broad scope of backgrounds and expertise that will expand the views and experiences available to the Board in its deliberations. Many factors are taken into account when evaluating director nominees, including their ability to assess and evaluate a company's strategies in the face of changing economic and regulatory environments that may impact customer and shareholder expectations. In addition, the Committee feels that candidates representing varied age, gender and cultural and ethnic backgrounds add to the overall diversity and viewpoints of the Board. The Governance Committee and the full Board believe that the director nominees listed below embody the breadth of backgrounds and experience necessary for a balanced and effective Board.
|
|  THE BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE ELECTION OF THE FOLLOWING DIRECTOR NOMINEES.
|
| | | DONNA M. ALVARADO, AGE 67
| Independent Director Nominee
| Biographical Information:
Donna M. Alvarado is the founder and current President of Aguila International, a business-consulting firm.firm. Previously, Ms. Alvarado served as President and Chief Executive OfficerOfficer of Quest International, a global educational publishing company, from 1989-1993.1989 to 1993. She has served on corporate boards in the manufacturing, banking, transportation and services industries. She has also led state and national workforce policy boards. Ms. Alvarado previously served as Chairwoman of the Ohio Board of Regents. Following executive and legislative staff appointments at the U.S. Department of Defense and in the U.S. Congress, Ms. Alvarado was appointed by President Ronald Reagan to lead the federal agency ACTION, the nation’s premier agency for civic engagement and volunteerism, a position which she held from 1985-1989.1985 to 1989. | | | Other Public Directorships:
•
Corrections Corporation of America
•
Park National Corporation
Skills and Qualifications:Qualifications As a result of her experience in the public and private sector, Ms. Alvarado brings to the Board significantsignificant workforce planning expertise, which is complemented by her experience with the Ohio Board of Regents. |
2016 Proxy Statement14Table of Contents
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ITEM 1: ELECTION OF DIRECTORS
| | |  SENATOR JOHN B. BREAUX, AGE 72
| Independent Director Nominee
| Biographical Information:Age 64
Senator John B. Breaux is a partner in the Breaux-Lott Leadership Group, a private consulting firm in Washington, D.C. owned by Squire Patton Boggs LLP. From 2005 through 2007, Senator Breaux served as Senior Counsel at Patton Boggs LLP. Senator Breaux held numerous leadership positions during his 14 years in the U.S. House of Representatives and 18-year tenure in the U.S. Senate, where he served on the House Public Works and Transportation Committee, the Senate Finance Committee and the Senate Commerce Committee. Senator Breaux also founded the Centrist Coalition of Senate Democrats and Republicans and served as chairman of the Democratic Leadership Council.
| | Director since:since2020 2005CSX Committees
Finance/Governance and Sustainability
Other Public Directorships Perma-Fix Environmental Services, Inc. | | Governance / Public Affairs / ExecutiveThomas P. Bostick
INDEPENDENT DIRECTOR NOMINEE | | Biographical Information Mr. Thomas P. Bostick is a retired U.S. Army Lieutenant General and former Chief Operating Officer at Intrexon, a biological engineering company. As Chief of Engineers and Commanding General of the U.S. Army Corps of Engineers, he was responsible for most of the nation’s civil works infrastructure and military construction, leading the world’s largest public engineering organization. Among his previous commands, Mr. Bostick was the Army’s Director of Human Resources and led the U.S. Army Recruiting Command. He was deployed during Operation Iraqi Freedom as second in command of the 1st Cavalry Division and later commanded the Army Corps of Engineers Gulf Region Division. Mr. Bostick joined Intrexon after retiring from the Army in 2016. He led a restructuring of the company in 2019 that resulted in Intrexon being renamed Precigen at the start of 2020. Skills and Qualifications Mr. Bostick has extensive leadership experience, engineering expertise and knowledge in the fields of sustainability and human resources. |
 Age 67 Director since2017 CSX Committees
Executive (Chair) Other Public Directorships:Directorships Skills and Qualifications:• None
Senator Breaux’s extensive public policy and regulatory experience allows him to provide critical input on regulatory and legislative proposals that could have a material effect on railroad operations.
|
| | James M. Foote MANAGEMENT DIRECTOR NOMINEE / PRESIDENT AND CHIEF EXECUTIVE OFFICER | | Independent Director Nominee
| Biographical Information:Information Pamela L. Carter retired
James M. Foote, a senior executive with over 40 years of railroad industry experience in July 2015finance, operations and sales and marketing, was named President and Chief Executive Officer and a director of CSX in December 2017. Mr. Foote joined CSX as Executive Vice President and Chief Operating Officer in October 2017. Prior to joining CSX, Mr. Foote was President and Chief Executive Officer of Bright Rail Energy, a technology company formed in 2012 to design, develop and sell products that allow railroads to switch locomotives to natural gas power. Before heading Bright Rail, Mr. Foote was Executive Vice President, Sales and Marketing with Canadian National Railway Company. Mr. Foote joined Canadian National in 1995 as Vice President of Cummins Inc. and President of Cummins Distribution Business, a division of Cummins Inc., a designer, manufacturer and marketer of diesel engines and related components and power systems. Ms. Carter joined Cummins Inc. in 1997– Investor Relations to assist with the company’s privatization. He also served as Vice President — General CounselSales and held various management positions before her appointment in 2008 as President of Cummins Distribution Business, a $5 billion business with a global footprint.Marketing – Merchandise at Canadian National. Prior to her career with Cummins, Ms. Carter served in various capacities with the State of Indiana and in the private practice of law. Ms. Carter was the first woman and the first African-American to be elected to the office of Attorney General in Indiana. Ms. Carter also became the first African-American woman to be elected state attorney general in the U.S.A. She served as Parliamentarian in the Indiana House of Representatives, Deputy Chief-of-Staff to Governor Evan Bayh, Executive Assistant for Health Policy & Human Services and Securities Enforcement Attorney for the Office of the Secretary of State.
| | •
Governance / Public Affairs
| Other Public Directorships:
•
Spectra Energy Corporation
•
Hewlett-Packard Enterprise
Skills and Qualifications:Qualifications With strong operational experience
Mr. Foote has expertise in railroad operations, including the scheduled railroading operating model, and extensive service in government, Ms. Cartersales and marketing. He also provides the Board with in-depthsignificant knowledge and insight into regulatory, legalunderstanding of the Company and public policy matters.its business. |
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ITEM 1: ELECTION OF DIRECTORS
 Age 66 Director since2006 CSX Committees
Audit/Compensation and Talent Management (Chair)/Executive Other Public Directorships • None | | Steven T. Halverson INDEPENDENT DIRECTOR NOMINEE | STEVEN T. HALVERSON, AGE 61
| Independent Director Nominee
| Biographical Information:Information Steven T. Halverson is the former Chairman and former Chief Executive OfficerOfficer of The Haskell Company, one of the largest design and construction firmsfirms in the United States. Prior to joining theThe Haskell Company in 1999, Mr. Halverson served as a Senior Vice President of M.A. Mortenson, a national construction firm.firm. Mr. Halverson also serves as a director for GuidewellGuideWell Mutual Insurance andHoldings, Blue Cross Blue Shield of Florida, ACIG Insurance Co.,and is past chair of the Florida CounselCouncil of 100, (past chair), the Florida Chamber of Commerce, (past chair), the Construction Industry Roundtable (past chair) and the Jacksonville Civic Council (past chair).Council. From 2008 until its sale to McKesson Corporation in 2013, Mr. Halverson served on the board of directors of PSS World Medical. | | •
Audit / Compensation / Executive
| Other Public Directorships:
Skills and Qualification:Qualifications Mr. Halverson'sHalverson’s expertise in the construction industry allows him to provide unique insight and perspective on the U.S. economy and certain CSX markets. In addition, through his roles with key organizations in Florida, Mr. Halverson provides broad leadership capabilities to the Board. |
 Age 54 Director since2017 CSX Committees
Executive/Finance/
Governance and Sustainability Other Public Directorships • Aramark | | Paul C. Hilal INDEPENDENT DIRECTOR NOMINEE / VICE CHAIRMAN OF THE BOARD | EDWARD J. KELLY, III, AGE 62
| Independent Director Nominee
| Biographical Information:Information Edward J. Kelly, III retired as Chairman
Paul C. Hilal founded and controls Mangle Ridge LP and each of the Institutional Clients Group at Citigroup, Inc. in July 2014. He joined Citigroup, Inc. in 2008, and served at various points as Vice Chairman, Chief Financial Officer and Head of Global Banking at Citigroup, among other roles.its related entities (“Mantle Ridge”). Prior to founding Mantle Ridge, Mr. Kelly previously served as Managing Director at The Carlyle Group and Vice Chairman of The PNC Financial Services Group, Inc. following PNC’s acquisition of Mercantile Bankshares Corporation in March 2007. At Mercantile, Mr. Kelly held the offices of Chairman, Chief Executive Officer and President from March 2003 until March 2007, andHilal was Chief Executive Officer and President from March 2001 to March 2003. Before joining Mercantile, Mr. Kelly served as Managing Director and co-head of Investment Banking Client Management at J.P. Morgan Chase and Managing Director and Head of Global Financial Institutions at J.P. Morgan. Previously, Mr. Kelly was General Counsel at J.P. Morgan and a partner and senior investment professional at the law firm of Davis Polk & Wardwell,Pershing Square Capital Management where he specialized in matters relatedworked from 2006 to financial institutions. Early in his career,2016. From 2012 to 2016, Mr. KellyHilal served as a law clerk to Supreme Court Justice William J. Brennan, Jr.director of Canadian Pacific Railway Limited where he was chair of the Management Resources and U.S. CourtCompensation Committee and a member of Appeals Judge Clement F. Haynsworth, Jr. the Finance Committee. Mr. Kelly previously servedHilal currently serves on the boardsBoard of directors for The Hartford Financial Services Group, The Hershey CompanyOverseers of Columbia Business School and Paris RE Holdings.served until 2016 on the Board of the Grameen Foundation – an umbrella organization that helps micro-lending and micro-franchise institutions empower the world’s poorest through financial inclusion and entrepreneurship. | | Director since: 2002
Presiding Director
•
Compensation / Governance / Executive
| Other Public Directorships:
Skills and Qualifications:Qualifications As
Mr. Hilal draws on his experience as a value investor, as a capital allocator, and as an executive with expertise inengaged director driving shareholder value. Additionally, through his railroad industry experience and perspective, Mr. Hilal provides the banking industry, Mr. Kelly provides extensive financial, regulatory and governance experience toBoard valuable insight regarding the Board. He offers important perspective on global financial markets.financial aspects of CSX’s business. |
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ITEM 1: ELECTION OF DIRECTORS
| | |  JOHN D. MCPHERSON, AGE
Age 69 | Independent Director Nominee
| Biographical Information:
John D. McPherson served as President and Chief Operating Officer of Florida East Coast Railway, a wholly-owned subsidiary of Florida East Coast Industries, Inc., from 1999 until his retirement in 2007. From 1993 to 1998, Mr. McPherson served as Senior Vice President – Operations, and from 1998 to 1999, he served as President and Chief Executive Officer of the Illinois Central Railroad. Prior to joining the Illinois Central Railroad, Mr. McPherson served in various capacities at Santa Fe Railroad for 25 years.
From 2012 to 2015, Mr. McPherson served on the board of directors of Las Vegas Railway Express, a start-up passenger railroad that plans to operate between Los Angeles and Las Vegas, From 1997 to 2007, Mr. McPherson served as a member of the board of directors of TTX Company, a railcar provider and freight car management services joint venture of North American railroads.
| | Director since:since2015 2008CSX Committees
Audit (Chair)/Executive/Finance
Other Public Directorships PayPal Holdings, Inc.Finance / Public Affairs•
| | David M. Moffett INDEPENDENT DIRECTOR NOMINEE | | Other Public Directorships:Biographical Information
Skills and Qualifications:
As a result of his extensive career in the rail industry, Mr. McPherson serves as an expert in railroad operations.
|
| | | | Independent Director Nominee
| Biographical Information:
David M. Moffett served as the Chief Executive OfficerOfficer and a director of the Federal Home Loan Mortgage Corporation from September 2008 until his retirement in March 2009. He previously served as a Senior Advisor with the Carlyle Group LLC from May 2007 to September 2008, and as the Vice Chairman and Chief Financial OfficerOfficer of U.S. Bancorp from 2001 to 2007, after its merger with Firstar Corporation where he served as Vice Chairman and Chief Financial OfficerOfficer from 1998 to 2001. Mr. Moffett also served as Chief Financial OfficerOfficer of StarBanc Corporation, a predecessor to Firstar Corporation, from 1993 to 1998. Mr. Moffett currently serves as a trustee on the boards of Columbia Fund Series Trust I and Columbia Funds Variable Insurance Trust, overseeing approximately 52 funds within the Columbia Funds mutual fund complex. He alsoIn addition, he serves as a trustee for the University of Oklahoma Foundation. Mr. Moffett also has served as a consultant to Bridgewater and Associates. From 2007 to 2015, Mr. Moffett served on the board of directors of eBay, Inc. | | | Other Public Directorships:
•
From 2010 to 2016, Mr. Moffett served on the board of directors of CIT Group Inc. Skills and Qualifications:Qualifications Mr. Moffett has
With his many years of experience as a chief executive officerofficer or chief financial officerfinancial officer of public financialfinancial services companies, as well as significantMr. Moffett is able to provide valuable insight to the Board concerning financial matters. He is also able to leverage his significant public policy experience. |
 Age 60 Director since2017 CSX Committees
Compensation and Talent Management/Executive/
Governance and Sustainability (Chair) Other Public Directorships • MSCI, Inc. | | Linda H. Riefler INDEPENDENT DIRECTOR NOMINEE | | Biographical Information Linda H. Riefler served as the Chairman of Global Research at Morgan Stanley from 2011 to 2013 and prior to that as Global Head of Research since 2008. From 2006 to 2008 she served as the Chief Talent Officer of Morgan Stanley, in which role she served on both the Management Committee and the Operating Committee of Morgan Stanley. Ms. Riefler joined Morgan Stanley in 1987 in the Capital Markets division and was elected a managing director in 1998. In addition to serving on the CSX board of directors, Ms. Rielfer currently serves on the board of MSCI, Inc., a global provider of indices and decision report tools, services to global portfolio managers and asset owners across the equity, fixed income, and alternative asset universes. MSCI is also a leader in ESG research. She also serves on the board of North American Partners in Anesthesia, a private equity-owned national health care company. Ms. Riefler also serves as the chair of an educational nonprofit called Pencils of Promise that is committed to literacy in global rural underserved communities. Previously, Ms. Riefler has served on the boards of Stanford Graduate School of Business and Choate Rosemary Hall. Skills and Qualifications Ms. Riefler draws on her experience at Morgan Stanley to provide the Board perspective on growth strategies, risk management, debt and equity financings, and capital market allocations. |
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ITEM 1: ELECTION OF DIRECTORS
 Age 61 Director since2019 CSX Committees
Audit/Governance and Sustainability Other Public Directorships • Ecolab, Inc. • Parsons Corporation • Wells Fargo & Co. | | Suzanne M. Vautrinot INDEPENDENT DIRECTOR NOMINEE | TIMOTHY T. O’TOOLE, AGE 60
| Independent Director Nominee
| Biographical Information:Information Timothy T. O’Toole
Suzanne M. Vautrinot is currently the Chief Executive OfficerFounder and President of FirstGroup, plc,Kilovolt Consulting, Inc., a leading transportation company that primarily provides railcyber security strategy and bus services. FirstGroup istechnology consulting firm. In 2013, Ms. Vautrinot retired from the United States Air Force (“USAF”) as a publicly traded company onMajor General following a distinguished 31-year career where she influenced the London Stock Exchange that employs approximately 110,000 individuals throughoutdevelopment and application of critical cyber security and space technology. From 2011 to 2013, Ms. Vautrinot served as Commander of the U.K.USAF’s Cyber Command where she oversaw a multibillion-dollar cyber enterprise and North Americaled a workforce of 14,000 personnel conducting offensive and transports some 2.5 billion passengers a year. Mr. O’Toole previouslydefensive cyber operations worldwide. She served as the ManagingDeputy Commander for Joint Forces Component Command Network Warfare and was instrumental in creating, operating and protecting U.S. Cyber Command and the global network architecture. During her career in the USAF, Ms. Vautrinot also served as Director of Plans and Policy, U.S. Cyber Command and Deputy Commander, Network Warfare, U.S. Strategic Command, as well as Commander - Air Force Recruiting Service. Ms. Vautrinot was formerly a director of Norton Life Lock Inc. (formerly Symantec Corporation) from 2013 to 2019. Skills and Qualifications Ms. Vautrinot provides the London Underground from 2003 through April 2009, where he was responsible for operatingBoard with expertise in cyber security, risk management, corporate governance and rebuildingtalent management. |
 Age 63 Director since2020 CSX Committees
Compensation and Talent Management/Finance Other Public Directorships • Parker-Hannifin Corp. | | James L. Wainscott INDEPENDENT DIRECTOR NOMINEE | | Biographical Information James L. Wainscott is the Tube, the world’s oldest metropolitan railway. Previously, he served asformer Chairman, President and Chief Executive OfficerOfficer of Conrail from 1998 to 2001. Additionally, during his more than 20 years at Conrail, Mr. O’Toole servedAK Steel Holding Corporation, a leading steel production and manufacturing company. He joined AK Steel in various senior management roles, including Senior Vice President of Law and Government Affairs, Senior Vice President of Finance and Chief Financial Officer,1995 as Vice President and Treasurer and Vice President and General Counsel.
| | | Other Public Directorships:
Skills and Qualifications:
Mr. O’Toole brings to the Board more than 30 years of railroad and transportation industry experience. He also provides invaluable operational experience in crisis management evidenced by his leadership following a terror attack on the London Underground in 2005.
|
| | | DAVID M. RATCLIFFE, AGE 67
| Independent Director Nominee
| Biographical Information:
David M. Ratcliffe retired from his position as Chairman, President and Chief Executive Officer of Southern Company, one of America’s largest producers of electricity, in December 2010. He had held that position since 2004. From 1999 to 2004, Mr. Ratcliffe was President and Chief Executive Officer of Georgia Power, Southern Company’s largest subsidiary. Prior to becoming President and Chief Executive Officer of Georgia Power in 1999, Mr. Ratcliffe served as Executive Vice President, Treasurer andappointed Chief Financial Officer.
Mr. Ratcliffe also serves asOfficer two years later. In 2003, he was named President, CEO and a member of the boardsboard of various organizations, including GRA Venture Fund, LLC, Georgia Research Alliance, Children’s Healthcaredirectors and then Chairman of Atlanta, Urjanet,the Board in 2006. Mr. Wainscott retired as President and CEO of AK Steel in 2015, and as Chairman in 2016. Prior to his time at AK Steel, Mr. Wainscott held a software start-up company, andnumber of leadership positions with National Steel Corporation. Mr. Wainscott also serves as vice chair of the Centers for Disease Control Foundation.Council of Chief Executives, a group primarily consisting of retired Fortune 500 Company CEOs.
| | •
Finance / Public Affairs / Executive
| Other Public Directorships:
Skills and Qualifications:Qualifications As Chairman, President
Mr. Wainscott brings a deep knowledge of key industrial markets and Chief Executive Officerproven leadership to the Company’s board of Southern Company, Mr. Ratcliffe participated in a heavily regulated industry with operations in substantial portions of CSX’s service territory. Through this experience, he provides expertise in an ever-changing regulatory environment, which includes important public policy matters such as climate change legislation.directors. |
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ITEM 1: ELECTION OF DIRECTORS
| | |  DONALD J. SHEPARD, AGE 69
| Independent Director Nominee
| Biographical Information:Age 66
Donald J. Shepard retired in 2008 as Chairman of the Board of Directors and Chief Executive Officer of AEGON, N.V., an international life insurance and pension company.
Mr. Shepard was also a director of Mercantile Bankshares Corporation until 2007, when the company was acquired by The PNC Financial Services Group, Inc. Mr. Shepard is also a director of the U.S. Chamber of Commerce.
| | Director since:since2011 2003CSX Committees
Audit/Finance (Chair)
Other Public Directorships Brunswick CorporationAudit / Compensation / Executive•
| | J. Steven Whisler INDEPENDENT DIRECTOR NOMINEE | | Other Public Directorships:Biographical Information
•
The PNC Financial Services Group, Inc.
•
The Travelers Companies, Inc.
Skills and Qualifications:
Through his executive positions with AEGON, N.V., Mr. Shepard brings financial and risk management expertise to the Board. His leadership role with the U.S. Chamber of Commerce, also provides significant insight into developing business trends and opportunities.
|
| | | | Management Director Nominee
| Biographical Information:
Michael J. Ward is a 38-year veteran of the Company and has served as Chairman and Chief Executive Officer since January 2003. He also served as President from January 2003 through early February 2015. Mr. Ward’s career with CSX has included key executive positions in nearly all aspects of the Company’s business, including sales and marketing, operations and finance.
Mr. Ward also serves on the boards of directors of the Association of American Railroads and the American Coalition for Clean Coal Electricity.
| | | Other Public Directorships:
•
The PNC Financial Services Group, Inc.
Skills and Qualifications:
With a long and extensive career with the Company, as well as service with the Association of American Railroads and the American Coalition for Clean Coal Electricity, Mr. Ward brings extremely valuable knowledge of operations, finances and public policy matters relating to both the railroad and energy industries.
|
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ITEM 1: ELECTION OF DIRECTORS
| | | J. STEVEN WHISLER, AGE 61
| Independent Director Nominee
| Biographical Information:
J. Steven Whisler is the retired Chairman and Chief Executive OfficerOfficer of Phelps Dodge Corporation, a mining and manufacturing company, where he served in many roles from 1981 until his retirement in 2007. During his tenure at Phelps Dodge Corporation, Mr. Whisler was instrumental in the implementation of its “Zero and Beyond” safety program designed to eliminate workplace injuries and its “Quest for Zero” process-improvement program designed to, among other things, eliminate environmental waste while enhancing product quality. Mr. Whisler also served as director of US Airways Group, Inc. from 2005 until 2011, and Burlington Northern Santa Fe from 1995 until its acquisition by Berkshire Hathaway in 2010. | | | Other Public Directorships:
Skills and Qualifications:Qualifications Through his prior tenure on the Burlington Northern Santa Fe board of directors and as a former executive in the mining industry, Mr. Whisler brings to the Board invaluable safety program experience, railroad knowledge and familiarity with certain key markets. |
 Age 65 Director since2017 CSX Committees
Compensation and Talent Management/
Executive/Governance and Sustainability Other Public Directorships • Ecolab, Inc. • Aramark | | John J. Zillmer INDEPENDENT DIRECTOR NOMINEE / CHAIRMAN OF THE BOARD | | Biographical Information John J. Zillmer is the President and Chief Executive Officer of Aramark, a food service, facilities, and uniform services provider. Prior to joining Aramark, Mr. Zillmer served as the Executive Chairman, President and Chief Executive Officer of Univar Inc., a global chemical distributor and Fortune 500 company, where he also served as a director from 2009 to 2012. Prior to joining Univar, Mr. Zillmer served as Chairman and Chief Executive Officer of Allied Waste Industries, Inc. from 2005 to 2008, leading an operational transformation that has become an industry benchmark. He has also served as a director of Liberty Capital Partners, a private equity and venture capital firm specializing in startups, early stage, growth equity, buyouts and acquisitions. Mr. Zillmer also serves on the North American advisory board of CVC Capital Partners. He previously served on the board of Reynolds American, Inc. from 2007 until its acquisition by British American Tobacco in 2017, Veritiv Corporation from 2014 to 2020, and Performance Food Group Company from 2015 to 2019. Skills and Qualifications Mr. Zillmer provides the Board valuable insight on business optimization and improvement, in addition to labor relations, environmental safety, logistics, corporate governance and talent management. |
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ITEM 1: ELECTION OF DIRECTORS
What are the directors’ qualifications to serve on the CSX Board of Directors?
The table below highlights the qualifications and experience of each nominee that resulted in the Board’s determination that each nominee is uniquely qualified to serve on the Board.
| | | | | | | | | | | | | Director Qualifications and Experience
| | | | | | | | | | | | | BUSINESS OPERATIONS gives directors a practical understanding of developing, implementing and assessing the Company’s operating plan and business strategy.
| | | | | | | | | | | | | CORPORATE GOVERNANCE experience supports Board and management accountability, transparency and protection of shareholder interests.
| | | | | | | | | | | | | FINANCE / CAPITAL ALLOCATION experience is important in evaluating the Company’s capital structure.
| | | | | | | | | | | | | FINANCIAL EXPERTISE / LITERACY is important because it assists directors with their oversight of financial reporting and internal controls.
| | | | | | | | | | | | | GOVERNMENT / PUBLIC POLICY experience is important in understanding the regulatory environment in which the Company operates.
| | | | | | | | | | | | | RISK MANAGEMENT experience is critical to the Board’s risk oversight role.
| | | | | | | | | | | | | MARKETING / SALES experience is important to understanding the Company’s business strategies in developing new markets.
| | | | | | | | | | | | | TALENT MANAGEMENT experience is valuable in helping the Company attract, motivate and retain high performing employees, including succession planning efforts.
| | | | | | | | | | | | | TRANSPORTATION INDUSTRY experience is important to understanding the dynamics within the freight transportation sector.
| | | | | | | | | | | | |
What if a nominee is unable to serve as director?
If any of the nominees named above is not available to serve as a director at the time of the Annual Meeting (an event which the Board does not now anticipate), the proxies will be voted for the election of such other person or persons as the Board may designate, unless the Board, in its discretion, reduces the number of directors.
The Board annually evaluates the independence of each of its directors and, acting through its Governance and Sustainability Committee, the performance of each of its directors. In evaluating the independence of each of its directors, the Board considers the NasdaqNASDAQ Global Select Market (“Nasdaq”NASDAQ”) listing standards and reviews transactions or relationships, if any, between each director, director nominee or his or her immediate family and the Company or its subsidiaries. The purpose of this review is to determine whether any such relationships or transactions are material,would interfere with the exercise of independent judgment by the director or director nominee in carrying out his or her responsibilities as a director, and thus, be inconsistent with a determination that the director or director nominee is independent. The Board also considers the independence of its committee members under applicable securities laws. In February 2016,2021, after considering NasdaqNASDAQ listing standards, the Board, upon recommendation from the Governance and Sustainability Committee, determined that the following directorsdirector nominees are independent under the NasdaqNASDAQ listing standards: Donna M. Alvarado, John B. Breaux, Pamela L. Carter,Thomas P. Bostick, Steven T. Halverson, Edward J. Kelly, III, John D. McPherson,Paul C. Hilal, David M. Moffett, Timothy T. O’Toole, DavidLinda H. Riefler, Suzanne M. Ratcliffe, Donald J. Shepard andVautrinot, James L. Wainscott, J. Steven Whisler.Whisler and John J. Zillmer. Back to Contents
ITEM 1: ELECTION OF DIRECTORS
Principles of Corporate Governance The Board is committed to corporate governance principles and practices that facilitate the fulfillmentfulfillment of its fiduciaryfiduciary duties to shareholdersthe Company and to the Company.its shareholders. The Board has adopted Corporate Governance Guidelines that reflectreflect the high standards that employees, investors, customers, suppliers and others can and should expect. Key corporate governance principles observed by the Board and the Company include: •
nomination of a slate of directors for election to the Board, all but one of whom are independent, as that term is defined in the Nasdaq listing standards;
•
establishment of qualification guidelines for director candidates and review of each director’s performance and continuing qualifications for Board membership;
| | | | | ■ | separation of the roles of Chairman and Chief Executive Officer; | | | ■ | nomination of a slate of directors for election to the Board, a substantial majority of which are independent, as that term is defined in the NASDAQ listing standards; | | | ■ | establishment of qualification guidelines for director candidates and review of each director’s performance and continuing qualifications for Board membership; | | | ■ | the requirement that the Audit Committee, Compensation and Talent Management Committee and Governance and Sustainability Committee be comprised solely of independent directors; | | | ■ | authority for the Audit, Compensation and Talent Management and Governance and Sustainability Committees to retain outside, independent advisors and consultants when appropriate; | | | ■ | adoption of a Code of Ethics, which meets applicable rules and regulations and covers all directors, officers and employees of CSX; | | | ■ | adoption of a Policy Regarding Shareholder Rights Plans, establishing parameters around the adoption of any future shareholder rights plan, including the expiration of any such plan within one year of adoption if the plan does not receive shareholder approval or ratification; | | | ■ | adoption of a Policy Regarding Shareholder Approval of Severance Agreements, requiring shareholder approval of certain future severance agreements with senior executives that provide benefits in an amount exceeding a threshold set forth in the policy; | | | ■ | a majority voting standard with a director resignation policy in an uncontested election; and | | | ■ | adoption of a proxy access bylaw with market terms. | | | | | |
•
the requirement that the Governance, Compensation and Audit Committees be comprised solely of independent directors;
•
authority for the Governance, Compensation and Audit Committees to retain outside, independent advisors and consultants when appropriate;
•
adoption of a Code of Ethics, which meets applicable rules and regulations and covers all directors, officers and employees of CSX;
•
adoption of a Policy Regarding Shareholder Rights Plans, establishing parameters around the adoption of any future shareholder rights plan, including the expiration of any such plan within one year of adoption if the plan does not receive shareholder approval or ratification;
•
adoption of a Policy Regarding Shareholder Approval of Severance Agreements, requiring shareholder approval of
certain future severance agreements with senior executives that provide benefits in an amount exceeding a threshold set forth in the policy; and
•
a majority voting standard with a director resignation policy.
•
CSX’s Corporate Governance Guidelines and Code of Ethics are available on the Company’s website at http://investors.csx.com under the heading “Corporate“Environmental, Social and Governance.” Shareholders may also request a free copy of any of these documents by writing to CSX Corporation, OfficeOffice of the Corporate Secretary, 500 Water Street, C160, Jacksonville, FLFlorida 32202. Any waivers of or changes to the Code of Ethics that apply to our directors or executive officersofficers will be disclosed on CSX’s website at http://www.csx.com.www.csx.com. There were no waivers to the Code of Ethics in 2015.2020. ShareholdersTable of Contents
ITEM 1: ELECTION OF DIRECTORS Shareholder Outreach and Engagement We believe that on-going shareholder engagement is a key component of effective corporate governance that allows the Company to better understand evolving trends and enable strategic decision-making to deliver shareholder value. We conduct shareholder outreach throughout the year to ensure that management and the Board understand and consider our shareholders’ views on important issues. Senior leaders and subject matter experts from the Company meet routinely with representatives from many of our institutional shareholders and periodically with proxy advisory firms to discuss CSX’s business strategy, corporate governance practices, executive compensation, and ESG matters. Members of the Board participate in these meetings from time to time. In addition to this shareholder outreach, CSX also engages with shareholders and other interested parties through its participation in industry and investment community conferences, investor road shows, and analyst meetings. In 2020, CSX maintained an active shareholder outreach program, including investor conferences, small group meetings, and non-deal roadshows. The Company leveraged the increased use of virtual meetings to expand international outreach, meeting with investors in Europe, Asia and Australia. In 2020, CSX hosted meetings with almost 400 firms, including 167 unique firms, representing $10.4 trillion of equity assets under management. In addition, we continue to successfully engage with individual shareholders to advance issues that are in the best interests of our broad and diverse shareholder base. As part of our ESG reporting process, we conduct a materiality assessment to rank those items deemed the most important to various stakeholders, including shareholders, employees, customers, regulators, and other interested parties. Interested parties who wish to communicate with the Board, or with a particular director, may forward appropriate correspondence to CSX Corporation, OfficeOffice of the Corporate Secretary, 500 Water Street, C160, Jacksonville, FLFlorida 32202. Pursuant to procedures established by the non-management directors of the Board, the OfficeOffice of the Corporate Secretary will forward appropriate correspondence to the Board or a particular director. Appropriate correspondence generally includes any legitimate, non-harassing inquiries or statements. Interested parties who wish to communicate with the Presiding Director or non-management directors may forward correspondence to CSX Corporation, the Presiding Director, CSX Board of Directors, 500 Water Street, C160, Jacksonville, FL 32202. Board of Directors’ Role in Risk Oversight Pursuant to its charter, the Audit Committee of the Board has primary responsibility for overseeing the Company’s business risk management (“BRM”) processes.oversight. In addition to regular risk presentations to the Audit Committee, management periodically reports to the Board of Directors and its other Board committees on current risks and the Company’s approach to avoiding and mitigating risk exposure. The BRM process at CSXCompany’s Enterprise Risk Management (“ERM”) program includes activities related to the identification,identification, assessment, mitigation and monitoring of risks. The CSX risk universe is divided into the following broad risk categories: Compliance — Risks directly impacting CSX’s ability to meet or comply with state, federal or local rules and regulations (e.g., environmental law and regulation);
Strategic — Risks (and opportunities) directly impacting CSX’s ability to achieve or exceed its stated longer term strategic objectives (e.g., market demand shifts); and
External — Risks arising from events outside CSX and beyond the Company’s direct influence or control (e.g., economic downturn).
| ■ | Compliance Risks directly impacting CSX’s ability to meet or comply with state, federal or local rules and regulations (e.g., environmental laws and regulations); | | ■ | Strategic Risks (and opportunities) directly impacting CSX’s ability to achieve or exceed its stated longer term strategic objectives (e.g., market demand shifts); and | | ■ | External Risks arising from events outside CSX and beyond the Company’s direct influence or control (e.g., economic downturn, cyber and other security risks). |
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ITEM 1: ELECTION OF DIRECTORS
The objective of the BRM processERM program is to facilitate timely identificationidentification and review of new and existing risks along with ensuringoverseeing the development and execution of mitigation plans are developed and executed by providing oversight.plans. A well-established risk management structure is leveraged to govern the program. Risks are prioritized based on their inherent and residualpotential impacts on the Company. On an ongoing basis, risks are evaluated to track the status of key mitigation activities along with the trends of key indicators. Ultimately, the BRM processERM program provides an opportunity for business and functional leadership to collaborate on the key Company risks and identify needed mitigation steps to help advance the Company’s objectives. 
Board of Directors’ Role in Succession Planning The Board of Directors is responsible for succession planning for the Board, as well as senior management.management, including the CEO. In addition to routine succession planning efforts by the Board and the Governance and Sustainability Committee throughout the year, the full Board engages in a comprehensive management succession planning exercise at itson an annual strategy conferencebasis where it analyzes potential succession candidates across all senior management positions. Although the Board focuses on the senior executive team and CEO succession, directors also discuss the pipeline for other key roles in the Company. As part of this exercise, the Board reviews skills, competencies and readiness levels of succession candidates and recommends development plans to ensure that management succession candidates are adequately prepared for planned and unexpected transitions. As part
Board of its succession planning efforts for potential director nominees,Director’s Role in Oversight of ESG The Governance and Sustainability Committee oversees the development and execution of CSX’s ESG strategy and reporting. Additionally, the Audit Committee of the Board considers, among other factors, diversityhas responsibility for risk oversight and evaluation of backgroundsclimate-related issues, including risks associated with energy and experience,environmental policy. On a day-to-day basis, ESG is collaboratively managed by the tenurerespective operational departments. Operational leaders are responsible for measuring and skill sets of existing directors,monitoring progress against key performance indicators and expertise in areas of strategic focus. In May 2015, the Board nominated,for reviewing and shareholders elected, David M. Moffett as a new member of the CSX Board of Directors. Mr. Moffett brings to the Board a unique perspective on financial marketsapplying stakeholder feedback and public policy matters.insights. The Board believes that the twelve director nominees standing for re-election at this year's Annual Meeting possess a diverse breadth of experience that will bolster management's positioning of CSX to respond to volatile macroeconomic conditions and challenges facing CSX and the rail industry.
Transactions with Related Persons and Other Matters CSX operates under a Code of Ethics that requires all employees, officersofficers and directors, without exception, to avoid engaging in activities or relationships that conflict,conflict, or would be perceived to conflict,conflict, with the Company’s interests or adversely affect its reputation. It is understood, however, that certain relationships or transactions may arise that would be deemed acceptable and appropriate upon full disclosure of the transaction, following review to ensure there is a legitimate business reason for the transaction and that the terms of the transaction are no less favorable to CSX than could be obtained from an unrelated person. The Audit Committee is responsible for oversight, review and oversightapproval or ratification of all transactions with related persons. CSX has not adopted written procedures for reviewing, approving or ratifying Related Person Transactions, but generally follows the procedures described below.below in accordance with Item 404 of Regulation S-K. A “Related Person Transaction” is a transaction, arrangement or relationship (or any series of similar transactions, arrangements or relationships) in which: (i) CSX (including any of its subsidiaries) was, is or will be a participant; (ii) the amount involved exceeds $120,000 in any fiscalfiscal year; and (iii) any Related Person had, has or will have a direct or indirect material interest (other than solely as a result of being a director or a less than 10% beneficialbeneficial owner of another entity). CSX considers aTable of Contents
ITEM 1: ELECTION OF DIRECTORS A “Related Person” to be:includes: (i) any person who is, or at any time since the beginning of the last fiscalfiscal year was, a director or executive officerofficer or a nominee to become a director; (ii) any person who is known to be the beneficialbeneficial owner of more than 5% of any class of CSX’s voting securities; (iii) any immediate family member of any of the foregoing persons, which means any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law of the director, executive officer,officer, nominee or more than 5% beneficialbeneficial owner, and any person (other than a tenant or employee) sharing the household of such director, executive officer,officer, nominee or more than 5% beneficialbeneficial owner; and (iv) any firm,firm, corporation or other entity in which any Back to Contents
ITEM 1: ELECTION OF DIRECTORS
of the foregoing persons is employed or is a partner or principal or in a similar position or in which such person has a 5%direct or greater beneficial ownershipindirect material interest. On an annual basis, in response to the Directors and OfficersOfficers Questionnaire (“Questionnaire”) and a Related Person Transaction survey (“Survey”), each director, director nominee and executive officerofficer submits to the Corporate Secretary a description of any current or proposed Related Person Transactions. Directors and executive officersofficers are expected to notify the Corporate Secretary of any updates to the list of Related Person Transactions during the year. If Related Person Transactions are identified,identified, those transactions are reviewed by the Audit Committee. The Audit Committee will evaluate Related Person Transactions based on: •
information provided by the Board during the required annual affirmation of independence;
•
applicable responses to the Questionnaires and Survey submitted to the Company; and
| ■ | information provided to the Board during the required annual affirmation of independence; |
•
any other applicable information provided by any director or executive officer of the Company, or obtained through internal database queries.
| ■ | applicable responses to the Questionnaires and Surveys submitted to the Company; and |
| ■ | any other applicable information provided by any director or executive officer of the Company, or obtained through internal database queries. |
In connection with the review, approval or ratification of any Related Person Transaction, the Audit Committee will consider whether the transaction will be a conflictconflict of interest or give the appearance of a conflictconflict of interest. In the case of any Related Person Transaction involving an outside director or nominee for director, the Audit Committee will also consider whether the transaction will compromise the director’s status as an independent director as prescribed in the NasdaqNASDAQ listing standards. There were no Related Person Transactions in 2015. Compensation Committee Interlocks and Insider Participation No member of the Compensation and Talent Management Committee is, or in 2020 was, an executive officerofficer or former officerofficer or employee of the Company. In addition, no executive officerofficer of the Company served on the board of directors of any entity whose executive officersofficers included a director of the Company. Board Leadership and Committee Structure CSX combines the roles of Chairman and CEO, which is balanced through the appointment of an independent Presiding Director.
The Board believes that combiningat this time, and based on the Company’s current circumstances, the positions of Chairman and CEO provides clarity of leadership and is inshould be separate, with the best interestsChairman of the Company and shareholders at this time. The Board believes that the use of a Presiding Director with carefully delineated duties provides appropriate independent oversight of management. The non-management directors regularly meet alone in executive session at Board meetings. The Presiding Director isrole being filled by an independent director selected annually by the Governance Committee. Mr. Kelly currently serves as the Presiding Director.director. The duties of the Presiding DirectorChairman include: (i) calling special meetings of the Board; (ii) presiding at all meetings of the Board at whichand shareholders; (iii) determining the Chairman is not present; (ii) serving as liaison between the Chairman and the independent directors; (iii) approving information, meeting agendasagenda, schedule and meeting schedules sent tomaterials for meetings of the Board in consultation with the Vice Chairman of the Board; (iv) callingguiding Board discussions and facilitating discussions between the Board and the Company’s management; (v) interacting with the Company’s analysts, investors, employees and other key constituencies; and (vi) keeping the Vice Chairman informed, and consulting with the Vice Chairman, as to material internal and external discussions the Chairman has, and material developments the Chairman learns, about the Company and the Board.
The Chairman is assisted by a Vice Chairman. The duties of the Vice Chairman include: (i) providing input on the agenda, schedules and meeting materials for meetings of independent directors when appropriate; (v) pre-clearing all transactionsthe Board; (ii) assisting in CSX securities by a director,guiding Board discussions and facilitating communication between the CEOBoard and the ExecutiveCompany’s management; (iii) interacting with the Company’s analysts, investors, employees and other key constituencies; (iv) performing the duties of Chairman in the absence or at the request of the Chairman; and (v) keeping the Chairman informed, and consulting with the Chairman, as to material internal and external discussions the Vice President—Law & Public Affairs, General CounselChairman has, and Corporate Secretary;material developments the Vice Chairman learns, about the Company and (vi) being available for direct communication with major shareholders, as appropriate.the Board. The CSX Board has sixfive standing committees: the Audit Committee, the Compensation and Talent Management Committee, the Executive Committee, the Finance Committee, and the Governance Committee, and the Public AffairsSustainability Committee. Each of these committees has a written charter approved by the Board, a copy of which can be found on the Company’s website at http://investors.csx.com under the heading “Corporate Governance”. As of the Record Date, the composition of the committees of the Board was as follows:“Environmental, Social and Governance.” | 22 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
2016 Proxy Statement24Table of Contents
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ITEM 1: ELECTION OF DIRECTORS
| Executive Committee | | 0 Meetings in 2020 | | | | | | | | Committee Members | | Independent Members | | | | | | | |  | James M. Foote (Chair)
Steven T. Halverson
Paul C. Hilal
David M. Moffett | Linda H. Riefler
J. Steven Whisler
John J. Zillmer | 6/7 
| | | | | | | | | | | | | | | The Executive Committee meets only as needed and has authority to act for the Boardpurpose of acting on most matters during the intervals between Board meetings, except where action bybehalf of the full Board between regularly scheduled meetings of the Board when time is specifically required or whereof the essence. The Executive Committee has and may exercise all the authority is specifically limitedof the Board, except as may be prohibited by Section 13.1-689 of the Virginia Stock Corporation Act, as it may from time to time be amended. Pursuant to the Board. Pursuant to theExecutive Committee charter, a notice of a meeting of the Executive Committee is required to be provided to all Board members. The Executive Committee has sixseven members, consisting of the CEO, Chairman of the Board, the Presiding DirectorVice Chairman and the chairs of each of the fivefour other standing committees. The Presiding Director currently serves as the chair of the Governance Committee. | | | | | | | |
John B. Breaux
| Audit Committee | | | | 9 Meetings in 2020 | | | | | | | | | | Committee Members | | | | Independent Members | | | | | | | | | |  | David M. Moffett (Chair)
Donna M. Alvarado
Steven T. Halverson | | Suzanne M. Vautrinot
Edward J. Kelly, III
David M. Ratcliffe
Donald J. ShepardSteven Whisler |
| | 5/5  | | | | | | | | | | | | | | | | | | | The primary functions of the Audit Committee include oversight of: (i) the integrity of the Company’s financialfinancial statements and accounting methodology; (ii) the Company’s compliance with legal and regulatory requirements; (iii) the Independent Auditors’ qualificationsRegistered Public Accounting Firm’s qualifications and independence; (iv) the Company’s risk management processes; (v) the performance of the Independent Auditors;Registered Public Accounting Firm; and (vi) the Company’s internal audit function. The Audit Committee recommends the appointment of the Independent AuditorsRegistered Public Accounting Firm and the Board approves the selection. This appointment is then submitted to shareholders for ratification.ratification. The Audit Committee also approves compensation of the Company’s Independent Auditors,Registered Public Accounting Firm, reviews the scope and methodology of the Independent Auditors’Registered Public Accounting Firm’s proposed audits, reviews the Company’s financialfinancial statements and monitors the Company’s internal control over financialfinancial reporting by, among other things, discussing certain aspects thereof with the Independent AuditorsRegistered Public Accounting Firm and management. The Audit Committee is responsible for the approval of all services performed by the Independent Auditors.Registered Public Accounting Firm. Finally, the Audit Committee maintains procedures for the receipt and treatment of complaints regarding the Company’s accounting, internal accounting controls or auditing matters. As part of its risk management responsibilities, the Audit Committee oversees cybersecurity risks. The Audit Committee has fivefive members, each of whom the Board, upon recommendation of the Governance and Sustainability Committee, has determined to be independent pursuant to the independence standards promulgated by NasdaqNASDAQ and the SEC. Additionally,Securities and Exchange Commission (“SEC”). The Board has determined that all members of the Audit Committee are “financially literate.” The Board has determined thatfinancially literate and Messrs. ShepardMoffett and Whisler arehave been designated as audit committee financialfinancial experts, as that term is defineddefined by SEC rules and regulations. Please refer to the Report of the Audit Committee below for additional information.
| | | | | | | | | |
Donna M. Alvarado
Steven T. Halverson
David M. Moffett
J. Steven Whisler
Donald J. Shepard
J. Steven Whisler
CSX Corporation25Table of Contents
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ITEM 1: ELECTION OF DIRECTORS
| Compensation and Talent Management Committee | 7 Meetings in 2020 | | | | | | | Committee Members | | Independent Members | | | | | | | |  | Steven T. Halverson (Chair)
Donna M. Alvarado
Linda H. Riefler
John D. McPherson | James L. Wainscott
John J. Zillmer
| 6/6 
| | | | | | | | | | | | | | | The primary functions of the Compensation and Talent Management Committee are to: (i) establish the Company’s philosophy with respect to executive compensation and benefits;benefits; (ii) review the Company’s compensation practices and policies, benefitbenefit plans and perquisites applicable to all employees and executives to ensure consistency with the Company’s compensation philosophy; (iii) assure thatmonitor the Company’s benefitbenefit plans, practices, programs and policies maintained for employees and directors complyfor compliance with all applicable laws; (iv) in consultation with the Board, review and approve corporate goals and objectives relevant to compensation and benefitsbenefits for the CEO, and evaluate the CEO’s performance in light of those goals and objectives, and as directed by the Board, set the level of compensation of the CEO based on such evaluation; (v) review and recommend approval of management compensation and Company compensation plans, including benefitsbenefits for key employees as determined by the Compensation and Talent Management Committee from time to time; (vi) establish performance objectives for certain executives, and certify the attainment of those objectives in connection with the payment of performance-based compensation within the meaning of Section 162(m) of the Internal Revenue Code (“Section 162(m)”); and (vii)(vi) review the Compensation Discussion and Analysis (“CD&A”) section of this Proxy Statement and, as appropriate, recommend to the Board for approval the inclusion of the CD&A section in the Company’s Annual Report on Form 10-K and Proxy Statement. In addition, the Compensation and Talent Management Committee monitorsis responsible for the administrationoversight of certain executivehuman capital management including review of the Company’s leadership development, performance management and management compensationtalent acquisition programs. In addition, the Compensation and benefit programs.Talent Management Committee has oversight responsibilities with respect to the Company’s plans and processes for promoting diversity, inclusion and pay equity. The Compensation and Talent Management Committee may, under its charter, delegate all or a portion of its duties and responsibilities to a subcommittee thereof as appropriate and consistent with applicable regulations, laws and exchange listing standards. The Compensation and Talent Management Committee has fivealso retained the services of an independent compensation consultant to advise on executive compensation matters. The role of the compensation consultant in determining or recommending the amount or form of executive compensation is described in the CD&A section of this Proxy Statement. The Compensation and Talent Management Committee has six members alleach of whom are:qualifies as: (i) “outside directors” within the meaning of regulations promulgated pursuant to Section 162(m); (ii)a “non-employee directors”director” within the meaning of Rule 16b-3 of Securities and Exchange Act of 1934; and (iii)(ii) independent pursuant to the independence standards promulgated by Nasdaq. For additional information regarding the functions of the Compensation Committee, please see “What is the role of the Compensation Committee” in the CD&A section of this Proxy Statement.NASDAQ. No member of the Compensation Committee was an officer or employee of CSX during 2015. No member of the Compensation Committee is a former officer of CSX. During 2015, none of our executive officers served as a member of a board of directors or compensation committee of any entity that has one of more executive officers who serve on our Board of Directors or the Compensation Committee.
| | | | | | | |
Donna M. Alvarado
Edward J. Kelly, III
Donald J. Shepard
| Finance Committee | | 4 Meetings in 2020 | | | | | | | | Committee Members | | Independent Members | | | | | | | |  | J. Steven Whisler |
(Chair)
Thomas P. Bostick
Paul C. Hilal | David M. Moffett
James L. Wainscott
| 5/5  | | | | | | | | | | | | | | | The Finance Committee provides general oversight and review of financialfinancial matters affecting the Company, including the monitoring of corporate debt, cash flow,flow and the assets and liabilities maintained by the Company and its affiliatesaffiliates in conjunction with employee benefitbenefit plans, including monitoring the funding and investment policies and performances of the assets. In addition, the Finance Committee reviews and recommends policies and practices related to dividends and share repurchasesrepurchase programs. | | | | | | | |
John D. McPherson
David M. Moffett
Timothy T. O’Toole
| 24 | |
2016 Proxy Statement26Table of Contents
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ITEM 1: ELECTION OF DIRECTORS
| Governance and Sustainability Committee | | 9 Meetings in 2020 | | | | | | | | Committee Members | | Independent Members | | | | | | | |  | Linda H. Riefler (Chair)
Thomas P. Bostick
Paul C. Hilal
John D. McPherson | MEETINGS IN 2015:
Suzanne M. Vautrinot John J. Zillmer | 6/6 
| | | | | | | | | | | | | | | The Governance and Sustainability Committee of the Board identifiesidentifies individuals qualifiedqualified to become Board members and recommends candidates for election to the Board. In identifying and recommending director nominees, the Governance and Sustainability Committee uses criteria established by the Board with respect to qualificationsqualifications for nominations to the Board and for continued membership on the Board. Additionally, the Governance and Sustainability Committee reviews and makes recommendations to the Board regarding director independence. In considering potential director candidates, the Governance and Sustainability Committee considers whether the individual has demonstrated leadership ability, integrity, values and judgment. The Governance and Sustainability Committee seeks to maintain a Board with a broad diversity of experience in business matters and the ability to assess and evaluate the role and policies of the Company in the face of changing economic conditions, regulatory environment and customer expectations. The Governance and Sustainability Committee generally identifiesidentifies nominees for directors through its director succession planning process. The Governance and Sustainability Committee will also consider persons recommended by shareholders of the Company in selecting director nominees. Potential nominees suggested by shareholders will be evaluated by the Committee on the same basis as individuals identifiedidentified directly by the Committee or from other sources. For more information on the director nominees, see Item 1: Election of Directors. The Governance and Sustainability Committee has six members each of whom the Board has determined to be independent under the applicable NASDAQ rules. The Governance and Sustainability Committee develops, recommends and monitors corporate governance principles and conducts regular evaluations of director performance and of the effectiveness of the Board as a working group. In addition, the Governance and Sustainability Committee reviews and recommends changes to the Board regarding committee structure and director compensation. The Committee is composed solely of independent directors pursuant to the independence standards promulgated by Nasdaq.
| John B. Breaux
Pamela L. Carter
Timothy T. O’Toole
|
| | | | The Public Affairs Committee reviews significant legal, legislative and regulatory initiatives and rulemaking by federal, state, local and foreign government authorities, as well as other public issues of significance that affect the Company and its shareholders. The Committee also reviews key issues, assumptions, risks and opportunities that relate to the development and implementation of the Company’s operations and safety initiatives. Additionally, the Committee provides oversight of the Company’s compliance with legal requirements and internal policies relating to equal employment, diversity in the workplace, employee safety and environmental protection.
| Pamela L. Carter
John D. McPherson
David M. Ratcliffe
|
Annual Evaluation of Board Performance The Board believes annual performance reviews are essential for ensuring overall effectiveness, including fulfilment of its oversight responsibilities, strategic planning and communications. For 2020, the Board evaluation process was initiated through detailed questionnaires. Individual director performance was then discussed with committee chairs or the Chairman of the Board, as appropriate. Summaries of the committee-specific feedback was provided to the relevant committee chairs, which were then reviewed with the Chairman of the Board. The Governance and Sustainability Committee reviewed the evaluations and recommendations. Each standing committee also conducted an evaluation of its own performance. Meetings of the Board and Executive Sessions During 2015,2020, there were sixnine meetings of the Board. Each of the current directors then serving attended at least 75% of the meetings of the Board and the committees on which he or she served. The non-managementnon-employee directors meetmet alone in executive session at each regular Board meeting. These executive sessions arewere chaired by the Presiding Director.Chairman of the Board. In accordance with the CSX Corporate Governance Guidelines, the independent directors (when different than non-management directors) meet in executive session at least once a year. While the Company does not have a formal policy regarding director attendance at annual shareholder meetings, the Company strongly encourages directors to attend absent an emergency. All of the then-serving incumbent directors attended the 2020 Annual Meeting. The Board periodically but at least once every three years, reviews and sets the compensation for non-managementthe non-employee directors based on the recommendation of the Governance and Sustainability Committee. Director compensation includes both cash and stock-based components. In recommending the amount and form of director compensation, the Committee considers, among other factors, peer benchmarking data and the level of compensation necessary to attract and retain qualified,qualified, independent directors. For 2015, the Board approved an annual retainer
Elements of $90,000, which was payable inDirector Compensation The following charts show director cash unless the director chose to receive his or her fee in the form of CSX common stock. The Board also approved: (i) an additional $20,000 retainerand equity compensation for the Presiding Director, (ii) an additional $10,000 for the chair of each Board committee other than the Audit and Compensation Committees; (iii) an additional $20,000 for the Chair of the Audit Committee; (iv) an additional $5,000 for each member of the Auditfiscal year 2020. | Annual Retainer | | Cash | | Equity(1) | | | Base Retainer | | $112,500 | | $162,500 | |
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ITEM 1: ELECTION OF DIRECTORS
| (1) | Annual grant of CSX common stock in the amount of $162,500 with the number of shares based on the average closing price of CSX common stock in the months of November 2019, December 2019 and January 2020. |
Committee; and (v) an additional $15,000 for the Chair of the Compensation Committee. At the February 2015 Board meeting, each non-employee director also received an annual grant of common stock in the amount of $150,000 with the number of shares based on the average closing price of CSX stock in the months of November 2014, December 2014 and January 2015.
| Incremental Amount Above Annual Retainer | | | | | Chairman of the Board | | $ | 250,000 | | | Audit Committee Chair | | $ | 25,000 | | | Audit Committee Member | | $ | 5,000 | | | Compensation and Talent Management Committee Chair | | $ | 20,000 | | | Finance Committee Chair | | $ | 10,000 | | | Governance and Sustainability Committee Chair | | $ | 15,000 | |
Each non-employee director was eligible to defer all or a portion of his or her director’s fees in 2015,2020, including cash and stockequity compensation, under the CSX Directors’ Deferred Compensation Plan (the “Directors’ Plan”). Cash deferrals are credited to an unfunded account and invested in various investment choices or deferred as shares of CSX common stock. The investment choices parallel the investment options offered to employees under CSX’s 401(k) plan. StockEquity deferrals are automatically held as outstanding shares in a rabbi trust, with dividends credited in the form of additional shares. Non-employee directors also are eligible to receive other compensation and benefits as discussed below. Mr. Ward does not receive compensation for his services as a director.
2015 Directors’ Compensation Table
The following table summarizes the compensation of each of the non-employee directors in 2015.
| | | | | | | | | | | | | | | | | | | | | | | | Fees Earned or
Paid in Cash(1) | | | Non-Equity
Incentive Plan
Compensation | Change in
Pension Value
and Nonqualified
Deferred
Compensation
Earnings | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Matching Gift Program and Other Benefits | | | Fees Earned or Paid in Cash – Includes a cash retainer of $90,000 and any Committee Chair, Audit Committee or Presiding Director fees earned in 2015. Messrs. Breaux, McPherson, O’Toole, Ratcliffe and Shepard elected to defer 100% of their cash retainers and fees in the form of stock into the Directors’ Plan. Ms. Alvarado elected to defer 100% of her cash retainer and fees as cash into the Directors’ Plan.
| | Stock Awards – Amounts disclosed in this column are based on the February 11, 2015 grant date fair value of the annual stock grant to directors calculated in accordance with FASB ASC Topic 718 (“Topic 718”). The number of shares granted is based on an award value of $150,000 divided by the average closing price of CSX stock in the months of November 2014, December 2014 and January 2015. All such stock awards to directors vested immediately upon grant.
| | Option Awards – As of December 25, 2015, there were no stock options outstanding for directors.
| | All Other Compensation – Includes excess liability insurance and Company matches under the Directors' Matching Gift Program. The only perquisites to exceed $10,000 for any director were Company matches under the Directors' Matching Gift Program, which included matches in the following amounts: $50,000 for each of Messrs. Halverson, Kelly, McPherson, Ratcliffe, Shepard and Ms. Carter, $49,491 for Mr. Moffett, $41,425 for Mr. Lamphere, $17,500 for Senator Breaux and $5,000 for Mr. O’Toole. The Company match for Mr. Whisler was $60,000, which includes $50,000 for 2015, and $10,000 for 2014 that was processed in early 2015.
| | Total – The differences in the amounts in this column are largely attributable to fees for committee Chairs, for service on the Audit Committee or as Presiding Director and the Company match on charitable contributions under the Directors' Matching Gift Program.
| | Mr. Lamphere did not stand for re-election at the CSX 2015 Annual Shareholders Meeting.
| | Mr. Moffett was elected to the CSX Board of Directors at the CSX 2015 Annual Shareholders Meeting.
|
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ITEM 1: ELECTION OF DIRECTORS
Directors elected before 2004 are eligible toNon-management directors may participate in the CSX Directors’ Charitable Gift Plan (“Charitable Plan”). Under the Charitable Plan, if a director serves for five consecutive years, CSX will make contributions totaling $1 million on his or her behalf to charitable institutions designated by the director. Contributions to designated charities are made in installments, with $100,000 payable upon the director’s retirement and the balance payable in installments of $100,000 per year, starting at the time of the director’s death. Only four current directors are eligible to participate in the Charitable Plan.
Matching Gift Program and Other Benefits
Directors may participate in the CSX Directors' Matching Gift Program, which is considered an important part of CSX’s philanthropy and community involvement. CSX will match director contributions to organizations that qualify for support under Company guidelines, up to a maximum annual CSX contribution of $50,000 per non-employee director per year. During 2015, 302020, seven philanthropic organizations in areas served by the Company collectively received $473,416$175,000 under the Directors'Directors’ Matching Gift Program. Non-employee directors also are eligible to receive other compensation and benefits as discussed below. The CEO does not receive compensation for his services as a director.
| 26 | |
In addition, CSX makes available toTable of Contents
ITEM 1: ELECTION OF DIRECTORS 2020 Directors’ Compensation Table The following table summarizes the compensation of each of the non-employee directors personal excess liability insurance at no expense to the directors. During 2015, the excess liability insurance premium, which is reflected in the “All Other Compensation” column of the Directors’ Compensation Table, was approximately $1,300 for each participating non-employee director.2020. | Name | | Fees Earned or
Paid in Cash(1)
($) | | | Stock
Awards(2)
($) | | | All Other
Compensation(3)
($) | | | Total
($) | | | Donna M. Alvarado | | | $ | 117,500 | | | | $ | 176,945 | | | | | — | | | | $ | 294,445 | | | Thomas P. Bostick(4) | | | $ | 21,635 | | | | | — | | | | | — | | | | $ | 21,635 | | | Pamela L. Carter(5) | | | $ | 53,594 | | | | $ | 176,945 | | | | $ | 4,843 | | | | $ | 235,382 | | | Steven T. Halverson | | | $ | 137,500 | | | | $ | 176,945 | | | | $ | 50,000 | | | | $ | 364,445 | | | Paul C. Hilal | | | $ | 112,500 | | | | $ | 176,945 | | | | | — | | | | $ | 289,445 | | | John D. McPherson | | | $ | 112,500 | | | | $ | 176,945 | | | | | — | | | | $ | 289,445 | | | David M. Moffett | | | $ | 137,500 | | | | $ | 176,945 | | | | $ | 50,000 | | | | $ | 364,445 | | | Linda H. Riefler | | | $ | 120,000 | | | | $ | 176,945 | | | | $ | 5,000 | | | | $ | 301,945 | | | Suzanne M. Vautrinot | | | $ | 117,500 | | | | $ | 176,945 | | | | $ | 20,000 | | | | $ | 314,445 | | | James L. Wainscott(4) | | | $ | 51,563 | | | | | — | | | | | — | | | | $ | 51,563 | | | J. Steven Whisler | | | $ | 122,500 | | | | $ | 176,945 | | | | $ | 50,000 | | | | $ | 349,445 | | | John J. Zillmer | | | $ | 120,000 | | | | $ | 449,198 | | | | | — | | | | $ | 569,198 | |
| (1) | Fees Earned or Paid in Cash – Includes a cash retainer of $112,500 and any Committee Chair or Audit Committee fees earned in 2020. Mr. Moffett elected to defer 100% of his cash retainer and fees in the form of cash into the Directors’ Plan. Mr. Whisler elected to defer 100% of his cash retainers and fees in the form of CSX stock into the Directors’ Plan. | | (2) | Stock Awards – Amounts disclosed in this column are based on the February 12, 2020 grant date fair value of the annual stock grant to directors calculated in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 (“FASB ASC Topic 718”). The number of shares granted was based on an award of $162,500 divided by the average closing price of CSX common stock in the months of November 2019, December 2019 and January 2020, which was $73.01. All such stock awards to directors vested immediately upon grant. Mr. Zillmer’s amount also includes a Non-Executive Chairman stock grant based on the February 12, 2020 grant date fair value calculated in accordance with FASB ASC Topic 718. The number of shares is based on an award of $250,000 divided by the average closing price of CSX common stock in the months of November 2019, December 2019 and January 2020. This stock award vested immediately upon grant. | | (3) | All Other Compensation – The only perquisites to exceed $10,000 for any director were: (i) the Company match under the Directors’ Matching Gift Program, which includes matches in the following amounts: $50,000 for each of Messrs. Halverson, Moffett and Whisler, and $20,000 for Ms. Vautrinot. | | (4) | Lt. Gen. (ret.) Bostick and Mr. Wainscott joined the CSX Board of Directors on October 8, 2020 and July 8, 2020, respectively. | | (5) | Ms. Carter retired from the CSX Board of Directors on May 22, 2020. |
Stock Ownership Guidelines
The Board has adopted Stock Ownership Guidelines to better align the interests of non-employee directors with the interests of shareholders. These guidelines require that all non-employee directors own shares of CSX common stock. Within fivefive years of election to the Board, a non-employee director is expected to acquire and hold an amount of CSX common stock equal in value to fivefive times the amount of such non-employee director’s annual cash retainer. If the annual cash retainer increases, the non-employee directors will have fivefive years from the time of the increase to acquire any additional shares needed to satisfy the guidelines. All non-employee directors who have served on the Board for five or more years since their election held a sufficient number of shares to satisfy these guidelines. Further information on the Stock Ownership Guidelines is available on CSX’s website at http://investors.csx.com under the heading “Corporate“Environmental, Social and Governance.” Anti-hedging / Anti-pledging Policy
CSX’s insider trading policy prohibits officers and directors from entering into transactions to hedge their ownership positions in CSX securities. In addition, the policy prohibits officers and directors from pledging CSX securities.
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▸ITEM 2: RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
| ITEM 2: Ratification of Independent
Registered Public Accounting Firm | |
The Audit Committee is directly responsible for the appointment, retention, compensation and oversight of the Independent AuditorsRegistered Public Accounting Firm retained to audit the Company’s financialfinancial statements. Pursuant to this responsibility, the Audit Committee engages in a comprehensive annual evaluation of the Independent Auditors’ qualifications,Registered Public Accounting Firm’s qualifications, performance and independence. When considering the Independent Registered Public Accounting Firm’s independence, the Audit Committee specifically considers non-audit fees and services. Additionally, the Audit Committee periodically considers whether there should be a regular rotation of the Independent Auditors.Registered Public Accounting Firm. Furthermore, in conjunction with the mandated rotation of the Independent Auditors’Registered Public Accounting Firm’s lead engagement partner, the Audit Committee and its chair were directly involved in the selection of the Independent Auditors’Registered Public Accounting Firm’s lead engagement partner. The Audit Committee has selected and appointed Ernst & Young LLP (“EY”) as the Company’s Independent AuditorsRegistered Public Accounting Firm to audit and report on CSX’s financialfinancial statements for the fiscalfiscal year ending December 30, 2016. Ernst & Young LLP31, 2021. EY or its predecessors have continuously served as the Company’s Independent AuditorsRegistered Public Accounting Firm since 1981. The Audit Committee and the Board believe that the continued retention of Ernst & Young LLPEY as the Company’s Independent AuditorsRegistered Public Accounting Firm is in the best interests of the Company and its shareholders. Action by shareholders is not required by law in the appointment of independent accountants.the Independent Registered Public Accounting Firm. If shareholders do not ratify this appointment, however, the appointment will be reconsidered by the Audit Committee and the Board. Even if the selection is ratified, the Audit Committee in its discretion may appoint a different, independent Registered Public Accounting Firm at any time during the fiscal year if it is determined that such a change would be in the best interest of CSX and its shareholders. Ernst & Young LLP
EY has no direct or indirect financialfinancial interest in CSX or in any of its subsidiaries, nor has it had any connection with CSX or any of its subsidiaries in the capacity of promoter, underwriter, voting trustee, director, officerofficer or employee. Representatives of Ernst & Young LLPEY will be present atparticipate in the Company’s Annual Meeting and will be afforded an opportunity to make a statement if they desire to do so. It also is expected they will be available to respond to appropriate questions.  | The Board unanimously recommends that the shareholders vote FOR this proposal. |
Fees Paid to Independent Registered Public Accounting Firm Ernst & Young LLP
EY served as the Independent AuditorsRegistered Public Accounting Firm for the Company in 2015.2020. The Audit Committee was responsible for the audit fee negotiations associated with the retention of Ernst & Young LLP.EY. Fees paid to Ernst & Young LLPEY were as follows: | | | | | | | | | | | Includes fees associated with the integrated audit, testing internal controls over financial reporting (SOX 404), the reviews of the Company’s quarterly reports on Form 10-Q, statutory audits and other attestation services related to regulatory filings. | | | | | | | Includes audits of employee benefit plans and subsidiary audits. | | | | | | | Includes fees for tax compliance and tax advice and planning. | | | | | | | Includes fees for advisory services for non-audit projects. The Audit Committee has concluded that the services covered under the caption “All Other Fees” are compatible with maintaining Ernst & Young LLP’s independent status. | | | | | | |
| | | 2019 | | | 2020 | | | Audit Fees: | | $ | 2,816,000 | | | $ | 2,918,000 | | | Includes fees associated with the integrated audit, testing internal controls over financial reporting (SOX 404), the reviews of the Company’s quarterly reports on Form 10-Q, statutory audits and other attestation services related to regulatory filings. | | | | | | | | | | Audit Related Fees: | | $ | 221,000 | | | $ | 225,000 | | | Includes audits of employee benefit plans and subsidiary audits. | | | | | | | | | | Tax Fees: | | $ | — | | | $ | — | | | Includes fees for tax compliance and tax advice and planning. | | | | | | | | | | All Other Fees: | | $ | 1,000 | | | $ | 380,000 | | | Includes fees for advisory services for non-audit projects. The Audit Committee has concluded that the services covered under the caption “All Other Fees” are compatible with maintaining EY’s independent status. | | | | | | | | |
Pre-Approval Policies and Procedures The Audit Committee is responsible for the approval of all services performed by Ernst & Young LLP.EY. The Chairman of the Audit Committee has the authority to approve all engagements that will cost less than $250,000 and, in such cases, will report any pre-approvals to the full Audit Committee for ratificationratification at theits next scheduled meeting. All engagements expected to cost $250,000 or more require pre-approval of the full Audit Committee. In addition, it is Company policy that tax and other non-audit services should not equal or exceed base audit fees plus fees for audit-related services. In 20142019 and 2015,2020, all services performed by Ernst & Young LLPEY were preapproved.pre-approved. | 28 | |
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| Report of the Audit Committee | | THE BOARD UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE “FOR” THIS PROPOSAL.
| |
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▸REPORT OF THE AUDIT COMMITTEE
The Audit Committee oversees the Company’s financialfinancial reporting process on behalf of the Board of Directors.Board. Management has the primary responsibility for the financialfinancial statements, for establishing and maintaining effective internal control over financialfinancial reporting and for assessing the effectiveness of internal control over financialfinancial reporting. In fulfillingfulfilling its oversight responsibilities, the Audit Committee reviewed and discussed with management the audited financialfinancial statements, including a discussion of the quality of the accounting principles, the reasonableness of significantsignificant judgments and the clarity of disclosures in the financialfinancial statements. The
During 2020, the Audit Committee iswas comprised solely of independent directors as defineddefined by NasdaqNASDAQ listing standards and Rule 10A-3 of the Securities Exchange Act of 1934. The members of the Audit Committee in 2020, together with appointment dates and meeting attendance, isare set forth below: | Members | | Committee
Member Since | | Attendance at Full
Committee Meetings
During 2020 | | David M. Moffett, Chair | | Attendance at full meetings duringMay 2015
| | 9/9 | Donald J. Shepard, Chairman
| | | | | August 2006 | | 9/9 | | | | | 9/9 | | Vautrinot | | December 2019 | | 9/9 | | | May 2011 | | 9/9 |
| | | Mr. Moffett joined the Board in May 2015.
|
The meetings of the Audit Committee are designed to facilitate and encourage communication among the Audit Committee, the Company, the Company’s internal audit function and the Company’s independent auditor.Independent Registered Public Accounting Firm. The Audit Committee discussed with the Company’s internal auditors and independent auditorIndependent Registered Public Accounting Firm the overall scope and plans for their respective audits. The Audit Committee meets with the internal auditors and the independent auditor,Independent Registered Public Accounting Firm, with and without management present, to discuss the results of their examinations, their evaluations of the Company’s internal controls over financialfinancial reporting and the overall quality of the Company’s financialfinancial reporting. Each year, the Audit Committee evaluates the qualifications,qualifications, performance and independence of the Company’s independent auditor,Independent Registered Public Accounting Firm, and determines whether to re-engage the current independent auditor.Independent Registered Public Accounting Firm. In doing so, the Audit Committee considers the quality and efficiencyefficiency of the services provided by the auditors,Independent Registered Public Accounting Firm, the auditor’s capabilities of the Independent Registered Public Accounting Firm, technical expertise and knowledge of the Company’s operations and industry. Based on this evaluation, the Audit Committee has retained Ernst & Young LLP (“EY”)EY as the Company’s independent auditorIndependent Registered Public Accounting Firm for 2016.2021. Although the Audit Committee has the sole authority to appoint the independent auditors,Independent Registered Public Accounting Firm, the Audit Committee willintends to continue to recommend that the Board ask shareholders to ratify the appointment of the independent auditorsIndependent Registered Public Accounting Firm at the Annual Meeting. EY, the Company’s independent registered public accounting firmIndependent Registered Public Accounting Firm for 2015,2020, is responsible for expressing an opinion that: (i) the Company’s consolidated financialfinancial statements present fairly, in all material respects, the financialfinancial position, results of operations and cash flowsflows in conformity with generally accepted accounting principles in the United States; and (ii) the Company maintained, in all material respects, effective internal control over financialfinancial reporting as of December 25, 2015.31, 2020. Table of Contents REPORT OF THE AUDIT COMMITTEE In this context, the Audit Committee has: | | | reviewed and discussed with management, the audited financialfinancial statements for the year ended December 25, 2015; |
| 31, 2020; | | | discussed with EY, the matters required to be discussed by Auditing Standard No. 16, “Communications with Audit Committee,” as adopted bythe applicable requirements of the Public Company Accounting Oversight Board (the “PCAOB”); and the SEC; | | | received from EY, the written disclosures and the letter from EY asregarding auditors’ independence required by the applicable requirementsprovisions of the PCAOB regarding communications about Audit Committee independence, and discussed EY’s independence with them; and | | | reviewed and discussed with management and EY, the results of management’s assessment of the effectiveness of the Company’s internal control over financialfinancial reporting and EY’s audit of the Company’s internal control over financialfinancial reporting. |
Based on its review and on the discussions described above, the Audit Committee has recommended to the Board, and the Board has approved, that the audited financialfinancial statements be included in the Company’s2020 Annual Report on Form 10-K for filing with the fiscal year ended December 25, 2015.SEC. Members of the Audit CommitteeCommittee: Donald J. Shepard, Chairman
David M. Moffett,Chair
Donna M. Alvarado
Steven T. Halverson
DavidSuzanne M. MoffettVautrinot
J. Steven Whisler | 30 | |
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| Letter from the Compensation and Talent
Management Committee | |
The members of the Compensation and Talent Management Committee (the “Committee”) believe it is important to provide shareholders with a clear understanding of the Committee’s processes for executive compensation and talent management decisions. This letter provides insight into our deliberations, thought processes and considerations, as we implement executive compensation and talent management programs that drive sustainable Company performance and create long-term shareholder value. Beginning in 2017, CSX undertook a significant transformation of its business – one designed to create long-term value for all stakeholders. In 2020, along with other businesses, CSX endured unprecedented disruption from the far-reaching impacts of COVID-19 on the global economy, supply chains, and employees and their families. The Committee gave deep consideration on how to maintain and advance its long-term strategic vision in light of the profound COVID-19 disruptions and determined that in-flight long-term plans would not be altered, given the long-term focus of these plans on aligning compensation with shareholder value creation. The Committee considered resetting the 2020 short-term incentive plan financial goals in the spring of 2020, when it was apparent that the pandemic had made these goals irrelevant. However, given the continuing high levels of economic uncertainty that could make revised goals just as irrelevant, the Committee instead advised management that it would consider exercising discretion in assessing performance under the 2020 short-term incentive plan. The Committee determined that, in exercising its discretion, it would consider CSX’s achievements using the following key performance criteria: | n | Actions taken to keep employees, customers and the communities in which CSX operates safe; | | n | The direct impact of COVID-19 on performance and what performance would likely have been excluding the impact of COVID-19; | | n | CSX performance on critical operational and financial metrics, relative to the other Class I railroads; | | n | Actions by management to manage the impacts of COVID-19, while also maximizing Company performance despite the pandemic and positioning the Company for growth; and | | n | Shareholder experience over 2020. |
Based on CSX’s achievements against these criteria, the Committee assessed the 2020 short-term incentive plan payout at 75% of target for the Named Executive Officers. (See the section titled “2020 MICP Targets and Payout Percentages” for a detailed assessment of performance against each of these criteria). Pandemic Response Efforts As members of the CSX Board of Directors, we wish to express our gratitude for the efforts and commitment of CSX employees during this extremely challenging time. The health and safety of Company employees is, and will always be, paramount. The Company’s quick response and system-wide COVID protocols implemented in March and April of last year helped provide a healthy, safe work environment under difficult and challenging circumstances. The safety protocols and extraordinary efforts of the Company’s employees allowed CSX to continue to provide transportation for critical goods and supplies while the global economy experienced historic disruptions from the pandemic. Further, the Company made significant progress toward its long-term strategic goals, preserving the ability to capitalize on the objectives made possible by the operational transformation to a scheduled railroad model. The swift adaptation to the pandemic disruptions helped the Company maintain operational efficiency, strong customer service, and safety performance. Importantly, the business model proved to be resilient in the face of unprecedented macroeconomic disruption. Human Capital Management In addition to executive compensation duties discussed below, the Committee has oversight responsibility with respect to human capital management. These responsibilities include reviewing the Company’s leadership development, performance management and talent acquisition programs. As a foundation for these programs, we are committed to providing the support management needs to hire, develop and retain top talent and ensure alignment of our executive compensation program with the Company’s long-term strategy. The Committee also oversees the Company’s plans and processes for promoting diversity, inclusion and pay equity. We recognize that people are the foundation of the Company’s success and are committed to enhancing our culture and environment that inspire employee engagement and excellence. We are proud of the strides the Company has made in creating a world-class, diverse organization that is delivering transformational change in the rail industry. We remain committed to building an even more diverse, engaged and motivated workforce that will continue to deliver sustainable returns for shareholders. Table of Contents LETTER FROM THE COMPENSATION AND TALENT MANAGEMENT COMMITTEE Competition for Scheduled Railroading Expertise Despite the significant challenges imposed by the pandemic in 2020, CSX continues to transform its business and advance critical strategic objectives. Given the Company’s success in advancing the business transformation and related strategic objectives, the Committee recognizes the critical importance of ensuring that it has a competitive, performance-based compensation structure in place to retain what we believe is a best-in-class management and operating team, particularly given the significant competition for the very small number of successful railroaders with scheduled railroading expertise. Executive Compensation Program Design Process The Company’s compensation programs are designed to attract and retain exceptional leadership talent, foster employee engagement and compensate employees appropriately in a competitive marketplace. In developing performance targets for the short- and long-term incentive plans that support the Company’s operating and strategic initiatives, the Committee reviews the Company’s annual and three-year business plans and global economic forecasts. The Committee’s ability to set appropriate and challenging performance goals is impacted by market and economic volatility, global trade dynamics, the geopolitical environment and overall visibility for short and long-term forecasts. Each year, the Committee reviews short and long-term incentive plan design to ensure alignment with the Company’s business strategy, key financial objectives, shareholder interests and environmental stewardship. To further this alignment, the Committee: | n | is committed to developing a pay-for-performance culture using incentive compensation performance measures that have a strong correlation to long-term shareholder value creation (see pages 44 – 50 of the CD&A); | | n | ensures that a majority of the CEO’s and other named executive officer’s total compensation is at risk; | | n | strikes the right balance between short and long-term incentives with significant weighting toward the long-term awards; and | | n | uses multiple financial performance metrics in both short and long-term incentive plans. |
Consistent with the Company’s goal of being the best run railroad in North America, the Company also continues to evolve its strategy and leadership position around sustainable business operations. We are extremely proud of the leadership the Company has and continues to show in this area. For the 10th straight year, CSX has been included in the Dow Jones Sustainability Index, as the sole U.S. railroad to receive this recognition. Going forward, we expect sustainability to be even more important to the Company’s long-term business strategy, as railroads offer a unique opportunity within the freight transportation sector to reduce carbon emissions. Reflective of this, we have included sustainability goals in the Company’s 2021 annual incentive program, which applies to all management employees. 2020 Executive Compensation Decisions Like many other companies, the Committee approved annual and long-term incentive compensation plans early in the year, just before the impacts of COVID-19 began to emerge. In fact, the Company performed well above target performance levels during the first quarter of 2020, which the Company believed to be a signal of strong performance to come over the rest of the year. With the onset of the pandemic, however, the Company experienced historic volume declines in the second quarter rendering the established financial performance goals for the annual incentive plan unattainable for the year. The Committee decided not to reset goals under the annual incentive plan due to the continuing economic uncertainty and decided not to reset goals for any of the outstanding long-term incentive cycles, given the long term focus of these plans on aligning compensation with shareholder value creation. However, the Committee indicated that it would assess performance under the 2020 short-term incentive plan using a principled approach to assess performance against key criteria, in light of the unprecedented economic upheaval. In making this decision, the Committee noted that, in order to accelerate our scheduled railroading transformation, we set the 2020 short-term incentive targets with significant stretch and with much narrower performance shoulders than had been our practice. Threshold operating income was set just 2% below the target performance level and threshold operating ratio was set just 50 basis points above target performance level. The impact of the pandemic on freight volumes industry-wide quickly rendered the financial performance goals unattainable. | 32 | |
Table of Contents LETTER FROM THE COMPENSATION AND TALENT MANAGEMENT COMMITTEE Although the financial performance thresholds for the short-term incentive plan pre-pandemic were not achieved, the Committee exercised discretion to provide a payout to the NEOs that was significantly below the payout level to which performance was tracking prior to the onset of COVID-19. The Committee’s rationale for exercising discretion is set out in detail in the section headed “2020 MICP Targets and Payout Percentages.” In exercising its discretion, the Committee reviewed detailed analyses in five key areas and took into account: | n | Revenue growth initiatives achieved through the strength of the Company’s service product, supporting our long-term strategy of growing our intermodal business; | | n | Strong financial performance relative to the other U.S. Class I railroads, leading the industry in volume performance while continuing to deliver significant cost savings; | | n | Management of our network through periods of extreme volatility to drive structural efficiencies and create operating leverage in both rapidly declining and rapidly rebounding volume environments; | | n | Achievement of an operating ratio of 58.8%; | | n | The Company’s common carrier obligations to move freight that is critical to the U.S. economy; | | n | The Company’s $10 million investment in employee health and safety, creating new processes and guidelines during the pandemic and achieving industry-leading personal injury safety performance; | | n | Shareholder return of 27.1% for 2020, which was second against the U.S. Class I railroad peers; | | n | First quarter (pre-pandemic) financial performance, which was tracking significantly above target; | | n | The retention of key scheduled railroading operational talent; and | | n | Continuing industry leadership in ESG and sustainable operations, earning multiple accolades in 2020 across a wide range of categories, including sustainability, diversity and inclusion, community service and emissions reductions. |
For 2020, the Committee determined to exercise discretion and award NEOs with a short-term incentive compensation payout at 75% of target, while eligible management employees who achieved performance expectations (approximately 2,500 employees) received a payout of 100% of target. The Committee has historically used discretion sparingly and such a decision is not ordinary course. As described more fully below, the Committee’s determination rested upon management’s quick pandemic response to maintain its position as an industry leader in operating efficiency, customer service and safety. As a result of this performance, CSX is positioned to execute on the strategy it developed pre-COVID to pursue profitable growth. As we look to the future, the Committee remains focused on structuring compensation programs to drive the next stage of the Company’s strategic growth plan. We believe that the Company is poised to capitalize on its superior customer service to deliver compelling value for new and existing customers. To drive this next phase of the Company’s continuing transformation, we have implemented compensation programs that drive sustainable growth, operating efficiency, reduced fuel consumption and emissions, and employee and train safety. We realize shareholders may express their opinions through our annual say-on-pay vote, and we encourage additional shareholder feedback on the Company’s executive compensation programs. You may provide feedback to the Committee by sending correspondence to CSX Corporation,31 Office of the Corporate Secretary, 500 Water Street, C160, Jacksonville, Florida 32202. We consider this input as we refine our compensation philosophy and talent management processes.
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▸COMPENSATION DISCUSSION AND ANALYSIS
This
| Report of the Compensation and
Talent Management Committee | |
The Compensation and Talent Management Committee has reviewed and discussed the Compensation Discussion and Analysis (“CD&A”) describeswith management. Based on its review of the disclosures, the Compensation and analyzesTalent Management Committee recommended to the full Board that the Compensation Discussion and Analysis be included in this Proxy Statement.  | |  | |  | |  | |  | |  |  | |  | |  | |  | |  | |  | | Steven T. Halverson | | Donna M. Alvarado | | John D. McPherson | | Linda H. Riefler | | James L Wainscot | | John J. Zillmer |
Chair March 23, 2021 | 34 | |
Table of Contents 
| Compensation Discussion
and Analysis | |
Key Business Highlights for 2020  | $4.36B Operating Income | |  | 58.8% Operating Ratio | |  | $3.60 Fully-Diluted EPS |
 | 27.1% Total Shareholder Return | |  | $1.7B Capital Returned to Shareholders |
Service Performance Volatile demand and supply chain disruptions, along with unpredictable personnel availability due to COVID-19 cases, contributed to service challenges throughout 2020. Nevertheless, CSX continued to perform at high levels and remained poised for a return to record-setting service reliability as conditions improved. | |  |
Safety Performance The Company’s commitment to being America’s safest railroad resulted in industry-leading safety performance in 2020, with the lowest personal injury rate of all U.S. Class I railroads. For the year, the Company improved its personal injury rate by 10%. These results were achieved by an intense focus on key operating principles, leadership and consistent communication. | |  |
Table of Contents COMPENSATION DISCUSSION AND ANALYSIS 2020 Impacts of COVID-19 Pandemic In 2020, the COVID-19 pandemic had a dramatic, if not unprecedented, impact on global economies and supply chains. While CSX was not immune to these challenges, the Company and its employees rose to the challenge to keep the domestic supply chain moving and deliver supplies needed across the country. Our employees remain steadfast in their commitment to running the best railroad in North America and delivering industry-leading service to our customers. Transparent and timely customer communication is a centerpiece of the Company’s pandemic response and will continue to reinforce our preparedness for providing safe, reliable rail service in support of economic recovery. In the face of a pandemic that dramatically impacted global economies and stressed resources around the world, CSX was able to deliver industry-leading safety performance for personal injuries and continue its efforts to provide superior customer service. Despite disrupted supply chains worldwide, the Company maintained its operating discipline and began to leverage its improved service product to drive volume and revenue growth, and accelerate the conversion of freight volumes from highway to rail. During the second quarter of 2020, CSX experienced the largest quarterly volume declines in Company history, as COVID-19 cases spread quickly throughout the country. This severe downturn required the Company to adjust assets and make difficult personnel decisions, including the furlough of approximately 2,000 employees. Approximately 1,700 of these employees were brought back in the second and the third quarters of 2020, as volume returned. The Company also implemented furlough mitigation programs that offered voluntary leaves of absence and temporary part-time assignments to our conductors and engineers. These programs helped reduce the impact of the pandemic on our workforce by allowing employees who might otherwise be furloughed to continue health and welfare benefits and remain available for prompt recall to full-time work. Operating Performance Despite the extreme volatility in freight volumes in 2020, the Company continued to drive efficiencies while providing a high level of customer service. Improved network planning and operational execution contributed to increased fuel efficiency, greater network fluidity and fewer crew starts. These efficiencies enabled the Company to generate $2.65 billion of free cash flow to support dividend payments to shareholders, stock repurchases and investment in the CSX rail infrastructure. The Company’s capital expenditures of approximately $1.63 billion for the year demonstrated a commitment to maintaining a safe, world-class rail network that is positioned for growth. This investment in infrastructure along with increased operating efficiencies and improved asset utilization have provided the Company with a substantial capacity reserve to accommodate higher volumes as economic conditions improve and highway-to-rail conversions increase. 
Note: Results prior to 2018 restated for pension accounting change. 2017 reflects non-GAAP reported results, which excluded the impact of tax reform and restructuring charges. | 36 | |
Table of Contents COMPENSATION DISCUSSION AND ANALYSIS Objectives of CSX’s Executive Compensation Program The primary objectives of the Company’s executive compensation programs how those principles are applied and how the Company’s compensation programs are designed to drive performance. This CD&A focuses on the compensation of the Named Executive Officers (“NEOs”) as set forth below.to: | n | Engage and reward executives for extraordinary results that will maximize shareholder value; | | n | Reinforce a pay-for-performance culture with a significant portion of the NEO’s total compensation at risk; and | | | Implement short and Chief Executive Officer | | | | Executive Vice Presidentlong-term incentive compensation programs that have stretch targets that drive operational performance and Chief Financial Officer (“CFO”)
| | Executive Vice President and Chief Sales and Marketing Officer
| | Executive Vice President and Chief Operating Officer (“COO”)
| | Executive Vice President, General Counsel and Corporate Secretary
| | Former President and Chief Operating Officer (“COO”)
|
Effective September 8, 2015, Mr. Munoz resigned as the President and Chief Operating Officer of the Company to become President and Chief Executive Officer of United Continental Holdings, Inc. Mr. Munoz also resigned from the CSX Board of Directors on September 8, 2015. On the same day, the Company announced additional management changes. Clarence W. Gooden was appointed President of the Company with Fredrik J. Eliasson succeeding him as Executive Vice President and Chief Sales and Marketing Officer. Mr. Eliasson had previously served as the Company’s Executive Vice President and Chief Financial Officer since 2012. Ms. Sanborn was appointed Executive Vice President and Chief Operating Officer of CSX Transportation, Inc. Since February 2015, Ms. Sanborn had served as the Company’s Executive Vice President – Operations and prior to that as the Vice President and Chief Transportation Officer since 2009. Both Mr. Eliasson and Ms. Sanborn report to Mr. Gooden. Additionally, the Company appointed Frank A. Lonegro as Executive Vice President and Chief Financial Officer. Mr. Lonegro had previously served in a variety of executive capacities in operations, finance and technology since 2007.
Pursuant to SEC rules, the Company is required to report Mr. Munoz as an NEO since his total compensation earned for the portion of the year in which he was employed by the Company would have resulted in his inclusion as one of the three most highly compensated officers other than the CEO and CFO. Additionally, since Messrs. Eliasson and Lonegro served as CFO at different times in 2015, they are both required to be included in the CD&A.
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COMPENSATION DISCUSSION AND ANALYSIS
In 2015, the Company experienced continued declines in coal volumes driven primarily by low natural gas prices with domestic and export coal volumes declining 11% and 19%, respectively. Additionally, freight volume declined overall as global economic markets responded to continued strength in the U.S. dollar and slowing growth in China. Despite these challenges, the Company was able to deliver solid financial results, including its first full-year sub-70 operating ratio. Below are notable business highlights for 2015.
•
Operating income and operating ratio of $3.584 billion and 69.7%, respectively
•
Earnings per share of $2.00, up 4% from 2014
•
Quarterly cash dividend increase of nearly 13% to $0.18 per share
•
Repurchase of approximately 26 million shares of CSX common stock
CSX remains committed to delivering value to shareholders through a balanced approach to deploying cash that includes investments in the business, dividend growth and share repurchases. In 2015, CSX returned approximately $1.5 billion to its shareholders in the form of dividends and share repurchases. In 2015, the Company also invested $2.5 billion to further enhance safety, service, capacity and flexibility of its transportation network.
Aligning Compensation ProgramAlignment with Leading Governance Practices
The Compensation Committee of the Board (for purposes of the CD&A, the “Committee”) establisheshas established executive compensation programs that incorporate leading governance principles.practices. Highlighted below are certain executive compensation practices designed tothat drive performance and fostersupport strong corporate governance. | | CSX Executive Compensation Practices Include: | | CSX Executive Compensation
Practices Do NOT Include / Allow: | | | | ✓
HighSignificant percentage of executive compensation that is performance-based | X
Dividends or dividend equivalents on unvested performance shares
| ✓
Performance measures that are highly correlated to shareholder value creation | | ✓
Engagement of an independent compensation consultant to review compensation programs and provide an annual risk assessment | X
Repricing of underwater options
| ✓
SignificantSignificant share ownership requirements for officersVice President-level executives and above and non-employee directors | X
Recycling of shares withheld for taxes
| ✓
Change of control agreements requiringrequire a double-trigger (i.e.(i.e., change of control plus termination) for severance purposes | X HedgingInclusion of CSX securities by officers or directors
| ✓
Clawbacksmultiple financial measures in short-short and long-term incentive compensation plans Use of payout caps on short and long-term incentives | |  Re-pricing of underwater options without shareholder approval
Excise tax gross ups Recycling of shares withheld for taxes Hedging or pledging of CSX securities by officers or directorscommon stock |
Factors Considered in Determining Executive Compensation The Committee annually evaluates competitive market data for the NEOs, including base salary and short and long-term incentives with that of similar positions at peer railroads and general industry companies that are part of the comparator group for executive compensation purposes (the “Comparator Group”). The Committee considers the following factors, among others, in evaluating target compensation levels: | n | Contribution to the Company’s financial results; | | n | Effectiveness in developing and implementing the Company’s business strategy to support operating and financial performance; | | n | Sustained strong performance, criticality of the role, experience and contribution to CSX financial and operational results; | | n | Contribution to a creating a culture that aligns with transformational business goals and reinforcing the Company’s guiding principles; and | | n | The nature, scope and level of the executive’s responsibilities internally relative to other executives and externally based on the Comparator Group. |
Table of Contents COMPENSATION DISCUSSION AND ANALYSIS In keeping with past practices, and in consultation with its independent compensation consultant, the Committee developed the Comparator Group for 2020, which was comprised of 14 primarily U.S.-based companies and North American railroads (the “Comparator Group”) to help guide executive compensation decisions at CSX. The Committee annually assesses and approves the Comparator Group to ensure that it reflects market characteristics comparable to those of the Company, including revenue, assets, net income, market capitalization, number of employees, industry type and business complexity. In addition, the Committee reviews the degree of overlap with proxy advisory peer companies. As a result of its review, the Committee approved the following Comparator Group for 2020, organized by market capitalization and revenue. 2020 COMPARATOR GROUP Market Capitalization as of December 31, 2020
(in millions) | | Revenue as of Fiscal Year-end 2020
(in millions) | ✓
Inclusion of multiple financial measures in long-term incentive program
| | |  | |  |
Aligning Executive
All Values as of December 31, 2020 Role of the Independent Compensation with Company Performance
ConsultantThe Committee’s performance-based compensation philosophy is designed
Pursuant to attract,its charter, the Committee has sole authority to select, retain and motivate executivesterminate any consultant used to deliver superior performance results.assist the Committee in fulfilling its duties. The Committee structureshas retained an independent compensation consultant, Meridian Compensation Partners, LLC (the “Consultant”), to provide objective analysis and to assist in the development and evaluation of the Company’s executive compensation programs. The Consultant reports directly to the Committee Chair, and generally attends all meetings where the Committee evaluates the overall effectiveness of the executive compensation programs or where the Committee analyzes or approves executive compensation. The Consultant is paid on an hourly fee basis, with such hourly rates approved by the Committee annually. | Consultant’s Role and Responsibilities | | | ■ Analyzing competitive practices, financial information, stock price and other performance data in relation to the Company’s executive compensation philosophy ■ Reviewing compensation governance practices, including an annual risk assessment related to the Company’s compensation plans ■ Reviewing performance targets and assessing performance against targets for the Company’s short and long-term incentive plans | | ■ Assessing compensation plan design in the context of the Company’s business goals, shareholder value creation and employee engagement ■ Providing regular updates to the Committee with respect to current trends and developments in legislative and regulatory activity, compensation program design and governance ■ Assisting in the development of the Comparator Group each year ■ Consulting with the Committee chair to plan and prioritize Committee agenda items |
| 38 | |
Table of Contents COMPENSATION DISCUSSION AND ANALYSIS The Committee reviews the performance and independence of the Consultant on an annual basis, at which time it decides whether to renew the Consultant’s annual engagement. Each year, the Committee considers all appropriate information relating to the independence of the Consultant and its professionals involved in the work performed for, and advice provided to, the Committee. In 2020, the Committee determined that: (i) the relationships and work of the Consultant and its professionals did not present any conflict of interest; and (ii) the Consultant and its professionals are independent for the purpose of providing advice to the Committee with respect to matters relating to the compensation of the executives and non-employee directors of the Company. In addition, management has retained a separate consultant, Willis Towers Watson, which advises management (but not the Committee) on market trends in executive compensation, provides ad hoc analysis and recommendations, and reviews and comments on compensation proposals. Compensation Risk Evaluation and Mitigation The Committee believes appropriately structured compensation programs should take into consideration enterprise risks and discourage behavior that leads to inappropriate increases in the Company’s overall risk profile. Accordingly, the Committee and its Consultant regularly review the Company’s enterprise risks and executive compensation plan design to consider whether the plans motivate the appropriate behaviors and mitigate unnecessary or excessive risk-taking. Each year, the Committee reviews a risk assessment prepared by management and the Consultant that focuses on the structure, key features and risk mitigating factors included in the Company’s executive compensation programs. This risk assessment: | n | Describes the process for establishing the Company’s executive compensation programs; | | n | Reviews potential risks and mitigating factors related to the Company’s executive compensation programs; | | n | Analyzes the relationship between the executive compensation programs and the Company’s enterprise risks identified through the Company’s business risk mitigation process; and | | n | When appropriate, provides recommendations for potential enhancements to further mitigate compensation risks. |
The risk assessment, which includes a summary of all executive compensation programs and participation, helps the Committee evaluate: (i) the nature of the risks inherent in the Company’s executive compensation programs; and (ii) whether the Company has designed and implemented appropriate risk management processes that foster a culture of risk-awareness. In 2020, this assessment led to a conclusion by management, which was affirmed by the Consultant, that the executive compensation programs of the Company were appropriately designed to mitigate compensation risk. As a result, the Committee believes that any risks arising from its executive compensation policies and practices are not likely to have a material adverse effect on the Company. | Executive Compensation Program Features that Serve to Mitigate Risk |  Compensation is appropriately balanced between (i) fixed and variable compensation and (ii) short and long-term incentives
Significant weighting towards long-term incentive compensation discourages short-term risk-taking Multiple long-term incentive compensation vehicles with overlapping vesting periods are used, including performance units and non-qualified stock options Performance measures for short and long-term incentive awards reinforce the Company’s business goals Clawback provisions in short and long-term incentive plans require repayment of awards in certain circumstances | | Financial performance measures have a strong correlation to long-term shareholder value creation Multiple financial performance measures in the short and long-term incentive plans provide a balanced approach Short and long-term incentive awards include maximum payout caps on financial performance measures for NEOs Internal controls over the measurement and calculation of performance measures protect data integrity Share ownership guidelines reinforce alignment of executive and shareholder interests |
Table of Contents COMPENSATION DISCUSSION AND ANALYSIS Say-on-Pay and Shareholder Engagement on Executive Compensation The annual say-on-pay vote is one of the opportunities to receive feedback from shareholders regarding the Company’s executive compensation programs. The Committee took note of the results of the say-on-pay vote from the 2020 Annual Meeting, which resulted in approximately 75% of the shares being voting in favor of the say-on-pay proposal. In connection with the say-on-pay vote, and also as a matter of course, during 2020, CSX actively sought feedback from shareholders to better understand what motivated their votes. The Committee Chair participated in a majority of these conversations. Over the course of this engagement, we learned that shareholders were generally satisfied with the Company’s executive compensation programs. Elements of the Company’s 2020 Executive Compensation Programs As an organization focused on pay-for-performance, CSX provides competitive total compensation opportunities in line with similar Comparator Group companies. The Committee reviews the performance and accomplishments of each executive to ensure incentive payouts that are consistent with the Company’s overall executive compensation program objectives. The Committee makes its decisions concerning the specific compensation elements and total compensation paid or awarded to reward short-the Company’s NEOs within the framework described herein. The objective is to provide total compensation opportunities that are competitive with those offered by companies in the Comparator Group and that appropriately incentivize individual performance. The actual amount of incentive compensation paid is dependent upon both the achievement of Company performance goals and individual performance. | Pay Element | | Form | | Performance | | Objective | Salary 
| | Cash | | Based on assessment of scope of responsibilities, individual performance, experience and long-term shareholder value creation | | Recruit, engage and retain talented high-performing leaders | Short-Term
Incentives 
| | Cash | | The Company’s performance measures for the 2020 short-term incentive awards are: ■ Operating Income ■ Operating Ratio ■ Safety Individual performance is also considered for determining the final payout for the executive | | Motivate and reward executives and eligible employees for driving performance within a one- year period | Long-Term
Incentives 
| | ■ Performance Units (50%) ■ Non-qualified Stock Options (50%) | | The performance measures for the performance units issued as part of the 2020-2022 long-term incentive plan are: ■ Operating Income ■ Free Cash Flow Formulaic linear Relative Total Shareholder Return modifier of +/- 25% with 250% maximum Non-qualified Stock Options only have value if the price of CSX’s common stock increases after grant | | Motivate and reward executives to drive strategic initiatives that create shareholder value over a three-year period |
The Company also provides retirement and other health and group benefits, non-qualified deferred compensation plans and limited perquisites. The NEOs generally participate in the same benefit programs as all eligible management employees. | 40 | |
Table of Contents COMPENSATION DISCUSSION AND ANALYSIS 2020 Target Compensation Mix for the CEO and Other NEOs The Company’s executive compensation philosophy requires that a substantial portion of total compensation be at-risk and consist of performance-based incentives that are linked to CSX’s financial and operating results. In addition, the Committee strives to strike an appropriate balance between short and long-term compensation. The mix between fixed and variable compensation and short and long-term compensation is designed to align the NEOs’ financial incentives with shareholder interests. In 2020, 91% of the CEO’s targeted Total Direct Compensation was performance-based and at-risk. The target compensation mix for each of the NEOs is shown below, with equity awards valued as described. | James M. Foote | President and Chief Executive Officer |
 | Age 67 | Tenure 3.4 years | | | | | | Responsibilities | | | | | | | Mr. Foote has served as President and Chief Executive Officer since December 2017. He joined CSX in October 2017, as Executive Vice President and Chief Operating Officer, with responsibility for both operations and sales and marketing. Mr. Foote has more than 40 years of railroad industry experience. Prior to joining CSX, he was President and Chief Executive Officer of Bright Rail Energy. Before heading Bright Rail, he was Executive Vice President, Sales and Marketing with Canadian National Railway Company. At Canadian National, Mr. Foote also served as Vice President – Investor Relations and Vice President Sales and Marketing – Merchandise. | | | | | | |
| 2020 Accomplishments | | ■ | Established, aligned and communicated CSX’s five-year strategy supporting growth through innovation, harnessing technology and fostering a one-team workforce setting aggressive long-term growth objectives. | | ■ | Named the 2020 Railroad Innovator of the Year by Progressive Railroading and RailTrends for outstanding achievements in the industry. | | ■ | Drove safety improvements that reduced FRA personal injuries and led the industry in personal injury performance. | | ■ | Delivered record operating ratio in 3 of 4 quarters excluding real estate and line sale gains. | | ■ | Participated in listening sessions and advanced diversity, equity and engagement by ensuring CSX is committed through actions to address racial equity and social justice. |
2020 Target Compensation 
| Base Salary: | $1,250,000 | | | Target Annual Bonus: | $2,000,000 | | | Target Long-Term Incentives: | $11,000,000 | | | Target Total Direct Compensation: | $14,250,000 | | | 50% of 2020 LTI was performance-based | | |
Table of Contents COMPENSATION DISCUSSION AND ANALYSIS | Kevin S. Boone | Executive Vice President and Chief Financial Officer |
 | Age 44 | Tenure 3.5 years | | | | | | Responsibilities | | | | | | | Mr. Boone has served as Executive Vice President and Chief Financial Officer since October 2019. In this role, he is responsible for all financial aspects of the Company’s business including financial and economic analysis, accounting, tax, treasury, real estate and purchasing activities. Mr. Boone has more than 18 years of experience in finance, accounting, mergers and acquisitions, and transportation performance analysis. He joined CSX in September 2017, as Vice President of Corporate Affairs and Chief Investor Relations Officer and was later named Vice President, Marketing and Strategy leading research and data analysis to advance growth strategies for CSX. | | | | | | |
2020 Accomplishments | ■ | Drove nearly $200 million of incremental productivity ($400 million in total). | | ■ | Quickly reacted to the impact of COVID and identified new opportunities to reduce costs. | | ■ | Positioned CSX with the strongest liquidity position in the industry with nearly $3 billion of cash. | | ■ | Led team through diligence process and execution of agreement to acquire Pan Am Railways, which is expected to provide an opportunity to leverage operating team and drive additional growth, if approved. |
2020 Target Compensation 
| Base Salary: | $475,000 | | | Target Annual Bonus: | $427,500 | | | Target Long-Term Incentives: | $2,500,000 | | | Target Total Direct Compensation: | $3,402,500 | | | 50% of 2020 LTI was performance-based | | |
| Jamie J. Boychuk | Executive Vice President – Operations |
 | Age 43 | Tenure 3.8 years | | | | | | Responsibilities | | | | | | | Mr. Boychuk has served as CSXT’s Executive Vice President – Operations since October 2019. In this role, he is responsible for transportation, mechanical, engineering and network operations. Since joining CSXT in 2017, he has held the positions of Senior Vice President of Network, Engineering, Mechanical and Intermodal Operations; Vice President of Scheduled Railroading; and Assistant Vice President of Transportation Support. Mr. Boychuk previously worked at Canadian National Railway, where he served for 20 years in various operational roles of increasing responsibility. | | | | | | |
| ■ | Led the reduction of total daily train starts by 15% year-over-year and improved distributed power trains by 14% year-over-year. | | ■ | Implemented a Furlough Mitigation program to reduce impact on T&E workforce during COVID-19 pandemic. | | ■ | Led the Operations team that delivered an industry-leading Federal Railroad Administration (“FRA”) personal injury rate. | | ■ | Achieved record levels of fuel, locomotive and T&E efficiencies. | | ■ | Generated $22 million in Engineering productivity. |
2020 Target Compensation 
| Base Salary: | $500,000 | | | Target Annual Bonus: | $450,000 | | | Target Long-Term Incentives: | $2,500,000 | | | Target Total Direct Compensation: | $3,450,000 | | | 50% of 2020 LTI was performance-based | | |
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Table of Contents COMPENSATION DISCUSSION AND ANALYSIS | Nathan D. Goldman | Executive Vice President – Chief Legal
Officer and Corporate Secretary |
 | Age 63 | Tenure 17.7 years | | | | | | Responsibilities | | | | | | | Mr. Goldman has served as Executive Vice President, Chief Legal Officer and Corporate Secretary of CSX since November 2017. In this role, he directs the Company’s legal affairs, government relations, risk management, public safety, environmental, corporate communications and internal audit functions. During his 17 years with the Company, Mr. Goldman has previously served as Vice President of Risk Compliance and General Counsel and has overseen work in compliance, risk management and safety programs. | | | | | | |
2020 Accomplishments | ■ | Worked to successfully secure over $200 million in rail infrastructure and safety improvement grants. | | ■ | Secured $745 million in state public funding to CSX on strategic growth projects. | | ■ | Managed critical litigation to successful conclusions. | | ■ | Actively engaged on critical legislation impacting the Company’s competitive interests. | | ■ | Successfully engaged in messaging and clear action regarding social unrest and racial equity with both employees and community partners. |
2020 Target Compensation 
| Base Salary: | $500,000 | | | Target Annual Bonus: | $450,000 | | | Target Long-Term Incentives: | $2,000,000 | | | Target Total Direct Compensation: | $2,950,000 | | | 50% of 2020 LTI was performance-based | | |
| Mark K. Wallace | Executive Vice President – Chief
Sales / Marketing Officer |
 | Age 51 | Tenure 4 years | | | | | | Responsibilities | | | | | | | Mr. Wallace has served as Executive Vice President of Sales and Marketing since July 2018. In this role, he is responsible for developing and implementing the Company’s commercial strategy. He joined the Company in March 2017 and previously served as Executive Vice President and Chief Administrative Officer, Executive Vice President of Corporate Affairs and Chief of Staff to the CEO. Prior to joining CSX, he served as the Vice President of Corporate Affairs and Chief of Staff at Canadian Pacific, a role he was appointed to in July 2012. | | | | | | |
2020 Accomplishments | ■ | Led development of CSX’s five-year growth strategy including creation of a blueprint for cultural transformation at CSX. | | ■ | Successfully hosted virtual customer engagement forums, customer town halls, and short-line conference comprised of 100 customers representing over $4.5 billion in revenue for CSX. | | ■ | Led COVID-19 return-to-work efforts and team focused on Jacksonville headquarters offices, including design and implementation of safety protocols and communications. | | ■ | Implemented technological advancements focused on customer service, automation, analytics and growth. |
2020 Target Compensation 
| Base Salary: | $550,000 | | | Target Annual Bonus: | $495,000 | | | Target Long-Term Incentives: | $2,500,000 | | | Target Total Direct Compensation: | $3,545,000 | | | 50% of 2020 LTI was performance-based | | |
Table of Contents COMPENSATION DISCUSSION AND ANALYSIS 2020 Base Salary The Committee determines a base salary for each executive annually based on its assessment of the individual’s scope of responsibilities, performance, that createsand experience. The Committee also considers salary data for similar positions within the Comparator Group. After considering this information and in light of the economic environment, including the impact of the COVID-19 pandemic on CSX, the Committee did not increase the base salary of any of the NEOs in 2020. Base salary may represent a larger or smaller percentage of total compensation actually paid, depending on whether actual Company and individual performance under the short and long-term incentive plans discussed herein fall short of or exceed the applicable performance targets. 2020 Short-Term Incentive Compensation Goal Setting Process for 2020 MICP In January 2020, the Committee established the goals and measures under the 2020 Management Incentive Compensation Plan (the “2020 MICP”) and developed a performance structure to drive business results and create value for shareholders. The 2020 MICP was designed to leverage the Company’s successful transition to scheduled railroading, an operating model that has enhanced customer service levels allowing the Company to focus on new business opportunities and revenue growth. The 2020 MICP was structured to reward executives and eligible employees for driving Company performance over a one-year period. Each NEO was provided an incentive opportunity based on the goals established by the Committee expressed as a percentage of base salary earned during the year (“Target Incentive Opportunity”). In 2020, the Target Incentive Opportunity level for Mr. Foote was 160% of base salary and 90% of base salary for Messrs. Boone, Boychuk, Goldman and Wallace. 2020 MICP Performance Measures In January 2020, the Committee approved the performance measures for the 2020 MICP, which included operating income, operating ratio and safety improvement targets. Each of these measures have proven to be critical drivers of CSX’s business success. In an effort to enhance focus on sustainable growth, the Committee adjusted the weightings of the operating income and operating ratio metrics from 45% each under the 2019 MICP to 60% and 30%, respectively, under the 2020 MICP. The safety metrics remained at a 10% weighting under the 2020 MICP. | Operating Income (60%) | | | Directly tied to Operating Ratio targets and gauges the general health of the core business - quantifying our profitability. | | | Operating Ratio (30%) | | | A key indicator of the Company’s efficiency, this measure helps us maintain focus on maximizing the value of our service product, as well as ensuring that our processes are safe and cost efficient, which are main themes of our guiding principles. | | | Safety (10%) | | | Added in 2019 and continued in 2020, FRA Personal Injury and Train Accident rates underscore the critical importance of intensifying our focus on injury and accident prevention. |
To determine the payout under the MICP, the Committee assesses the Company’s performance against the performance goals for the year. These Company performance measures can result in a payment between 0% and 200% of the NEO’s Target Incentive Opportunity. In addition, individual performance and Committee discretion allows for upward or downward payout adjustments based on individual performance and / or in the case of exceptional circumstances such as those experienced in 2020. As shown in the Summary Compensation Table, the 2020 MICP payouts reflect the Company’s financial and operational performance, and individual NEO performance, taking into account the Committee’s exercise of discretion to recognize the successes of the management team in the midst of the COVID-19 pandemic. | 44 | |
Table of Contents COMPENSATION DISCUSSION AND ANALYSIS 2020 MICP Targets and Payout Percentages Given CSX’s strong performance in 2019 and to accelerate our business transformation, we set the 2020 annual incentive targets with significant stretch and with much narrower performance shoulders than had been our practice. The 2020 MICP was designed to leverage the Company’s strong customer service levels to create new business opportunities and grow revenue. The charts below illustrate the very narrow performance shoulders for both operating income and operating ratio in the 2020 MICP. 
The Committee approved an operating income target for the 2020 MICP of $4.93 billion and an operating ratio target of 58.1% (adjusted for the actual average price of highway diesel fuel) based on the Company’s business plan. The threshold payout level for operating income and operating ratio were $4.83 billion and 58.6%, respectively. The 2020 operating income target of $4,930 million was set lower than the 2019 target and 2019 actual results of $4,955 million and $4,965 million, respectively, due to adjustments made to 2019 results based on one-time extraordinary items. These items, totaling $95 million, resulted in normalized 2019 results of $4,870 million, which was the basis for the 2020 operating Income targets. In addition, the 2020 MICP also included safety improvement targets for FRA Personal Injuries and FRA Train Accidents of 0.86 and 2.20, respectively. Assessing 2020 Performance in the COVID-19 Environment The COVID-19 pandemic significantly disrupted our business in a manner that, in the opinion of the Committee, rendered the performance goals under the 2020 MICP no longer attainable for purposes of measuring and rewarding the performance of our management team in 2020. As previously noted, in the second quarter, CSX experienced the largest quarterly volume declines in Company history. In light of the continuing uncertainty and volatility related to the pandemic, the Committee chose not to reset the goals under the 2020 MICP during the performance period. Instead, the Committee indicated that it would use a principled approach to assessing payouts based on overall Company performance during the year focusing on five key areas: | n | Actions taken to keep employees, customers and the communities in which CSX operates safe; | | n | The direct impact of COVID-19 on performance and what performance would likely have been excluding the impact of COVID-19; | | n | CSX performance on critical operational and financial metrics, relative to the other Class I railroads; | | n | Actions by management to manage the impacts of COVID-19, while also maximizing Company performance and positioning the Company for growth; and | | n | Shareholder experience over 2020. |
The Company performed well above target levels during the first quarter of 2020 (producing a record first quarter operating ratio of 58.7%), which the Company believed to be a signal of strong performance to come over the rest of the year. With the onset of the COVID-19 pandemic, which began to impact the Company’s business performance during the second quarter of 2020, the financial and operational targets under the 2020 MICP became unachievable. In the second quarter, volume and revenue dropped 20% and 26%, respectively. Table of Contents COMPENSATION DISCUSSION AND ANALYSIS Notwithstanding the historic disruption caused by the COVID-19 pandemic, our management team demonstrated exceptional performance that proved critical to our Company’s overall success in 2020 in the following five key areas: | SAFETY: | Actions taken to keep employees, customers and the communities in which CSX operates safe. | | n | The Company invested $10 million to protect its employees by prioritizing health and safety, and accelerating the Company’s total well-being strategy. | | n | In response to the impact of the COVID-19 pandemic, the Company quickly developed and implemented technology solutions enabling remote work capabilities and efficiencies. | | n | Management was able to minimize the impacts of the pandemic on the workforce by maintaining base salary levels and creating a furlough mitigation program. | | n | The Company also actively engaged in messaging and implementing an action plan regarding social unrest and racial equity, engaging in conversations with union leaders and advocating at the local, state and federal government levels on behalf of CSX and the industry. | | | | | | | | IMPACT OF COVID: | The direct impact of COVID-19 on performance and what performance would likely have been excluding the impact of COVID-19. | | n | CSX had a record operating ratio in the first quarter of 2020. | | n | Excluding second quarter results, CSX would have achieved a maximum payout under the operating ratio performance measure, which would have produced an MICP payout of 60% on this measure alone. | | | | | | | PERFORMANCE
RELATIVE TO PEERS: | CSX performance on critical operational and financial metrics, relative to other Class I railroads. | | n | CSX performance remained strong relative to class I peers, leading the industry in volume performance while continuing to deliver significant cost savings. | | n | The Company continued to be an industry leader in safety, achieving record low numbers in personal injuries in 2020, which was the lowest among its Class I peers. | | n | The total number of train accidents was 16% lower than in 2019, but the lower volumes resulted in fewer train miles, and a corresponding increase in the Company’s train accident rate in 2020. | | | | | | | PERFORMANCE,
GROWTH & SUSTAINABILITY: | Actions to manage COVID-19 impacts, while maximizing performance and positioning for growth. | | n | The Company effectively managed the network through periods of extreme volatility to drive additional structural efficiencies and create incremental operating leverage in both rapidly declining and rapidly rebounding volume environments, all while continuing to prioritize safety. | | n | The Company was able to realize significant revenue growth in certain markets through efforts by the Sales and Marketing team during the pandemic to leverage its customer relationships. | | n | As volumes declined with the onset of the pandemic, the Company found ways to control or reduce expenses by taking actions and driving productivity in asset efficiency, engineering, fuel savings and reduced overtime. These efforts resulted in a total year-over-year expense reduction of $751 million. | | n | Swift actions taken to reduce cash outflows on both the expense and share buyback side, coupled with a debt issuance in March and elevated cash balances entering 2020 resulted in $3.8 billion of available liquidity at the end of the second quarter of 2020, when the impact of the pandemic was at its strongest. | | n | The Company continued to be an industry leader in ESG performance for its achievements in sustainability, diversity and inclusion, community service and emissions reduction, receiving multiple accolades in these areas, including recognition by the Wall Street Journal as the highest ranking company in sustainability in the transportation sector. | | n | The Company also became the first U.S. Class I railroad to operate at a fuel efficiency rate of less than one gallon of fuel per thousand gross ton miles for a quarter. | | | | | | | | VALUE CREATION: | Shareholder experience over 2020. | | n | By virtue of management executing a rapid response plan with the onset of the COVID-19 pandemic, CSX was able to reinforce customer confidence and maintain its operating and service advantage over other railroads. | | n | In connection with these efforts, CSX stock prices reached an all-time high of $93.71 in 2020, with total shareholder return of 27.1% for the year. |
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Table of Contents COMPENSATION DISCUSSION AND ANALYSIS The Committee believes that these achievements are aligned with the Company’s strategic short and long-term goals, which are directly impacted by executive leadership actions, support our long-term strategy, help deliver shareholder value and ensure retention of critical talent. The Committee also believes that while sustained improvements in operating efficiencies and the focus on growth will continue to play a critical role in the creation of shareholder value, our management team was able to deliver shareholder value under exceptional circumstances, while positioning the Company to grow volumes as consumer demand returns. The 2020 MICP allowed for the Committee to exercise its discretion in making payouts above actual results. In light of the achievements of our management team described above and their performance in the face of the unprecedented challenges brought on by the COVID-19 pandemic, the Committee determined that it was appropriate to make payments to each of our NEOs under the 2020 MICP at 75% of their respective Target Incentive Opportunities. The Committee believes that the payout was aligned with the overall business performance and stakeholder experience in 2020. The payout consisted of 10% of the Target Incentive Opportunities based on safety performance for 2020, and 65% of the Target Incentive Opportunities based on the Committee’s discretion in recognition of our NEOs performance during 2020, measured relative to the five key areas of focus. These payouts are reflected in the “Bonus” and “Non-Equity Incentive Plan Compensation” columns, respectively, of the Summary Compensation Table. While the NEOs received a payout of 75% for the 2020 MICP, eligible management employees who achieved performance expectations (approximately 2,500 employees) received an annual incentive compensation programpayout of 100% of their Target Incentive Opportunities. 2021 MICP Design The 2021 MICP design continues to emphasize safety, operating income and operating ratio with the addition of other operational and ESG-focused performance measures, which include customer service, fuel efficiency and initiative-based revenue growth. The addition of these measures is designed to provide an appropriate allocation between fixedenhance focus on items that employees have the ability to directly influence, align to shareholder expectations, and variable compensation while mitigating unnecessary or inappropriate risk. Each NEO’s total compensation is heavily weighted towards performance-based awards with long-term incentive compensation comprisingsupport the majorityOne-CSX initiative. The goal of the target compensation.“One-CSX” initiative is to promote a culture, rooted in a set of core values, that positions the Company to be an employer of choice to attract and retain the best talent and assure that every employee understands and delivers on strategic priorities.
Long-Term Incentive Compensation. From 2006 to 2012, the Company used Operating Ratio as the sole performance measure for the long-term incentive plan (“LTIP”). For the 2013-2015 LTIP cycle, a second performance measure, Return on Assets (“ROA”), was added to supplement Operating Ratio and further drive performance and value creation. This additional financial measure was designed to improve customer service and profitability through better asset utilization. The 2013-2015, 2014-2016 and 2015-2017 LTIP cycles use Operating Ratio and ROA on an equally weighted basis to measure the Company’s performance. Both Operating Ratio and ROA have demonstrated a high correlation to shareholder value over time. For the 2013-2015 cycle, CSX achieved a cumulative Operating Ratio of 70.8% and average ROA of 7.86%, which resulted in a payout of 64% of target. Short-Term Incentive Compensation. The Company utilizes Operating Income as the financial performance measure to determine annual incentive compensation. The annual incentive compensation program also incorporates various strategic measures. Based on 2015 adjusted Operating Income of $3.631 billion, which excludes $47 million of non-recurring
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COMPENSATION DISCUSSION AND ANALYSIS
expenses pursuant to the terms of the program, and the Company’s performance against strategic goals, the short-term incentive payout for 2015 was 60% of target.
CEO’s Total Compensation in 2015. The Summary Compensation Table contains elements of compensation that were earned for the year, such as base salary and annual incentive compensation, as well as target long-term incentive compensation for the 2015-2017 cycle. It does not reflect the CEO’s actual or “realized” pay (“Realized Pay”) for the most recently completed fiscal year. The CEO’s Realized Pay could be worth more or less than what is shown in the Summary Compensation Table depending on the Company’s overall financial performance, the CEO's individual performance and share price.
For 2014 and 2015, the primary difference between the CEO's Realized Pay and compensation as reflected in the Summary Compensation Table for each year is the amount of the LTIP payout. In 2014, LTIP participants did not receive a payout, and for 2015, the payout was 64% of target for all participants. In both 2014 and 2015, the Summary Compensation Table includes the fair market value of the target LTIP grants made each year, which may or may not pay out, depending on Company performance. The chart below shows the CEO’s Realized Pay for fiscal years 2014 and 2015.
Realized Pay for 2015 includes the following:
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base salary of $1.2 million paid during 2015;
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restricted stock units (“RSUs”) that vested during 2015 in the amount of $2,485,690 (based on the Company’s stock price on the vesting date);
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performance units awarded pursuant to the 2013-2015 LTIP in the amount of $3,206,487 (based on the Company’s stock price on the vesting date); and
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annual bonus of $864,000 earned for 2015.
The CEO’s Realized Pay for 2015 was $7.76 million compared to $4.70 million in 2014. In 2014, there was no payout on the performance unit component of the CEO's long-term incentive opportunity. Back to Contents
COMPENSATION DISCUSSION AND ANALYSIS
Executive Compensation Practices
What is CSX’s executive compensation philosophy?
The Committee believes that a strong, dedicated and engaged executive leadership team is essential to driving performance and delivering shareholder value. Accordingly, the Committee has designed the executive compensation program to motivate and reward the executive leadership team and align their compensation with the short- and long-term performance of the Company. In designing the Company’s compensation program, the Committee considers shareholder input through the annual say-on-pay vote, and believes that the positive 2015 vote (95.7% of votes cast voted for our say-on-pay proposal) validates the Company’s compensation philosophy.
The compensation program at CSX is premised on the following two key principles:
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balanced, performance-based compensation is essential to enhancing shareholder value; and
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the total executive compensation opportunity, including benefits, should be competitive with reasonable market practices.
These key principles help ensure that the Company’s executives are properly compensated and focused on specific performance factors that measure progress against the Company’s strategic business goals.
What are the specific objectives of the Company’s executive compensation program?
The executive compensation program is structured to achieve the following objectives:
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Attract and retain high-performing talent. Utilize competitive compensation and benefits programs to attract and retain talented, motivated, high-performing executives with specific skill sets and relevant experience.
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Drive business and financial performance. Inspire leaders to achieve or exceed annual business goals.
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Focus on long-term success. Mitigate risk and hold leaders accountable for long-term results that provide strong returns for shareholders over time.
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Align ownership interests with shareholders. Require that a significant portion of overall compensation be performance-based equity to align the long-term interests of executives with those of CSX’s shareholders.
What is the role of the Compensation Committee?
The Committee oversees the development and approval of the Company’s compensation philosophy, strategy and design. The Committee strives to incent and reward performance through compensation plans that appropriately balance risks and incentives while taking into account independent data and changing market practices. In assessing performance of the NEOs in connection with incentive compensation payouts, the Committee conducts a detailed review of strategic goals that consider enterprise-wide risk assessments.
In establishing individual executive compensation opportunities and awarding actual payouts, the Committee considers analyses and recommendations from its independent compensation consultant, comparative job responsibilities, competitive practices and the CEO’s recommendations (for senior executives other than himself). In determining opportunities and payouts, the Committee does not rely solely on guidelines, formulas or short-term changes in business performance. Key factors affecting the Committee’s determinations include:
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the nature, scope and level of the executive’s responsibilities internally relative to other executives, and externally based on market comparisons;
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performance compared to the specific goals and objectives determined for CSX and for the individual executive at the beginning of the year;
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the executive’s contribution to CSX’s financial results;
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the executive’s contribution to CSX’s safety performance;
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the executive’s effectiveness in leading CSX’s initiatives to improve customer service, productivity, and employee development and engagement; and
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the executive’s contribution to CSX’s corporate responsibility efforts, including the executive’s success in creating a culture of unyielding integrity and compliance with applicable laws and CSX’s ethics policies.
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COMPENSATION DISCUSSION AND ANALYSIS
What is the role of the independent compensation consultant?
Pursuant to its charter, the Committee has sole authority to select, retain and terminate any consultant used to assist the Committee in fulfilling its duties, including the authority to approve or ratify payments and other retention terms to any consultant.
The Committee has retained an independent compensation consultant, Meridian Compensation Partners, LLC (the “Consultant”), to provide objective analyses and to assist in the development and evaluation of the Company’s compensation programs. The Consultant reports directly to the Chairperson of the Committee and performs no other work for the Company. The Consultant generally attends all meetings where the Committee evaluates the overall effectiveness of the executive compensation programs or where the Committee analyzes or approves executive compensation. The Consultant is paid on an hourly fee basis, with such hourly rates approved by the Committee annually.
The Committee reviews the performance and independence of the Consultant on an annual basis, at which time they make a determination as to the renewal of the Consultant’s annual engagement. Each year, the Committee considers all appropriate information relating to the independence of the Consultant and its professionals involved in the work performed for, and advice provided to, the Committee. In 2015, the Committee determined that: (i) the relationships and work of the Consultant and its professionals did not present any conflict of interest; and (ii) the Consultant and its professionals are independent for the purpose of providing advice to the Committee with respect to matters relating to the compensation of the executives and directors of the Company.
In 2015, the Consultant’s duties and responsibilities included:
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assisting in the development of a peer group of companies for comparison purposes;
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analyzing competitive practices, financial information, stock price and other performance data;
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assessing compensation plan design in the context of the Company’s strategic business needs and shareholder impact;
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reviewing performance targets for the Company’s short-term and long-term incentive plans;
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providing regular updates to the Committee with respect to current trends and developments in legislative and regulatory activity, compensation program design and governance;
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consulting with the Committee Chair to plan and prioritize Committee agenda items; and
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providing the Committee with an independence letter each year in a form approved by the Committee Chair.
The performance of the Consultant’s duties in 2015 required an understanding of relevant Company practices, critical business issues, human resource considerations, strategic initiatives, financial plans and actual results, performance drivers and cultural factors.
What is the role of the CEO in compensation decisions?
Mr. Ward reviews compensation benchmark data for members of his senior executive team, which includes: President, Executive Vice President and CFO; Executive Vice President and COO; Executive Vice President and Chief Sales and Marketing Officer; Executive Vice President, General Counsel and Corporate Secretary; and Executive Vice President and Chief Administrative Officer (together with Mr. Ward, the “Executive Team”). Using this data, he considers information on executive performance and scope of responsibility and makes individual compensation recommendations to the Committee for each Executive Team member. These recommendations include: (i) possible salary adjustments, which are generally considered every other year; (ii) adjustments to the annual incentive compensation payout for Executive Team members based on individual performance during the previous year; and (iii) annual and long-term incentive awards.
Mr. Ward also provides input on targets for performance-based compensation plans but does not participate in the formal determination of such targets. He does not make recommendations with respect to his own compensation, nor is he present when the Committee discusses his individual compensation.
What is the Company’s process for evaluating risk in connection with its compensation programs?
The Committee believes appropriately structured compensation plans should take into consideration enterprise risks and discourage behavior that leads to inappropriate increases in the Company’s overall risk profile. Accordingly, management, the Committee and the Consultant routinely review the Company’s enterprise risks and compensation plan design to consider whether the plans motivate the appropriate levels of risk and mitigate unnecessary or excessive risk-taking.
On an annual basis, management prepares a risk assessment that focuses primarily on the structure, key features and risk mitigating factors included in the Company’s cash and stock incentive compensation programs. This risk assessment: (i) describes the process for establishing the Company’s compensation programs; (ii) reviews the risks and mitigating factors present in the Company’s compensation plans; (iii) analyzes the relationship between the compensation programs and the Company’s enterprise risks identified through the Company’s business risk mitigation process; and (iv) when appropriate, provides recommendations for potential enhancements to further mitigate compensation risks.
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COMPENSATION DISCUSSION AND ANALYSIS
The risk assessment helps the Committee evaluate: (i) the nature of the risks inherent in the Company’s compensation programs; and (ii) whether the Company has designed and implemented appropriate risk management processes that foster a culture of risk-awareness.
How does the executive compensation program mitigate excessive risk taking?
The Committee believes the following elements of the Company’s executive compensation program serve to mitigate risk:
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executive compensation appropriately balances between (i) fixed and variable compensation, and (ii) short- and long-term compensation;
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significant weighting towards long-term incentive compensation discourages short-term risk taking;
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rolling multi-year performance periods for the long-term incentive compensation program discourages short-term risk-taking;
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performance measures for short- and long-term incentive awards apply to all eligible executives and employees alike, regardless of business unit;
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performance measures for short- and long-term incentive awards align with the Company’s strategic operating plan and focus on Operating Income, Operating Ratio, ROA, safety, customer service, operating efficiency and other strategic goals;
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short- and long-term incentive compensation clawback provisions require repayment of awards in certain circumstances;
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financial performance measures have a high correlation to long-term shareholder value creation;
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the use of multiple financial performance measures in the long-term incentive plan that are calculated on an average and cumulative basis provides a balanced approach associated with reduced risk;
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short- and long-term incentive awards include maximum payout caps;
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the Committee may apply downward discretion to reduce incentive compensation payouts for Executive Team members;
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strict internal controls over the measurement and calculation of performance measures protect against manipulation by employees; and
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minimum three-year vesting periods and share ownership guidelines reinforce alignment of executive and shareholder interests.
The Company’s executive compensation program is designed to reward consistent performance by heavily weighting the NEO’s compensation to long-term incentives that reward sustainable financial and operating performance. Moreover, the Committee believes that the Company’s approach to goal setting, establishment of targets with payouts at differing levels of performance and evaluation of performance results serve to mitigate excessive risk-taking that could negatively impact shareholder value or reward poor judgment or execution by executives.
How does CSX benchmark its competitive pay practices?
The Committee regularly evaluates competitive compensation data including information from peer railroad companies and general industry companies. Data sources include third-party surveys of general U.S. companies and proxy disclosures of other major U.S. railroads.
The Company benchmarks targeted and actual payout data for the NEOs, including base salary and short- and long-term incentives with that of similar positions at peer railroads and general industry companies. For purposes of reviewing targeted compensation amounts for the NEOs, the Committee reviews market data at the 25th, 50th and 75th percentiles of comparator group compensation. When making compensation decisions, the Committee considers this market data, the scope of the individual’s responsibilities and performance, as well as other factors previously discussed in this CD&A.
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COMPENSATION DISCUSSION AND ANALYSIS
For 2015, the Company used a customized comparison group comprised of 15 primarily U.S.-based companies (the “Comparator Group”) to help determine compensation levels and mix. The Committee annually assesses and approves the Comparator Group to ensure that it reflects market characteristics comparable to those of the Company, including revenue, assets, net income, market capitalization, number of employees, industry type and business complexity. The Company believes the use of the Comparator Group over the larger general industry group allows for a more refined analysis of various compensation components. For 2015, the Comparator Group was comprised of the following companies:
| | | | | | | | | | | | Market Capitalization(2)
(in millions) | | | | | Union Pacific Railroad Co. | | | | Union Pacific Railroad Co. | | | | | | | | | | | | Canadian National Railway Co. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Air Products & Chemicals Inc. | | | | | | | | | | | | | | | | | | | | Canadian National Railway Co. | | | | Norfolk Southern Corporation | | | | | | | | | | | | | | | | Canadian Pacific Railway Ltd. | | | | Norfolk Southern Corporation | | | | | | | | Air Products & Chemicals Inc. | | | | | | | | | | | | | | | | Canadian Pacific Railway Ltd. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| n | Engage and reward employees for extraordinary results that will maximize shareholder value; | | | Reinforce a pay-for-performance culture with a significant portion of fiscal year-end 2015.total compensation at risk; and | | | Align NEO interests with those of December 31, 2015.shareholders with a focus on generating sustainable performance over a multi-year period. |
What are the elements of the Company’s executive compensation program?
The various components of the Company’s compensation program include base salary and short- and long-term incentive compensation (“Total Direct Compensation”). The Company also provides retirement and other employee benefits, nonqualified deferred compensation plans and limited perquisites (“Indirect Compensation”).
The Committee makes its decisions concerning the specific compensation elements and total compensation paid or awarded to the Company’s NEOs within the framework described below and after consultation with the Consultant. The objective is to provide total pay opportunities that are competitive with those provided by peer companies in the railroad industry and general industry, with actual payment dependent upon Company and individual performance. The Committee bases its specific decisions and judgments on whether each award or payment provides an appropriate incentive and reward for individual performance that is consistent with the Company’s compensation objectives. The Committee also periodically reviews the competitiveness of indirect pay.
Were there any adjustments to NEO compensation in 2015?
Yes. As a result of the management changes that occurred in September, four NEOs received compensation adjustments to recognize new roles and responsibilities. In conjunction with Mr. Gooden’s promotion to President, his base salary was increased by 7.6% to $700,000. Additionally, his short-term incentive opportunity was increased from 90% to 100% of base salary and his long-term incentive compensation was increased to $2.5 million beginning in 2016. Mr. Eliasson’s base salary was increased by 9% to $600,000 to recognize his new role as Executive Vice President and Chief Sales and Marketing Officer. His short- and long-term incentive opportunity levels did not change. Mr. Lonegro’s compensation was also increased as a result of his promotion to Executive Vice President and Chief Financial Officer. He received a base salary increase to $500,000, an increase in his short-term incentive opportunity level to 90% of base salary and an increase in his target long-term incentive opportunity to $1.5 million.
As a result of her promotion to Executive Vice President – Operations in February, Ms. Sanborn received an increase in her base salary to $500,000, an increase in her short-term incentive opportunity level to 90% of base salary and an increase to her target long-term incentive opportunity to $1.5 million. In connection with her subsequent promotion to Executive Vice President and Chief Operating Officer in September, Ms. Sanborn’s base salary was increased by 10% to $550,000. She
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COMPENSATION DISCUSSION AND ANALYSIS
will be eligible to receive long-term equity incentive awards with a targeted value of $2.0 million beginning in 2016.
The increased base salaries and short-term incentive opportunities described above were pro-rated based on the amount of time they held each position. With respect to the 2013-2015 and 2014-2016 long-term incentive plan cycles, Messrs. Gooden and Lonegro and Ms. Sanborn were eligible to receive a pro-rated number of performance units in accordance with the Plans.
What is the target compensation mix for the CEO and other NEOs?
The Company’s compensation philosophy requires that a substantial portion of total compensation should be at-risk and consist of performance-based incentives that link to CSX’s financial and strategic results. In addition, the Committee strives to strike an appropriate balance between short- and long-term compensation. The mix between fixed and variable (performance-based) compensation and short- and long-term compensation is designed to align the NEOs’ financial incentives with shareholder interests. In 2015, approximately 70% of the CEO’s targeted Total Direct Compensation and an average of 64% of the other NEOs’ targeted Total Direct Compensation was at-risk. The at-risk component of executive compensation means that if the Company did not meet or exceed the pre-established threshold financial performance levels, the executive would not receive a payout under the applicable short- or long-term incentive plan.
The chart below illustrates the amount of target Total Direct Compensation, including compensation that is at-risk, for the CEO and the other NEOs. Actual percentages of Realized Pay may vary in a given year depending on the payouts under the incentive compensation programs.
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COMPENSATION DISCUSSION AND ANALYSIS
How is base salary determined?
The Committee determines a salary for each NEO based on its assessment of the individual’s experience, responsibilities, performance and contribution to CSX. For purposes of recruiting and retention, base salaries are determined following a review of salary data for similar positions within the Comparator Group. Base salary may represent a larger or smaller percentage of Total Direct Compensation if actual performance under the incentive plans discussed below exceeds or falls short of performance targets.
Short-Term Incentive Compensation
How is short-term incentive compensation determined?
Short-term incentive compensation is designed to reward executives and other members of management for improving performance within a 12-month period. The Senior Executive Incentive Plan (“SEIP”) is the Company’s vehicle for providing annual incentive opportunities for the NEOs covered under Section 162(m). The Company’s objective is for payments made pursuant to the SEIP to be covered under Section 162(m) of the Internal Revenue Code (“Code”), although there can be no assurance that such payments will be deductible under Section 162(m) of the Code. Under this shareholder-approved plan, the maximum amount payable is equal to the lesser of: (i) 0.3% of operating income for the CEO and 0.2% of operating income for each other NEO covered under Section 162(m); or (ii) $3 million. The Committee may adjust this amount downward in its sole discretion.
In 2015, the Committee exercised its downward discretion with respect to the NEOs covered under Section 162(m) by utilizing the same methodology and performance achievement used under the Company’s Management Incentive Compensation Plan (“MICP”). The MICP is the Company’s annual incentive plan for eligible employees other than the NEOs covered under Section 162(m). The MICP is 100% performance-based and requires attainment of both financial and strategic objectives. No payout is made under the MICP unless a pre-set Operating Income level is achieved, regardless of achievement of strategic goals. Applying the methodology utilized under the MICP, each NEO has an incentive opportunity expressed as a percent of base salary earned during the year (“Target Incentive Opportunity”). In 2015, the Target Incentive Opportunity levels for the NEOs that were promoted were adjusted as follows: Ms. Sanborn’s target incentive opportunity increased from 80% to 90%, Mr. Gooden’s incentive opportunity increased from 90% to 100% and Mr. Lonegro’s incentive opportunity increased from 70% to 90%. The payouts were prorated to reflect the number of months at each salary and Target Incentive Opportunity level. The incentive opportunity levels for Messrs. Ward and Eliasson and Ms. Fitzsimmons remained unchanged at 120%, 90% and 80%, respectively. The actual payout is adjusted to reflect Company and individual performance.
The Committee reviews the Company’s performance against the preapproved performanceThese goals for the year. The performance goals are divided between: (i) the financial measurement—Operating Income—which is based upon the Company’s business plan and can result in a payment between 0% and 120% of the NEO’s Target Incentive Opportunity; and (ii) the strategic measurements that can result in a payment between 0% and 40% of the NEO’s Target Incentive Opportunity. Therefore, the actual payout can range between 0% and 160% of the NEO’s Target Incentive Opportunity.
The MICP Operating Income target for 2015 was set at $3.85 billion based on the Company’s business plan. Achievement of this Operating Income target would have produced a payout of 60% under the financial component. Depending on the level of achievement on the strategic component, which has a maximum payout of 40%, the total payout at the target performance range could have ranged from 60% to 100% of the Target Incentive Opportunity.
| | | | 2015 MICP Achievement (Payout) Percentages
| | | | | | | | | Target - 2015 Business Plan - $3.85B
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The 2015 MICP included strategic goals in the following categories: (i) safety; (ii) service excellence; (iii) profitable growth; (iv) resource utilization; (v) risk management; and (vi) value pricing. These categories were selected to ensure that senior executives balance financial goals with key operating and business initiatives that impact employees, customers, communities and shareholders. There is no formal or informal weighting assigned to the individual goals or categories, and the Committee considers strategic results based on a subjective evaluation.
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COMPENSATION DISCUSSION AND ANALYSIS
2015 MICP Strategic Performance Goals
| | | | | | | Maintain FRA Personal Injury Frequency Index
| | | | | Reduce FRA Train Accident Frequency Index
| | | | | Reduce severe injuries as measured by Life Changing Index (LCI)
| | | | | Advance Service Excellence
| | | | Improve Customer Satisfaction Score
| | | | | | Core Intermodal Availability
| | | | | Committed Time of Arrival (CTA) – Merchandise
| | | | | Service Rail Car Availability – Auto
| | | | | Local Service Measurement (LSM) Carload
| | | | | | | | | | | | | | Achieve Intermodal “Same Store Sales” price
| | | | | Increase shipments of energy-related products
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COMPENSATION DISCUSSION AND ANALYSIS
| | | | Improve Resource Utilization & Engagement
| | | Achieve 10% reduction in management headcount in G&A and Operations support functions through streamlining work and restructuring organization.
Minimize disruption and impact on employee engagement through thoughtful implementation of retirement incentive and planned headcount reductions.
| A 10% reduction in G&A and operations support headcount and costs was realized through the elimination of 294 positions resulting in total annual savings of $72M, ($57M from G&A and $15M from Operations support functions).
The Company was able to minimize the impact of the headcount reductions through the implementation of a voluntary separation incentive program.
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| | | | | Improve Resource Utilization
| | | | Operations net productivity
| | | | | | | | | | | | | Achieve “Same Store Sales” price above rail inflation
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| | | | | | | Advance Railroad Industry
Advance regulatory and legislative policies that encourage competitiveness and safe operations, protect existing markets and encourage growth, and reinforce public and private investment in rail transportation infrastructure.
| Favorable legislation on environmental permitting reform was passed by Congress and signed into law. Economic regulation legislation, passed by Congress and enacted will not harm railroad growth or investment.
Rail safety legislation, included in Surface Transportation Reauthorization bill passed by Congress and signed by the President provides for a three to five year extension of PTC. Provisions allowing heavier trucks on federal highways were defeated and not included in the underlying legislation.
| | | Positive Train Control (“PTC”)
Complete Field Qualification Testing (FQT) on first field test territory, and receive Federal Railroad Administration (“FRA”) approval to begin PTC Revenue Service Demonstration (RSD) on first field test territory.
Complete RSD readiness efforts on 15 total subdivisions, commence PTC RSD operation, and fully equip over 1,000 locomotives.
Progress strategy to support deadline extension, industry interoperability and long-term PTC operations, maintenance and value.
| FQT completed on the Wilmington and Aberdeen subdivisions. FRA approved RSD request for eight subdivisions.
RSD readiness completed on 15 subdivisions. RSD operation has commenced on four subdivisions. Locomotive installations finished slightly lower than planned given emphasis on improved service and recent closure of Erwin and Corbin locomotive facilities.
The House and Senate passed a three-year PTC extension with an option for two additional years. President signed bill into law on October 29, 2015. CSX led the extension advocacy efforts and continues to lead industry interoperability efforts.
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COMPENSATION DISCUSSION AND ANALYSIS
What was the payout under the 2015 MICP?
The Company achieved a 2015 Operating Income of $3.584 billion that, pursuant to the terms of the 2015 MICP, was adjusted to exclude $47 million of non-recurring expenses. This Operating Income performance resulted in a 23% payout for the financial component of the 2015 MICP. Based on performance against the strategic goals, the Committee approved a payout of 37% on the strategic component. Thus, the payout levels for the financial and strategic components, when combined, resulted in a total overall payout of 60% of target incentive opportunities. In accordance with the Company’s performance management program, actual MICP award payouts were adjusted upward or downward from the 60% based on individual performance.
What was the 2015 short-term incentive compensation payout for the NEOs?
Similar to how management assesses the performance of all eligible employees, the Committee annually assesses the individual performance of each NEO and determines payout amounts, which are reported in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table. As in prior years, the payouts for the NEOs were calculated pursuant to the methodology applied to the MICP and, therefore, were substantially less than the maximum available to each individual under the SEIP. Consistent with MICP practices, awards for the NEOs may vary based on individual performance. However, no such adjustments were made for the NEOs for 2015. Accordingly, the Committee approved an annual incentive compensation payout for each of the NEOs at 60% of target. For Mr. Ward, this produced a payout of $864,000, as reflected in the Summary Compensation Table along with the amounts for all other NEOs. Mr. Munoz’s payout was reduced to zero to reflect the fact that he did not complete the full year.
How does the 2015 payout compare to prior year payouts?
The chart below illustrates the Company’s historical Operating Income and the percentage payout under the MICP since 2011.
| | | | | | | | | | | | | | | | | | | | | | | Operating Income (Target) (amounts in billions) | | | | | | | | | | | | | | | | Operating Income (Actual)(1) (amounts in billions) | | | | | | | | | | | | | | | | Overall Payout (as a percentage of target incentive opportunity) | | | | | | | | | | | | | | | |
| | | Actual results reflect Operating Income at time of payout approval and do not reflect the revenue-related accounting adjustments disclosed in the Company’s Form 10-K for 2013. The adjusted Operating Income for 2011 and 2012, as disclosed in the Company’s Form 10-K for 2013, was $3.470 billion and $3.464 billion, respectively. MICP payouts were not impacted by the adjustments.
| | For 2015, the overall payment was based on 2015 adjusted Operating Income of $3.631 billion, which excludes $47 million of non-recurring expenses pursuant to the terms of the plan.
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Has the short-term incentive plan been effective in driving Company performance?
The Committee believes that the short-term incentive opportunities provided to the NEOs help drive the Company’s annual performance. From 2011 to 2015, Operating Income improved from $3.418 billion to $3.584 billion despite an approximate $1.4 billion decrease in coal revenue during that time period. This improvement has been driven by initiatives focusing on asset utilization, productivity and yield management. The Committee believes that sustained improvements in Operating Income will continue to play a critical role in the creation of shareholder value.
Long-Term Incentive Compensation
Long-term incentive compensation is intended to incent employee behavior that supports strategic initiatives to drive shareholder value over a multi-year period. This is accomplished by providing equity-based incentives basedfocused on financial performance measures that: (i) have had a historically high correlation to shareholder returns; (ii) are within management’s direct control; and (iii) encourage long-term commitment and perspective.
to delivering shareholder value. Long-term incentives arehave been granted under the shareholder-approved 2010 CSX Stock and Incentive Award Plan (the “2010 Stock Plan”) and 2019 Stock and Incentive Award Plan (the “2019 Stock Plan” and together with the 2010 Stock Plan, the “Stock Plan”Plans”). The Stock Plan allows multiple and varyingPlans allow for different types of equity-based awards and provides flexibilityprovide flexibility in compensation design. Award types can include restricted stock, RSUs,design to attract, retain and engage high-performing executives. The Committee determines the mix of equity vehicles annually to ensure alignment with market practice, motivate appropriate long-term results-driven behaviors, and align Company and NEO performance shares, performance units, stock optionsto shareholder interests and stock appreciation rights. How is the LTIP structured?
New LTIP cycles are approved each year when the Committee grants performance units to participants. These grants are made following annual Board review of the Company’s business plan for the applicable upcoming three-year period, upon which the performance targets are set. Each LTIP cycle is designed to emphasize performance while aligning executives’ interests with those of shareholders by linking the payout’smaximize value to share price. The three-year performance cycles run concurrently, so the Company can have up to three active cycles during a given year. The 2013-2015 cycle closed on December 25, 2015. The 2014-2016, 2015-2017 and the 2016-2018 cycles remain in progress.creation.
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COMPENSATION DISCUSSION AND ANALYSIS
Elements of Long-Term Incentive Compensation The Long-Term Incentive Plan (“LTIP”) provides a significant portion of the NEOs’ compensation. Each year, a market competitive long-term incentive target grant value (in dollars) is identifieddetermined by the Committee for each position levelNEO, as part of the Committee’s annual review process, based on factors described above and converted into the appropriate value of equity awards. The awards have generally consisted of performance units and non-qualified stock options. The number of performance units is determined based on the award value divided by the average closing value of CSX common stock for the full three-month period prior to the grant. ActualThe number of non-qualified stock options is determined based on the award value divided by the Black-Scholes value for that same period. The grants associated with each three-year cycle are reviewed and approved by the Committee each year for the NEOs and other eligible participants. These grants are made and the performance targets set following the annual Board review of the Company’s business plan for the applicable upcoming three-year period. For 2020, as part of its review process, the Committee increased the incentive target value for Mr. Foote to $11 million and for Messrs. Boone, Boychuk and Wallace to $2.5 million. Each LTIP grant was comprised of performance units and non-qualified stock options awards, which were designed to drive long-term value and growth through the achievement of Company performance goals and increased stock prices. Since the three-year performance cycles run concurrently, the Company may have up to three active cycles during a given year. For example, the 2018-2020 performance cycle closed on December 31, 2020, and was paid out in January 2021. The 2019-2021, 2020-2022 and 2021-2023 cycles remain in progress, which help ensure that our employees remain focused on sustainable long-term performance. Although the goals established under each of the outstanding LTIP cycles have been adversely affected by the impacts of the pandemic, the Committee chose not to reset goals on any of the in-flight plans. Performance Units. Performance units are granted at the beginning of the applicable performance cycle in accordance with the LTIP, as described below. Awards are paid in the form of CSX common stock at the end of the performance period based on the level of achievement on Company performance goals. Performance units are generally subject to forfeiture if a participant’s employment terminates before the end of the performance cycle for any reason other than death, disability, retirement or other limited circumstances, as approved by the Committee. In such instances, participants generally receive a pro-rata portion of their award based on the number of months completed in the LTIP cycle. Mr. Foote is currently eligible for retirement for purposes of the LTIP and his employment agreement provides that, in connection with his retirement, his outstanding performance units will remain outstanding and eligible to vest based on performance through the end of any outstanding LTIP cycles. Performance unit payouts for each LTIP cycle, if any, do not occur until approved by the Committee in January of the year following the last year inof the three-year performance cycle. These payouts can vary significantly from the target grants in terms of both the number of shares paid out due to financial performance and the market value of CSX common stock at the time of payout. The payout is made in shares with the value of the payout derived by multiplying the number of performance units earned by the share price of CSX common stock at the time of payout. Based on actual performance, as discussed below, the performance unit payouts for the NEOs at the end of the performance cycle can range from 0% to 200% or 0% to 250% of the target grants. The Executive Team’s awardsgrants depending on the cycle, and can be reduced byof lesser or greater value than the original grant value based on the level of achievement on the performance goals and the price of CSX common stock. Non-qualified Stock Options. Non-qualified stock options require stock price appreciation to provide any value to the NEOs. As a result, they reinforce leadership’s focus on the importance of value creation for shareholders. Non-qualified stock options provide participants with the right to buy CSX stock at an agreed-upon price within 10 years of the date of grant. The exercise price of the non-qualified stock options is established as much as 30% based upon the Committee’s assessmentclosing stock price on the date of total shareholder return relative to three different indices duringgrant. The Stock Plans prohibit the cycle. Dividend equivalents are not paid on performance units forrepricing of outstanding non-qualified stock options without the approval of shareholders. For outstanding LTIP cycles. Performance unitscycles, non-qualified stock options are subject to forfeiture if a participant’s employment terminates before the end of the performance cyclevesting period for any reason other than death, disability, retirement or retirement. If employment terminates due to death, disability or retirement,other limited circumstances, as approved by the Committee. In such instances, participants receive a pro-rata portion of the award based on the number of months completed in the LTIP cycle. The employment agreement for Mr. Foote provides that, in connection with his retirement, the full awards will continue to vest in accordance with their terms.
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COMPENSATION DISCUSSION AND ANALYSIS Performance Measures for the 2013-20152018-2020 LTIP cycle?
For performance units granted under the 2018-2020 LTIP cycle, final year operating ratio and cumulative free cash flow were selected and were equally weighted to measure the Company’s performance. Operating Ratio and ROA served as the performance measures for the 2013-2015 LTIP cycle. The Committee chose Operating Ratio due to itsratio has a historically high correlation to Companythe Company’s stock price alignment with shareholder valueand serves as a key financial performance measure for CSX and the abilityrailroad industry. As such, the use of employees to understand the impact of their actions in relation to Company performance. It also motivates employees to support service improvements. The Committee chose ROA because it serves as an indicatoroperating ratio has strengthened participants’ understanding of how efficientlythey can impact Company assets are being utilized. Operating Ratio is defined asperformance and drive operating expense divided byefficiency. Long-term improvements in operating revenue adjusted by excluding non-recurring items that are disclosed in the Company’s financial statements. ROA is calculated using tax-adjustedratio have increased operating income excluding non-recurring itemsand earnings, and created value for shareholders. Free cash flow was chosen as disclosed ina performance measure as it is a key measure of the Company’s financial statements, divided by net property. The tax-adjusted operating income usesfinancial health of the business and has a flat 38% tax ratehigh correlation to eliminate volatility of one-time tax issues. Net property is calculated by subtracting accumulated depreciation from gross property.shareholder returns and aligns with CSX’s financial business plan. Operating Ratioratio and ROAfree cash flow were each comprisedweighted 50% of the total payout opportunity for participants, and each waswere measured independently of the other.
| | | Operating Ratio =
 | | | | | Tax-Adjusted Operating Income
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The threshold, target and maximum payouts for each measure are 10%, 50% and 100%, of the performance units subject to the award respectively, generating a total target payout of 100% of the performance units and a maximum possible payout of 200% of the performance units for the 2013-20152018-2020 LTIP. The 2018-2020 LTIP cycle. While plans prior to 2013 measured Operating Ratio in the finalfinal year of the LTIP cycle, the 2013-2015 LTIP cycle measuredoperating ratio and cumulative Operating Ratio and average ROAfree cash flow over an 11-quartera 12-quarter period from April 2013 toJanuary 2018 through December 2015. The first quarter of 2013 was not included in the performance period due to timing of approval of the LTIP cycle.2020. In addition to Operating Ratiooperating ratio and ROA,free cash flow, the Committee maintainsperformance units for this LTIP cycle had a formulaic linear upward or downward discretion on the payouts for Executive Team members based on relative total shareholder return (“Relative TSR”). If modifier of up to 25% (subject to the 200% overall cap) based on CSX’s 2013-2015 Relative TSRstock price performance compared to the peer group (weighted 80% core peers and 20% additional correlated companies) for the 12-quarter period from January 2018 through December 2020. The Committee recognizes that operating ratio is a measure in the bottom quartile of anyshort and long-term plans, but believes inclusion in both plans reflects the criticality of the comparison groupsalignment between operating ratio and the Company’s focus on operating efficiency. The Committee does not believe this overlap will create inappropriate risk-taking since the measurement periods are different (one vs. three years), and operational measures and reviews are in place to monitor risk. The Committee annually reviews the measures used for each long-term incentive cycle, and makes changes as appropriate. Financial Goals for the 11-quarter period, the Committee may exercise up to 30% downward discretion on the payout to Executive Team members. The Committee evaluated Relative TSR performance against the S&P 500, S&P 500 Transportation Industry and peer railroads, and the Company's Relative TSR was not in the bottom quartile of any of the comparison groups for the cycle. Accordingly, no downward discretion was applied.2018-2020 LTIP What were the financial goals for the 2013-2015 LTIP cycle?
The LTIP targets for the 2013-2015performance units granted under the 2018-2020 LTIP cycle were set to provide incentives to continue growingincentivize long-term shareholder value. Under the 2013-2015 LTIP cycle: (i) a cumulative Operating Ratio of 72.6% was needed to achieve a threshold payout; (ii) a cumulative Operating Ratio of 71.1% was needed to achieve a target payout; and (iii) a cumulative Operating Ratio of 69.6% was needed to achieve a maximum payout.These performance levelsvalue creation. The goals were subject to adjustmentset in February 2018 based on the price per gallonthree-year business plan at the time of highway diesel fuel,its adoption. The targets under the 2018-2020 LTIP were as discussed below. For ROA, the threshold, target and maximum payout goals were set at 7.69%, 8.25% and 8.78%, respectively.follows: Back to Contents
COMPENSATION DISCUSSION AND ANALYSIS
| Final Year Operating Ratio (100% maximum payout) | | Cumulative Free Cash Flow (100% maximum payout) | | Threshold | | Target | | Maximum | | Threshold | | Target | | Maximum | | (10% payout) | | (50% payout) | | (100% payout) | | (10% payout) | | (50% payout) | | (100% payout) | | | | | | | | | | | | | | | | | | | | | | | | | | 62.8% | | 61.8% | | 59.8% | | $8,000M | | $8,150M | | $8,500M |
How are the performance levels adjusted for the price of fuel?
At the time of adoption of the 2013-20152018-2020 LTIP cycle,was approved by the Committee, a provision was made for the adjustment of the Operating Ratiooperating ratio performance goals by a pre-determined amount if the average cost of highway diesel fuel was outside the range of $3.67$2.75 - $4.17$3.25 per gallon. This potential adjustment is included indesigned to mitigate the plan design for each LTIP cycle due to the significantpositive and negative impact volatile fuel prices may have on expenses and Operating Ratio. Basedoperating ratio. Pursuant to the terms of the 2018-2020 LTIP, the final year operating ratio targets were adjusted based on thean average price per gallon of highway diesel fuel duringof $2.57, which fell below the 2013-2015 cycle,range of $2.75 – $3.25 per gallon. This adjustment made the adjusted threshold,operating ratio target and maximum payout targets were 72.0%, 70.5% and 69.0%, respectively.more difficult to achieve. What was the actual payoutTable of Contents
COMPENSATION DISCUSSION AND ANALYSIS Payout for the 2013-20152018-2020 LTIP cycle?
Performance UnitsBased on thea final year operating ratio of 58.8% and a cumulative Operating Ratiofree cash flow of 70.8% and an average ROA of 7.86%$9.3 billion for the cycle, the payout for the 2013-2015performance units, which comprised 60% of 2018-2020 LTIP, was 200% of target. The Company’s Relative TSR performance against the peer group was in the top quartile for the cycle, providing an upward modifier of 125%, but the maximum payout for the 2018-2020 LTIP was capped at 200% so no upward adjustment was applied.  Performance Measures for the Outstanding LTIPs In determining the performance measures for the performance units for each LTIP cycle, the Committee: (i) considers information on various return-based measures; and (ii) actively monitors the effectiveness of existing measures in driving the Company’s strategic business objectives and delivering shareholder returns. For performance units, the 2019-2021 LTIP uses operating ratio and free cash flow on an equally weighted basis to measure the Company’s performance and the 2020-2022 LTIP uses operating income and free cash flow on an equally weighted basis to measure the Company’s performance. One of the metrics was 64%. What typeschanged for the 2021-2023 LTIP to address some of long-term incentive compensation were grantedthe impacts of the economic uncertainty brought about by the COVID-19 pandemic. The 2021-2023 LTIP uses the average annual operating income growth rate and free cash flow on an equally weighted basis, as the performance measures for the performance units. The average annual operating income growth rate measure aligns with the Company’s objective of profitable growth and provides the ability to the NEOs in 2015?
In 2015, the Company continued to provide long-term incentivesrecover and potentially receive a payout in the formevent of bothan economic downturn in one year of the program.
The 2019-2021 and 2020-2022 LTIPs are comprised of performance units and RSUs in order to provide a stablenon-qualified stock options for the NEOs, and balanced long-term incentive portfolio and maintain a strong link to shareholder value. This was achieved by determining a market competitive long-term incentive grant value and allocating 75%the 2021-2023 LTIP is comprised of such value to performance units, non-qualified stock options and 25% to time-based RSUs. This approach partially offsets market volatility and other external factors by sustaining a level of value while simultaneously preserving an incentive to meet performance goals. Performance units are granted at the beginning of the period known as the performance cycle in accordance with the Company’s LTIP. Awards are paid in the form of CSX commonrestricted stock at the end of the period based on attainment of pre-established performance goals.
RSUs represent a promise to issue shares of common stock if a participant remains employed by the Company for a defined period of time referred to as the restriction period. RSUs granted in 2015 vest three years after the date of grant. Participants receive cash dividend equivalents on the unvested shares during the restriction period. Unlike performance units, RSUs are not subject to any performance requirements. RSUs are subject to forfeiture if employment terminates before the end of the restriction period for any reason other than death, disability or retirement. If employment terminates due to death or disability, the award fully vests and the shares are distributed to the participant or the participant’s estate. Upon retirement, the participant receives a pro-rata award based on the number of months completed in the restriction period.
In determining the number of units to be granted under each long-term incentive vehicle, the target award value is divided by the average of CSX’s stock price during the three full months prior to the grant date is used, rather than the stock price on the date of grant. Using the three-month average reduces the impact of daily fluctuations in stock price.
How many performance units and RSUs were granted to the NEOs in 2015?
After establishing the market-competitive, annual long-term incentive award value (in dollars) for each NEO, the dollar value was then converted into aunits. The number of performance units and RSUsrestricted stock units awarded to each NEO is calculated based on a specific grant value divided by the average closing price of CSX common stock for November 2014, December 2014 and January 2015, which was $35.61.
the full three-month period prior to the grant. The table below indicates the number of options awarded is calculated based on the Black-Scholes value for the same period. For the 2019-2021 LTIP, the Committee approved a market competitive LTIP grant value for the NEOs allocating 60% of the value to performance units, granted underand 40% for non-qualified stock options. The allocation for the 2013-20152020-2022 LTIP cyclewas 50% performance units and 50% for non-qualified stock options. Due to continued uncertainty of the numbermacroeconomic environment in light of RSUs grantedthe COVID-19 pandemic, for the 2021-2023 LTIP, the Committee determined that a more stable equity vehicle was appropriate and approved the inclusion of restricted stock units (“RSUs”) for a portion of the LTIP. For the 2021-2023 LTIP, the allocation was 50% performance units, 25% non-qualified stock option and 25% RSUs. The performance units for these three LTIP cycles have a formulaic linear upward or downward Relative TSR modifier of up to each25% with a maximum payout of 250%, which applies only to the CEO and Executive Vice Presidents, which includes all NEOs. This modifier is designed to appropriately align NEO on February 11, 2015.payouts with share price performance relative to a transportation-related peer group. | | | | | | | | | | | | | | | 2015 Long-Term
Incentive Value | 2015-2017
Performance Units
(75% of Value) | | Total Performance
Units and RSUs | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| Mr. Lonegro’s long-term incentives were granted prior to his promotion to Executive Vice President and Chief Financial Officer.
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CSX Corporation45Table of Contents
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COMPENSATION DISCUSSION AND ANALYSIS
Does
Clawback Provision Payouts made under the MICP and LTIPs are subject to recovery or clawback in certain circumstances. Under such clawback provisions, an employee who has received a payout will be required to promptly return the monies (or any portion of the monies requested by the Company) in each of the following circumstances: (i) if it is determined that the employee engaged in misconduct, including but not limited to, dishonesty, fraud (including reporting inaccurate financial information), theft, or other serious misconduct as determined by the Company, (ii) if the Company is required to file an accounting restatement due to the Company’s material noncompliance with any financial reporting requirements under the federal securities laws, or (iii) if the payout is otherwise required to be recovered by law or court order (i.e. garnishment). Employment Agreements Mr. Foote entered into an employment agreement upon his hiring as Executive Vice President and Chief Operating Officer in October 2017, which was superseded by an employment letter agreement entered into upon his promotion to President and CEO in December 2017. This agreement incorporated certain provisions from his prior agreement relating to: (i) severance benefits; (ii) vesting of long-term incentive awards after retirement; and (iii) employment benefits following a change of control. Mr. Wallace entered into an employment agreement upon his hiring as Executive Vice President in March 2017. This agreement expires on March 29, 2021. No other NEOs have non-competeindividual employment agreements. The individual employment agreements have been filed and clawback provisions?
can be reviewed on the U.S. Securities and Exchange Commission website at www.sec.gov.Yes.
Non-Compete and Non-Solicitation Agreements The Company utilizes non-compete agreementsPresident and clawback provisions in connection with its compensation plans. Vice Presidents and above (“Senior Management”)CEO, executive vice presidents, senior vice presidents, vice presidents, as well as certain other key employees, are required to enter into formal non-compete and non-solicitation agreements with the Company as a condition for participation in each LTIP cycle. The non-compete agreements precludeagreement precludes an employeeexecutive from working for a competitor.competitor of the Company. The non-compete conditions extend for a period of 18 months following separation from employment.
Short-term Incentive Plan. The short-term incentive plan containsnon-solicitation provisions requiring NEOs to repay togenerally prohibit executives from soliciting CSX customers or soliciting, hiring or recruiting CSX employees for any business that competes with CSX for a period of 18 months after separation.
Severance Agreements Mr. Foote is eligible for the following severance benefits under his employment letter agreement with the Company portions of any payment received if: (i) withindated December 22, 2017: | n | Lump sum cash payment equal to two times his base salary plus two times his target MICP; | | n | Pro-rata payment of MICP award; and | | n | Unless he is terminated for cause, his unvested equity awards will remain outstanding and vest per the original vesting schedules, with any performance-based awards remaining subject to satisfaction of pre-established performance goals. |
Mr. Wallace is eligible for the two-year period following the receipt of the payment,severance benefits under his employment agreement with the Company is required to restate its financial statements due to accounting irregularities;dated March 29, 2017: | n | Pro-rata vesting of his unvested equity awards, per the original vesting schedules, with any performance-based awards remaining subject to satisfaction of pre-established performance goals; | | n | Pro-rata payment of MICP award; | | n | Lump sum cash payment equal to two times his base salary plus two times his target MICP; and | | n | Reimbursement for all reasonable relocation costs for moving outside the Jacksonville area to another primary residence in North America if relocation is within one year of termination of employment |
As of December 31, 2020, Messrs. Boone, Boychuk, and (ii) the payment amount received exceeded the otherwise proper payment based on the restated financials. Long-term Incentive Plan. Each LTIP contains provisionsGoldman were eligible for Senior Management that require the repayment to the Company of portions of any award received if, within the two-year period following the receipt of the award, the employee violates certain conditions, including: (i) separation from the Company and working for a competitor in a similar capacity as the participant has functioned during the past five years at the Company; or (ii) engaging in conduct that puts the Company at a competitive disadvantage. In the event the Company is required to restate its financial statements due to accounting irregularities, the clawback also requires that amounts in excess of the otherwise proper award be repaid to the Company.
What types of Retirement and Health and Welfare Benefits are provided to the NEOs?
CSX’s retirement programs consist of two components: a defined benefit pension plan and a 401(k) plan. The retirement programs described below are provided to the NEOsbenefits under the following plans:
•
CSX Pension Plan (the “Pension Plan”);
•
Special Retirement Plan for CSX Corporation and Affiliated Corporations (the “Special Retirement Plan”); and
•
The CSX Corporation 401(k) Plan (“CSXtra Plan”).
The Pension Plan is qualified under the Code and covers CSX’s non-union employees. InCompany’s general pension benefits accrue in two different ways: (i) for employees hired before January 1, 2003, benefits accrue based on a “final average pay” (“FAP”) formula; and (ii) for employees hired on or after January 1, 2003, benefits accrue based on a “cash balance” formula. Further information on the Pension Plan can be found in the discussion following the Pension Benefits Table.
CSX Special Retirement Plan
The Special Retirement Plan is a nonqualified plan and primarily provides benefits that are otherwise limited under the Pension Plan due to the qualified plan Code provisions. Further information on the Special Retirement Plan can be found in the discussion following the Pension Benefits Table.
All CSX non-union employees may contribute to the CSXtra Plan, which is a traditional qualified 401(k) plan. Participants may contribute on a pre-tax basis and receive Company matching contributions. The Company’s matching contribution is equal to 100% on the employee’s first 1% contribution, and 50% on the employee’s additional contributions up to 6% of base salary. Participants may invest contributions in various funds, including the CSX stock fund.
Executive Deferred Compensation Plan:
CSX maintains an elective nonqualified executive deferred compensation plan (“EDCP”) for the benefit of its eligible executives and certain other employees. The purpose of the EDCP is to provide executives with the opportunity to:
•
defer compensation in excess of qualified plan limits until retirement or another specified date or event; and
•
defer compensation to allow them to receive the full Company matching contribution of 3.5% of base salary not otherwiseseverance policy available to them under the 401(k) plan.
The types of compensation eligible for deferral include base salary, short-term (annual) incentive compensation and LTIP awards.
Health and Welfare Benefits:
CSX provides the same health and welfare benefits to the NEOs as those available to eligible management employees. The Company also provides basic life insurance and accidental death and dismemberment (“AD&D”) insurance coverage to all management employees, eachemployees. Under the general severance policy, the NEOs are eligible to receive: (i) severance based on tenure (certain weeks of whichsalary based on CSX years of service); (ii) continuation of medical and dental coverage for up to one year if periodic separation payments are selected; (iii) financial planning for up to one year; and (iv) prorated vesting of certain outstanding incentive awards.
Notwithstanding the foregoing, if an NEO is equalentitled to two times theirseverance benefits under his respective annual salaries. Both life and AD&D benefits were capped at $1,000,000 effective January 1, 2006, butChange-of-Control Agreement, he or she shall not be entitled to the severance benefits outlined above. Severance amounts that would have been payable had the NEOs terminated employment with the Company as of December 31, 2020 are described herein.
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COMPENSATION DISCUSSION AND ANALYSIS
employees who already had coverage in excess of $1,000,000 retained the prior cap of $3,000,000.
Change-of-Control Agreements The Company also provides to the NEOs, on the same basis as other management employees, salary continuance in the event of short-term or long-term disability, travel accident insurance and vacation based on length of service. CSX sponsors a post-retirement health and welfare plan for management employees hired before January 1, 2003. The Company stopped providing post-retirement health and welfare benefits for management employees, including executive officers, hired on or after January 1, 2003, as a cost-saving measure.
Does the Company provide perquisites to its NEOs?
The perquisites provided to NEOs in 2015 included: (i) financial planning services up to $12,000; (ii) excess liability insurance; and (iii) an annual physical examination. These perquisites were valued at approximately $15,000 for each NEO.
Since Mr. Ward became CEO in 2003, he has been required to travel by Company aircraft at all times for security purposes and to ensure efficient use of his time. In 2015, the aggregate incremental cost to the Company of Mr. Ward’s Company-mandated personal aircraft usage was $23,496. The aggregate incremental cost to the Company for personal aircraft usage for each of the other NEOs did not exceed $5,600 in 2015.
Severance and Change-Of-Control Agreements
Is there any special severance plan provided to the NEOs?
With the exceptions discussed in the Post-Termination and Change-of-Control Payments section in the Compensation Tables’ narrative below, the Company does not generally provide for any special termination of employment payments or benefits that favor the NEOs in scope, terms or operation. Payments are generally available to all salaried employees whose positions are eliminated,“double-trigger” change-of-control benefits pursuant to the terms of CSX’s severance plan, which pays benefits based upon years of service. The benefits range from one month of base pay (if one to three years of service has been attained) to one year of base pay (if at least 34 years of service has been attained).
Does the Company provide Change-of-Control Agreements to its NEOs?
Yes. At the end of 2015, each of the NEOs had a Change-of-Control Agreementagreements that wasare designed to ensure management objectivity in the face ofas it makes strategic business decisions. The Company’s policy for severance benefits upon a potential transaction and further promote recruitment and retention of top executives. Since payment ischange-of-control: (i) requires a “double-trigger” (i.e.(i.e., payments are conditioned upon a change-of-control as well as separation from employment), executives are financially protected and thereby properly positioned to negotiate in the best interests of shareholders.
A detailed description of the Change-of-Control Agreements is set forth under the section entitled “Post-Termination and Change-of-Control Payments.”
Are there limits on severance amounts paid to the NEOs pursuant to Change-of-Control Agreements?
Yes. In February of 2011, the Board adopted a policy for severance benefits applicable to all agreements (the “Policy”). The Policy: (i) requires a “double-trigger” to receive severance; (ii) prohibits Company reimbursement for the payment of excise taxes; (iii) definesdefines “bonus” as the current “target” amount; and (iv) requires a contract term not to exceed three years. The Policypolicy also provides that the payment of severance benefits,benefits, without shareholder approval, is limited to 2.99 times base salary plus bonus. The Policy is available onbonus for NEOs.
All NEOs are subject to the Company’s website at http://investors.csx.comterms of the change-of-control agreements described above and as further detailed under the heading “Corporate Governance.section entitled “Post-Termination and Change-of-Control Payments.” All Benefits Retirement Programs CSX’s retirement programs currently consist of two components: a defined contribution 401(k) plan and a now closed defined benefit pension plan. The retirement programs described below are provided to the NEOs’ Change-of-Control Agreements are in compliance with the Policy. Back to Contents
COMPENSATION DISCUSSION AND ANALYSIS
Does the Company have stock ownership guidelines for the NEOs?
Yes. CSX believes that, in order to align the interests of the Executive Team with those of its shareholders, it is important that Executive Team members hold a meaningful ownership position in CSX common stock relative to their base salary. To achieve this linkage, CSX has establishedNEOs under the following formal stock ownership guidelines.plans:
| n | The CSX Corporation 401(k) Plan (“CSXtra Plan”); | | n | CSX Pension Plan (the “Pension Plan”); and | | | | n | | Executive Vice Presidents
| | | | Vice Presidents and Equivalent
| |
Members of the Executive Team must retain 100% of their net shares issued until the guidelines are achieved and have five years in which to do so. As of December 25, 2015, all NEOs but Mr. Lonegro, who was promoted to Executive Vice President and CFO in September 2015, held amounts of CSX common stock in excess of these ownership guideline requirements. Mr. Lonegro has five years from his promotion to reach his ownership requirements.
In addition, as part of its stock ownership guidelines, the Company has adopted a one-year holding period for Executive Team members for the after tax portion of: (i) restricted stock and RSUs following vesting; and (ii) common stock received upon the exercise of options. Accordingly, NEOs must wait one year after the completion of the restriction period before entering into any transaction involving such stock.
What are the accounting, tax and dilution considerations of CSX’s compensation programs?
As discussed above, a significant portion of each NEO’s direct compensation is performance-based. Section 162(m) of the Code imposes a $1 million limit on the amount that CSX may deduct for compensation paid to the NEOs. However, performance-based compensation paid under a plan that has been approved by shareholders is excluded from the $1 million limit if, among other requirements, the compensation is payable only if pre-established objective performance goals are achieved and the Committee that establishes and certifies attainment of the goals consists only of outside directors.
While the tax effect of any compensation arrangement is a factor to be considered, the effect is evaluated by the Committee in light of CSX’s overall compensation philosophy and objectives. CSX’s compensation program for NEOs has both objective and discretionary elements. Generally, the Committee wishes to maximize CSX’s federal income tax deductions for compensation expense. Therefore, the Company has endeavored to structure the short-term and long-term performance-based incentive elements of executive compensation to meet the requirements for deductibility under Section 162(m) while retaining the ability to apply permissible negative discretion in determining the ultimate award payouts. Nonetheless, the Committee does not believe that compensation decisions should be unduly constrained by how much compensation is deductible for federal tax purposes. Accordingly, the Committee is not limited to paying compensation under plans that are qualified under Section 162(m) and the Committee’s ability to retain flexibility in this regard may, in certain circumstances, outweigh the advantages of qualifying all compensation as deductible under Section 162(m).
The Committee also considers other tax aspects and the accounting and shareholder dilutive costs of specific executive compensation programs, and seeks to balance the tax, earnings and dilutive impact of executive compensation plans with the need to attract, retain and motivate highly-qualified executives.
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COMPENSATION DISCUSSION AND ANALYSIS
Summary Compensation Table
The Summary Compensation Table presents the amount and type of compensation for the NEO's in 2015.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Non-Equity
Incentive Plan
Compensation(2)
($) | Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings(3)
($) | All Other
Compensation(4)
($) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Executive Vice
President and CFO | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Executive Vice President
and Chief Sales and
Marketing Officer | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Executive Vice President
and COO | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Executive Vice President,
General Counsel, and
Corporate Secretary | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Stock Awards—Amounts disclosed in this column are related to LTIP performance units, RSUs and restricted stock granted in 2013, 2014 and 2015, and reflect the aggregate grant date fair value of such stock awards computed in accordance with FASB ASC Topic 718. For performance units, the grant date fair value is based on the probable outcome of performance conditions at the time of grant. For more information and assumptions used in valuing these awards, see Note 4, Stock Plans and Share-Based Compensation in the Notes to Consolidated Financial Statements in the Company’s 2015 Annual Report on Form 10-K, which was filed on February 10, 2016. If the highest level of performance under each LTIP cycle is achieved, the maximum grant date fair value of the performance units (which does not include RSUs or restricted stock) for each NEO by year of grant would be: 2015: Mr. Ward—$10,597,268, Mr. Lonegro—$302,758, Mses. Fitzsimmons and Sanborn—$2,270,832, Messrs. Eliasson and Gooden—$3,027,802 and Mr. Munoz—$6,055,602; 2014: Mr. Ward—$10,443,920, Mr. Eliasson—$2,983,986, Mr. Munoz—$5,632,592, Mr. Gooden—$3,609,735 and Ms. Fitzsimmons—$2,237,976; and 2013: Mr. Ward—$11,356,300, Mr. Eliasson—$3,244,672, Mr. Munoz—$4,688,153, Mr. Gooden—$3,394,762, and Ms. Fitzsimmons $2,433,504.
| | Non-Equity Incentive Plan Compensation—The 2015 annual incentive compensation was paid in February 2016 based on a 60% payout of the 2015 MICP. Mr. Munoz did not receive a payout under the annual incentive plan as a result of his resignation.
| | Change in Pension Value and Nonqualified Deferred Compensation Earnings—The values in this column reflect only changes in the actuarial present value of pension benefits as there were no above-market nonqualified deferred compensation earnings to report. The present value of accumulated benefits for 2015 reflects a discount rate of 4.3% compared to the 4.0% discount rate applicable for 2014. This discount rate change was the result of actuarial adjustments based on changes in corporate bond rates. The present values also increased due to actuarial adjustments to the mortality basis reflecting a change in life expectancies. CSX measured its pension values as of December 31, 2015. For 2015, the actuarial change in Mr. Ward’s pension value was ($78,161) and the actuarial change in Mr. Gooden’s pension value was ($378,448). The decreases in present value for Mr. Ward and Mr. Gooden are a result of continuing to work past the pension plan’s unreduced retirement benefit age of 60, thereby forgoing retirement payments.
| | All Other Compensation—The values in this column include amounts for personal aircraft usage, financial planning services, physical examination, annual health care savings account contribution, excess liability insurance, and the Company’s match under the 401(k) and nonqualified deferred compensation plans. For Mr. Ward, this column includes, along with the items discussed above, costs associated with home security and Company-mandated aircraft usage with an aggregate incremental cost to the Company of $23,496. The personal aircraft usage amount was calculated using the direct hourly operating cost of $1,424 per flight hour for 2015 plus taxes. The aggregate incremental cost to the Company for the use of Company aircraft for personal travel is calculated by multiplying the hourly variable cost rate (including fuel, oil, airport and hangar fees, crew expenses, maintenance, catering and taxes) for the aircraft by the hours the executive used the aircraft. For these purposes, hours occupied by any “deadhead” aircraft legs are included in the total hours the aircraft was used by the executive.
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COMPENSATION DISCUSSION AND ANALYSIS
2015 Grants of Plan-Based Awards Table
The Grants of Plan-Based Awards Table is a supporting table to the Summary Compensation Table. In 2015, the NEOs received the plan-based awards as shown in the table below.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | Estimated Possible Payouts
Under Non-Equity Incentive
Plan Awards(1) | Estimated Future Payouts
Under Equity Incentive
Plan Awards(2) | All Other Stock
Awards; Number
of shares of
stock or units(3)
(#) | Grant Date Fair
Value of Stock
and Option
Awards(4)
($) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards—The amounts in these columns reflect what the payments could have been for 2015 under the SEIP as typically administered by the Committee using the Target Incentive Opportunities and Company performance measures under the MICP. The values reflect a threshold payout of 10%, a target payout of 100% and a maximum payout that cannot exceed the lesser of 0.3% of operating income for the CEO and 0.2% of operating income for each covered NEO or $3 million under the shareholder approved SEIP. Ms. Sanborn and Mr. Lonegro were not covered by the SEIP in 2015. As such, their maximum potential payouts under the MICP were 160% of their target incentive opportunities. At the Committee’s discretion, payouts can be zero. The actual payments for 2015 are shown in the Summary Compensation Table.
| | Estimated Future Payouts Under Equity Incentive Plan Programs—The values in these columns reflect the potential payout in shares under the 2015-2017 LTIP cycle based on pre-established financial performance and strategic goals. The Company’s performance will determine a payout of shares that can range from 0% to 200% of the LTIP grants. The values reflect payouts of 10% at threshold, 100% at target and 200% at maximum. The 10% threshold payout assumes that only one financial performance measure were to reach the threshold performance level. If both financial performance measures were to reach the threshold performance level, the resulting payout would be 20%.
| | All Other Stock Awards; Number of shares of stock or units—The value in this column reflects the number of RSUs granted in 2015.
| | Grant Date Fair Value of Stock and Option Awards—The values in this column reflect the number of performance units (based on the probable outcome of the performance conditions, which is the target number) and RSUs, each multiplied by the closing price of CSX stock on the date of grant in accordance with FASB ASC Topic 718. The closing price of CSX stock on each date of grant is as follows: February 11, 2015 - $35.94, May 11, 2015 - $36.06 and December 8, 2015 - $24.99.
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COMPENSATION DISCUSSION AND ANALYSIS
2015 Outstanding Equity Awards at Fiscal Year End
The table below presents information pertaining to all outstanding equity awards held by the NEOs as of December 25, 2015. Stock awards are comprised of outstanding restricted stock, RSUs and performance units.
| | | | | | | | | | | | | | | | | Number of
Shares or
Units of Stock
That Have
Not Vested(1)
(#) | Market Value of
Shares or
Units of Stock
That Have
Not Vested(2)
($) | Equity Incentive Plan
Awards: Number of
Unearned Shares,
Units or Other
Rights That Have
Not Vested(3)
(#) | Equity Incentive Plan
Awards: Market or
Payout Value of
Unearned Shares,
Units or Other
Rights That Have
Not Vested(4)
($) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Number of Shares or Units That Have Not Vested—The units reflected in this column represent RSUs granted in May 2013, 2014 and 2015 that will vest in 2016, 2017 and 2018, respectively, assuming continued employment. In addition, this column includes 64,048 RSUs for Mr. Ward that will vest in May 2016, 21,349 shares of restricted stock for Mr. Eliasson that will vest in May 2018, 21,349 RSUs for Mr. Gooden that will vest in May 2016 and 20,670 shares of restricted stock for Ms. Sanborn that will vest in April 2016.
|
| | | Market Value of Shares or Units of Stock That Have Not Vested—The market values are based on the Company’s closing stock price as of December 25, 2015 of $26.13.
| | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested—In accordance with the SEC requirements for this table, the number of shares shown in the column above represents the sum of the performance units that would be payable under the 2014-2016 and 2015-2017 LTIP cycles if the Company’s cumulative performance through 2015 was applied to each plan’s performance measures. The Company’s 2015 performance would have resulted in a 68% payout for the 2014-2016 cycle and 51% for the 2015-2017 cycle. The SEC requires that projected payouts be shown at the next higher performance measure; therefore, the number of performance units shown is equal to the target payout for the 2014-2016 cycle (100%) and the target payout for the 2015-2017 cycle (100%).
| | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested—The market values are based on the Company’s closing stock price as of December 25, 2015 of $26.13.
|
2015 Option Exercises and Stock Vested Table
The table below presents the value of options, restricted stock and RSUs that vested in 2015.
| | | | | | | | | | | | | | | | | | Shares Acquired
on Exercise
(#) | Value Realized
on Exercise
($) | Shares Acquired
on Vesting(1)
(#) | Value Realized
on Vesting(2)
($) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Shares Acquired on Vesting—Shares acquired through stock awards include restricted stock units that vested in May 2015 and performance units that were paid out pursuant to the 2013-2015 LTIP cycle.
| | Value Realized on Vesting—The values in this column reflect: (i) the number of restricted stock units that vested on May 7, 2015 multiplied by $35.91 – the closing price of CSX stock on the vesting date; and (ii) the number of performance units paid out pursuant to the 2013-2015 LTIP cycle multiplied by $22.35, the closing price on the date of payment.
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COMPENSATION DISCUSSION AND ANALYSIS
As reflected by the Pension Benefits Table, and as described below, CSX maintains defined benefit plans (qualified and nonqualified) under which the NEOs are entitled to benefits including: the Pension Plan (both “final average pay” and “cash balance” formulas) and the Special Retirement Plan.
| | | | | | | | | | | | | | Number of Years
Credited Service
(#) | Present Value of
Accumulated Benefit
($) | Payments During
Last Fiscal Year
($) | | Qualified CSX Pension Plan | | | | | | | | | | | Nonqualified Special Retirement Plan | | | | | | | | | | | Qualified CSX Pension Plan | | | | | | | | | | | Nonqualified Special Retirement Plan | | | | | | | | | | | Qualified CSX Pension Plan | | | | | | | | | | | Nonqualified Special Retirement Plan | | | | | | | | | | | Qualified CSX Pension Plan | | | | | | | | | | | Nonqualified Special Retirement Plan | | | | | | | | | | | Qualified CSX Pension Plan | | | | | | | | | | | Nonqualified Special Retirement Plan | | | | | | | | | | | Qualified CSX Pension Plan | | | | | | | | | | | Nonqualified Special Retirement Plan | | | | | | | | | | | Qualified CSX Pension Plan | | | | | | | | | | | Nonqualified Special Retirement Plan | | | | | | | | | |
| | | Nonqualified Special Retirement Plan—Mr. Ward’s credited service under the Special Retirement Plan is 44 years, including additional years of service credited in accordance with the Special Retirement Plan (see section entitledfor CSX Corporation and Affiliated Corporations (the “Special Retirement Plan of CSX and Affiliated Corporations—Additional Service Credit”Plan”); his actual years of service are 38.58 years. The present value of his accumulated benefit under the Special Retirement Plan that is attributable to his credited years of service above his actual years of service is $2,770,650. Note that Mr. Ward stopped receiving accruals of extra years of service in 2006.
|
Qualified
CSXtra Plan The NEOs may contribute to the CSXtra Plan, a defined contribution 401(k) plan. Participants may contribute on a pre-tax or after-tax basis and receive Company matching contributions. The Company’s matching contribution is equal to 100% on the employee’s first 1% of eligible compensation contributed, and 50% on the employee’s additional contributions up to 6% of base salary, for a Company match up to 3.5% of eligible compensation. Participants may invest contributions in various investment funds. Qualified CSX Pension Plan
Final Average Pay Formula
ForThe Pension Plan, which has been closed to new employees hired beforesince January 1, 2003,2020, is qualified under the final average payInternal Revenue Code (the “Code”) and covers the NEOs and CSX’s non-union employees who were employed with the Company prior to January 1, 2020. For the NEOs, pension benefits accrue based on a “cash balance” formula. Under the cash balance formula, provides for a benefit,benefits are expressed in the form of a life annuity starting at age 65. The pay taken intohypothetical account underbalance. For each month of service, the final average pay formula includes base salary and annual incentive payments for the employee’s highest consecutive 60-month period. The benefitNEO’s account is equal to 1.5%credited with a percentage of the employee’s final averageparticipant’s pay multiplied byfor that month. The percentage of pay credited is determined based on the employee’sparticipant’s age and years of service. This amount is then reduced by 40%
The hypothetical account earns interest credits on a monthly basis based on the annual 10-year Treasury bond rate and the participant’s account balance as of the employee’s Social Security benefits or 60%end of the employee’s Railroad Retirement benefits, or both, as applicable. prior month. The average annual interest crediting rate used for 2020 was 3.66%. The resulting benefitbenefit is subject to a cap imposed under Code Section 415 of the Code (the “415 Limit”). The 415 Limit for 2015 is $210,0002020 was $230,000 (for a life annuity at age 65) and is subject to adjustment for future cost of living changes. Further, under the Code, the maximum amount of pay that may be taken into account for any year is limited. This limit (the “Compensation Limit”) is $265,000$285,000 for 20152020 and is also subject to adjustment for future cost of living changes. Messrs. Ward, Gooden, Eliasson and Lonegro, as well as Mses. Fitzsimmons and Sanborn were hired before January 1, 2003, and are covered by the final average pay formula under the Pension Plan. •
Transfer Benefits—The Pension Plan provides an enhancement to the pension benefits of those participants
who transfer from a position covered by Railroad Retirement to a position covered by Social Security before January 1, 2015. This enhancement is to make up for any retirement benefit lost due to discontinuance of Railroad Retirement service.
•
Vesting—Benefits under the Pension Plan's final average pay formula vest upon the earlier of the completion of five years of service or attainment of age 65.
| n | Vesting — Benefits under this formula vest upon the earlier of the completion of three years of service or attainment of age 65. | | n | Form of Payment of Benefits— Benefits under this formula may be paid upon termination of employment or retirement as a lump sum or in various annuity forms. The valuation method and actuarial factors used to determine the present value of accumulated benefits shown in the table are described in the 2020 Annual Report. |
| 52 | |
Early Retirement—The Pension Plan final average pay formula has a normal retirement ageTable of 65. However, employees with 10 years of service may retire as early as age 55, but with a reduction from full benefits to reflect early commencement of the benefit prior to age 65. If an active participant reaches age 55 with 10 years of service, the reduction for early retirement is 1/360th of the pension benefit for each month the benefit commences prior to age 60 (rather than age 65). Mr. Gooden and Ms. Fitzsimmons have already attained age 55 with 10 years of service and thus are currently eligible to retire under the early retirement provisions of the Pension Plan.
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COMPENSATION DISCUSSION AND ANALYSIS
•
Form of Payment of Benefits—Benefits under the Pension Plan’s final average pay formula are payable in various annuity forms at retirement. The valuation method and actuarial factors used to determine the present value of accumulated benefits shown in the table are described in CSX’s 2015 Annual Report on Form 10-K.
Employees who become eligible to participate in the Pension Plan on or after January 1, 2003 earn pension benefits under the cash balance formula. These benefits are expressed in the form of a hypothetical account balance. For each month of service, the participant’s account is credited with a percentage of the participant’s pay for that month. The percentage of pay credited is determined based on the participant’s age and years of service.
The hypothetical account earns interest credits on a monthly basis based on the annual 10-year Treasury bond rate and the participant’s account balance as of the end of the prior month. The average annual interest crediting rate used for 2015 was 3.66%. Pay for purposes of the cash balance formula is defined in the same way as for the final average pay formula. The 415 Limit and Compensation Limit also apply in determining benefits under the cash balance formula.
Because Mr. Munoz was hired after January 1, 2003, he is covered by the cash balance formula. Mr. Munoz earned benefits in 2015 at a rate equal to 7% of pay up to the Social Security Wage Base (“Wage Base”), which was $118,500 in 2015, and 11% of pay in excess of the Wage Base.
•
Vesting—Benefits under the cash balance formula vest upon the earlier of the completion of three years of service or attainment of age 65.
•
Form of Payment of Benefits—Benefits under the cash balance formula may be paid upon termination of employment or retirement as a lump sum or in various annuity forms. The valuation method and actuarial factors used to determine the present value of accumulated benefits shown in the table are described in CSX’s 2015 Annual Report on Form 10-K.
Special Retirement Plan of CSX and Affiliated Affiliated Corporations The Special Retirement Plan is a nonqualifiednon-qualified plan that generally covers CSX executives,employees, including the NEOs, whose compensation exceeds the Compensation Limit. The purpose of the Special Retirement Planwho were hired before January 1, 2020 and is now closed to assist CSX in attracting and retaining key executives by allowing the Company to offer competitive pension benefits on the basis described below. new employees. The Special Retirement Plan formula replicates the qualified plan formula but provides for the payment of benefitsbenefits that would otherwise not be deniedavailable under the Pension Plan due to the 415 Limit and the Compensation Limit, both described above. Additional Service Credit
The Special Retirement Plan previously provided additional service credit to executives where it is necessary to do so in order to provide competitive retirement benefits. Messrs. Ward and Gooden have been covered by the Special Retirement Plan’s additional service crediting provisions since September 2, 1995 and December 21, 1996, respectively. Pursuant to the Special Retirement Plan’s applicable service crediting rules, an eligible executive was credited with one additional year of service for each actual year of service worked beginning no earlier than age 45 continuing until age 65. Total service cannot exceed a maximum of 44 years, unless actual service exceeds 44 years. Messrs. Ward and Gooden have attained the maximum levels of creditable service under this provision. The additional two-for-one service credits were awarded in the mid-1990’s under a plan provision that is no longer utilized for new participants. Executive-Specific Benefits
The Special Retirement Plan allows for the payment of individually negotiated nonqualified pension benefits. Mr. Ward is the only NEO that has such benefits. Mr. Ward’s benefit ensures that any shortfall that may arise under the transfer benefit (from Railroad Retirement to Social Security) will be paid under the Special Retirement Plan.
Form of Payment of Benefits; Certain Forfeiture Provisions
Under the termspurpose of the Special Retirement Plan nonqualifiedis to assist CSX in retaining key executives by allowing the Company to offer competitive pension benefitsbenefits.
Under the Special Retirement Plan, participants receive non-qualified pension benefits on base salary and short-term incentive compensation that exceed the $285,000 compensation limit under the Code and the $230,000 benefit cap under Section 415 of the Code. These benefits are calculated using the cash balance formula described above for all of the NEOs, without regard to the 415 Limit or the Compensation Limit. Non-qualified pension benefits can be paid in the same form as under the Pension Plan, except that Messrs. Ward and Gooden were permitted and elected to receive their Special Retirement Plan pension benefits in the form of a lump sum.Plan. Pension benefitsbenefits under the Special Retirement Plan are subject to: (i) suspension and possible forfeiture if a retired executive competes with the Company or engages in acts detrimental to the Company; or (ii) forfeiture if an executive is terminated for engaging in acts detrimental to the Company. Under the current terms of the Special Retirement Plan, unless an employee has elected otherwise, within 45 days after a change-of-control, the employee is entitled to a lump sum payment equal to the actuarial present value of his or her accrued benefit under the Special Retirement Plan.
The valuation method and actuarial factors used to determine the present value of accumulated benefitsbenefits shown in the 2020 Pension Benefits Table Benefits Tablefor the Special Retirement Plan are described in CSX’s 2015the 2020 Annual ReportReport. Health and Group Benefits CSX provides the same health and group benefits to the NEOs as those available to all non-union employees. The Company also provides basic life insurance and accidental death and dismemberment insurance coverage to all management employees, each of which is equal to two times their respective annual salaries, up to $1 million. The Company also provides NEOs, on Form 10-K.the same basis as other management employees, salary continuance in the event of short-term or long-term disability, travel accident insurance and vacation based on length of service. Back to Contents
COMPENSATION DISCUSSION AND ANALYSIS
NonqualifiedExecutive Deferred Compensation TablePlan
The Nonqualified
CSX offers a voluntary, non-qualified Executive Deferred Compensation Table presents a summaryPlan (“EDCP”) for the benefit of 2015 contributions madeits executives and other eligible employees. Under the EDCP, the NEOs may defer compensation in excess of qualified plan limits until retirement or another specified date or event. Participating employees with base salary above the qualified plan limits, may defer compensation to allow them to receive the full Company matching contribution of up to 3.5% of base salary not otherwise available to them under the EDCP, CSX’s current executive nonqualified deferral program, as well as 2015 earnings, distributions and year-end balances. Two types of deferrals are represented below: cash deferrals and stock deferrals. Cash deferrals include deferred portions of an NEO’s base salary and short-term incentive payments. Stock deferrals include deferred portions of compensation payable in the form of CSX common stock.CSXtra Plan. | | | | | | | | | | | | | | | | | | Executive
Contributions
Last Fiscal Year(1)
($) | Registrant
Contributions
Last Fiscal Year(2)
($) | Aggregate
Earnings
Last Fiscal Year(3)
($) | Aggregate
Distributions
Last Fiscal Year(4)
($) | Aggregate
Balance Last
Fiscal Year ($) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Executive Contributions Last Fiscal Year—Executive contributions in 2015 under the CSX Executive’s Deferred Compensation Plan are also reported in the Salary column of the Summary Compensation Table.
| | Registrant Contributions Last Fiscal Year—Company contributions in 2015 are also reported in the All Other Compensation column of the Summary Compensation Table.
| | Aggregate Earnings Last Fiscal Year—Earnings on cash deferrals include the total gains and losses credited in 2015 based on the hypothetical investment of those amounts in the manner described below. Earnings on stock deferrals reflect the difference between the closing stock price at the end of 2014 and 2015, plus any dividends credited in 2015.
| | Aggregate Distributions Last Fiscal Year—Mr. Ward’s distribution is dividends credited in 2015 on deferred stock balances that were paid out in the form of cash, Mr. Eliasson’s distribution was a scheduled distribution according to his election at the time of deferral, and Ms. Fitzsimmons’ distributions are comprised of dividends credited in 2015 on deferred stock balances that were paid out in the form of cash and a scheduled distribution according to her election at the time of deferral.
|
Under the EDCP, participantsparticipating employees, including NEOs, are entitled to voluntarily elect to defer up to: (i) 75% of base pay; (ii) 100% of awards payable in cash under CSX’s short-term incentive compensation plans; and (iii) 100% of performance units payable under the Company’s LTIP in the form of stock. ParticipantsNEOs also are entitled to receive matching contributions that would have been received under CSX’s 401(k) plan assuming that: (i) certain compensation limits prescribed by the Code limits did not apply; and (ii) contributions made under the EDCP were instead made under CSX’s 401(k) plan. Investment of Deferred Amounts
In accordance with a participant’s individual elections, deferred amounts, other than stock awards, are treated as if they were invested among the investment funds available under the qualifiedqualified 401(k) plan. Participants may elect to change the investment of deferred amounts, other than deferred stock awards. Timing and Form of Payments
EDCP participants may elect to receive payment of their deferred amounts, including earnings, upon separation from service or upon the attainment of a specified date or upon a change-of-control.specified date. Participants may elect to receive payment in the form of a lump sum or in semi-annual installments over a numberperiod of up to 10 years not in excess of(or 20 years.years, prior to 2021). A participant may apply for accelerated payment of deferred amounts in the event of certain hardships and unforeseeable emergencies. A participant also may elect to receive accelerated distribution of amounts deferred before January 1, 2005 (and earnings thereon) other than for hardship or an unforeseeable emergency, but the participant is required to forfeit a percentage of the amount to be distributed. Under the EDCP, cash deferrals are distributed in the form of cash and deferred stock awards are paid in the form of CSX common stock. Post-Termination and Change-of-Control Payments
Do NEOs participate in a severance plan?
The Company covers its NEOs under the same severance plan available to all employees and does not generally provide for any special termination of employment payments or benefits that favor the NEOs. Other than the Change-of-Control Agreements, the Company currently does not have any severance agreements in place with its NEOs that would provide special termination payments or benefits.
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COMPENSATION DISCUSSION AND ANALYSIS
Do
Employee Stock Purchase Plan The CSX Employee Stock Purchase Plan (“ESPP”) provides eligible employees the NEOs participateright to purchase shares of CSX common stock in Change-of-Control Agreements?
Yes. Eachaccordance with the terms of the NEOs participates in a Change-of-Control Agreement providing “double-trigger” benefits (i.e., payments are conditioned upon a change-of-control as well as separation from employment) with a three-year term ending in 2017 unless renewed.
How is change-of-control defined?
UnderESPP. All employees who have been employed by the agreements described below, a “change-of-control” generally includes any of the following:
•
the acquisition of beneficial ownership of 20% or more of CSX’s outstanding common stock or the combined voting power of CSX’s outstanding voting stock by an individual or group as defined under applicable SEC rules;
•
if individuals, who as of the date of the Change-of-Control Agreement, constitute the Board (the “Incumbent Board”) cease for any reason to constituteCompany at least a majority of the Board; provided, however, that any individual becoming a director subsequent to such date whose election or nomination for election by the Company’s shareholders was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of an individual, entity or group (as defined under applicable SEC rules);
•
a business combination (such as a merger, consolidation or disposition of substantially all of the assets of CSX or its principal subsidiary), excluding business combinations that will not result in a change in the equity and voting interests held in CSX, or a change in the composition of the Board over a specified percentage; or
•
the liquidation or dissolution of CSX or its principal subsidiary.
Each Change-of-Control Agreement provides for salary and certain benefits to be continued at no less than specified levels generally for a period of up to three years after a change-of-control (the “Employment Period”), and for certain payments and other benefits to be paid or provided by CSX upon an executive’s termination of employment within the Employment Period. No payments have been made to any NEO pursuant to the Change-of-Control Agreements.
What benefits are provided during the Employment Period where no termination has occurred?
During the Employment Period, CSX is required to:
•
pay the executive an annual base salary that is at least equal to the highest base salary payable to the executive in the 12-month period immediately preceding the Employment Period (although certain reductions in salary that are also applicable to similarly situated peer executives may be permitted);
•
provide the executive with an opportunity to earn an annual incentive at a minimum, target and maximum level that is not less favorable than the executive’s opportunity to earn such annual incentives30 days prior to the Employment Period
(although certain reductions also applicable to similarly situated peer executives may be permitted); and
•
causebeginning of the executive to beenrollment period are eligible to participate in incentive, retirement, welfarethe ESPP.Under the ESPP, employees may purchase shares at the lesser of: (i) 85% of the fair market value of a share of CSX common stock on the first day of an offering; or (ii) 85% of the fair market value of a share of CSX common stock on the last day of an offering. There are two offering periods each year. The ESPP limits the number of shares of CSX common stock that an employee may purchase in a calendar year to a number of shares that have a fair value (as of the applicable grant date) equal to $25,000. Other Benefits The perquisites provided to NEOs in 2020 included: (i) financial planning services of up to $12,000; and (ii) an annual health and well-being examination. The aggregate cost to the Company of these perquisites was approximately $15,000 for each NEO. Additionally, pursuant to Company policy, Mr. Foote, as CEO, is required to travel by Company aircraft at all times for security purposes and to ensure efficient use of his time. Other senior-level executives have access to the Company aircraft and may use it on a limited basis for personal reasons. The amounts related to the NEO’s use of the Company aircraft are disclosed in the Summary Compensation Table. Stock Ownership Guidelines CSX believes that, in order to align the interests of management with those of its shareholders, it is important that NEOs and other benefit planssenior leaders hold a significant ownership position in CSX common stock relative to their base salary. To achieve this, CSX has established the following formal stock ownership guidelines. Each of the individuals covered by these guidelines must retain 100% of their net shares issued until the guidelines are achieved and has five years in which to benefit from paid vacationdo so. The types of equity that apply towards these ownership guidelines are vested and unvested restricted stock units, vested performance units, and any other policiesCSX common stock owned. | Position | Minimum Value | | Chief Executive Officer | 6 times base salary | | Executive Vice Presidents | 4 times base salary | | Senior Vice Presidents | 3 times base salary | | Vice Presidents | 1 times base salary |
Policy Prohibiting Hedging / Pledging of CSX and its affiliates, on a basis not less favorable than the benefits generally available to the executive before the Employment Period (or the benefits generally available to peer executives at any time after the beginning of the Employment Period, whichever is more favorable).
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COMPENSATION DISCUSSION AND ANALYSIS 2020 Summary Compensation Table
The Summary Compensation Table and the accompanying footnotes describe the amount and type of compensation for the NEOs for 2020 and, if applicable, 2019 and 2018. | Name | | Year | | Salary
($) | | Bonus(2)
($) | | Stock
Awards(3)
($) | | Option
Awards(4)
($) | | Non-Equity
Incentive Plan
Compensation(5)
($) | | Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings(6)
($) | | All Other
Compensation(7)
($) | | Total
($) | James M. Foote
President & Chief
Executive Officer | | 2020 | | 1,250,000
| | 1,300,000
| | 5,989,727
| | 6,006,842 | | 200,000 | | 338,576 | | 221,570 | | 15,306,715 | | | 2019 | | 1,250,000 | | — | | 6,096,711 | | 3,993,136 | | 3,425,391 | | 534,271 | | 228,024 | | 15,527,533 | | | 2018 | | 1,220,833 | | — | | 5,310,204 | | 3,524,190 | | 3,052,083 | | 441,428 | | 221,863 | | 13,770,601 | Kevin S. Boone(1)
Executive Vice President
& Chief Financial Officer | | 2020 | | 475,000 | | 277,875 | | 1,361,291 | | 1,365,194 | | 42,750 | | 70,665 | | 31,007 | | 3,623,782 | | | 2019 | | 399,928 | | | | 995,402 | | 1,481,381 | | 599,756 | | 78,450 | | 27,956 | | 3,582,873 | | | 2018 | | | | | | | | | | | | | | | | | Mark K. Wallace
Executive Vice President
& Chief Sales and
Marketing Officer | | 2020 | | 550,000 | | 321,750 | | 1,361,291 | | 1,365,194 | | 49,500 | | 92,798 | | 113,188 | | 3,853,721 | | | 2019 | | 550,000 | | — | | 1,219,356 | | 798,634 | | 860,310 | | 132,808 | | 42,602 | | 3,603,710 | | | 2018 | | 550,000 | | — | | 3,367,141 | | 783,158 | | 990,000 | | 139,665 | | 118,199 | | 5,948,163 | Jamie J. Boychuk(1)
Executive Vice President
– Operations, CSXT | | 2020 | | 500,000 | | 292,500 | | 1,361,291 | | 1,365,194 | | 45,000 | | 74,190 | | 26,121 | | 3,664,296 | | | 2019 | | 392,696 | | — | | 1,007,915 | | 1,686,335 | | 645,054 | | 81,938 | | 23,885 | | 3,837,823 | | | 2018 | | | | | | | | | | | | | | | | | Nathan D. Goldman
Executive Vice President
& Chief Legal Officer | | 2020 | | 500,000 | | 292,500 | | 1,089,048 | | 1,092,151 | | 45,000 | | 136,918 | | 47,674 | | 3,203,291 | | | 2019 | | 500,000 | | — | | 1,219,356 | | 2,001,314 | | 711,000 | | 172,086 | | 33,600 | | 4,637,356 | | | 2018 | | 500,000 | | — | | 1,180,057 | | 783,158 | | 900,000 | | 182,544 | | 36,523 | | 3,582,282 |
| (1) | No amounts are included for Messrs. Boone and Boychuk as they were not NEOs for 2018. | | (2) | Bonus – The amounts included in this column represent the discretionary portion of the annual incentive payout for the 2020 MICP. The Committee approved a total payout percentage of 75% of the Target Incentive Opportunity for each of the NEOs in total, of which 65% was discretionary and the remaining 10% was based on performance against measures under the 2020 MICP. The portion of the annual incentive payout under the 2020 MICP based on actual performance is included in the “Non-Equity Incentive Plan Compensation” column. | | (3) | Stock Awards – Amounts disclosed in this column are related to LTIP performance units, RSUs and restricted stock granted in 2018, 2019 and 2020, as applicable, and reflect the aggregate grant date fair value of such stock awards computed in accordance with FASB ASC Topic 718. For performance units, the grant date fair value is based on the probable outcome of performance conditions at the time of grant. For more information and assumptions used in valuing these awards, see Note 4, Stock Plans and Share-Based Compensation in the Notes to the Consolidated Financial Statements in the 2020 Annual Report, which was filed with the SEC on February 10, 2021. If the highest level of performance under each LTIP cycle is achieved, the maximum grant date fair value of the performance units (which does not include stock options, RSUs or restricted stock) for each NEO by year of grant would be: 2020: Mr. Foote - $14,974,317, Messrs. Boone, Wallace and Boychuk - $3,403,227, and Mr. Goldman - $2,722,621; 2019: Mr. Foote - $15,241,776 Mr. Boone - $2,403,222, Messrs. Goldman and Wallace - $3,048,389, and Mr. Boychuk - $2,416,972; 2018: Mr. Foote - $10,620,408, Mr. Boone - $209,898, Messrs. Goldman and Wallace - $2,360,115, and Mr. Boychuk - $272,705. | | (4) | Option Awards – The values included in this column represent the aggregate grant date fair value of non-qualified stock options granted to each NEO computed in accordance with FASB ASC Topic 718. For more information and assumptions used in valuing these awards, see Note 4, Stock Plans and Share-Based Compensation in the Notes to the Consolidated Financial Statements in the 2020 Annual Report, which was filed with the SEC on February 10, 2021. | | (5) | Non-Equity Incentive Plan Compensation – The amounts included in this column represent non-discretionary annual incentive payouts under the MICP for the applicable year. For 2020, the non-discretionary annual incentive payout was 10% of the Target Incentive Opportunity for each of the NEOs. | | (6) | Change in Pension Value and Non-qualified Deferred Compensation Earnings – The values in this column reflect aggregate changes in the actuarial present value of pension benefits. The changes in values result from increases in each individual’s years of service, total cash compensation and revised mortality assumptions, as well as from a decrease in the pension discount rate from 3.13% to 2.43%. CSX measured its pension values as of December 31, 2020. | | (7) | All Other Compensation – The values in this column for 2020 include amounts for personal usage of Company aircraft, financial planning/tax preparation services, annual health savings account contribution associated with participation in the medical plan and the Company’s match under the 401(k) and non-qualified deferred compensation plans. For Mr. Foote, the values in this column for 2020 include, along with the other items discussed above, $165,806 for Company-mandated aircraft usage, as described in the CD&A, and a $33,789 nonqualified deferred contribution Company match. Mr. Wallace’s figure includes $75,550 for aircraft usage. Mr. Goldman’s figure includes $10,050 in matching charitable contributions made on behalf of him and his spouse. |
What benefitsTable of Contents
COMPENSATION DISCUSSION AND ANALYSIS 2020 Grants of Plan-Based Awards Table In 2020, the NEOs received grants of the plan-based awards as shown in the table below. | | | | | Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards(1) | | Estimated Future Payouts
Under Equity Incentive
Awards(2)
(# units) | | All
Other
Stock | | All
Other
Option | | Exercise
Price of
Option | | Grant Date
Fair Value
of Stock
and Option | | Name | | Grant Date | | Threshold
($) | | Target
($) | | Maximum
($) | | Threshold
(units) | | Target
(units) | | Maximum
(units) | | Awards(3)
(units) | | Awards(4)
(#) | | Awards
($) | | Awards(5)
($) | | James M. Foote | | Feb. 18, 2020 | | | | | | | | 14,125 | | 75,333 | | 188,333 | | | | | | | | 5,989,727 | | | | Feb. 18, 2020 | | | | | | | | | | | | | | | | 318,159 | | 79.51 | | 6,006,842 | | | | | | 50,000 | | 2,000,000 | | 4,000,000 | | | | | | | | | | | | | | | | Kevin S. Boone | | Feb. 18, 2020 | | | | | | | | 3,210 | | 17,121 | | 42,803 | | | | | | | | 1,361,291 | | | | Feb. 18, 2020 | | | | | | | | | | | | | | | | 72,309 | | 79.51 | | 1,365,194 | | | | | | 10,687 | | 427,500 | | 855,000 | | | | | | | | | | | | | | | | Mark K. Wallace | | Feb. 18, 2020 | | | | | | | | 3,210 | | 17,121 | | 42,803 | | | | | | | | 1,361,291 | | | | Feb. 18, 2020 | | | | | | | | | | | | | | | | 72,309 | | 79.51 | | 1,365,194 | | | | | | 12,375 | | 495,000 | | 990,000 | | | | | | | | | | | | | | | | Jamie J. Boychuk | | Feb. 18, 2020 | | | | | | | | 3,210 | | 17,121 | | 42,803 | | | | | | | | 1,361,291 | | | | Feb. 18, 2020 | | | | | | | | | | | | | | | | 72,309 | | 79.51 | | 1,365,194 | | | | | | 11,250 | | 450,000 | | 900,000 | | | | | | | | | | | | | | | Nathan D.
Goldman | | Feb. 18, 2020 | | | | | | | | 2,568 | | 13,697 | | 34,243 | | | | | | | | 1,089,048 | | | Feb. 18, 2020 | | | | | | | | | | | | | | | | 57,847 | | 79.51 | | 1,092,151 | | | | | 11,250 | | 450,000 | | 900,000 | | | | | | | | | | | | | | |
| (1) | Estimated Future Payouts Under Non-Equity Incentive Plan Awards – The amounts in these columns reflect the threshold, target and maximum payout opportunities for 2020 under the MICP based on the Target Incentive Opportunities for each NEO. The values reflect a threshold payout of 2.5% of each NEO’s Target Incentive Opportunity, a target payout of 100% of each NEO’s Target Incentive Opportunity and a maximum payout of 200% of each NEO’s Target Incentive Opportunity. The amounts actually paid for 2020 under the MICP are included in the Summary Compensation Table above. | | (2) | Estimated Future Payout Under Equity Incentive Plan Programs – The amounts in these columns reflect the number of shares subject to performance units granted for the 2020-2022 LTIP cycle that are eligible to be earned and vest based on threshold, target and maximum achievement of pre-established financial performance goals. The Company’s performance over the 2020-2022 performance period will determine the number of shares that are paid out in respect of such performance units, which can range from 0% to 250% of the performance units subject to the grants. The 2020-2022 LTIP is designed to payout 25% at threshold, 100% at target and 200% at maximum. The number listed in the threshold column (25% of the total performance units subject to the grant) is the number of performance units that would be earned if the threshold performance level were achieved for only one of the financial performance measures. The NEOs also have a relative Total Shareholder Return payout modifier applicable to the performance units based on a linear formula, which can increase or decrease the payout by as much as 25%, giving them a threshold payout of 18.75% and a maximum payout of 250%. The number listed in the threshold column (18.75% of the total performance units subject to the grant) is the number of performance units that would be earned if the threshold performance level were achieved for only one of the financial performance measures and the modifier is -25%. If both financial performance measures reach threshold performance level and the modifier is -25%, the resulting threshold payout would be 37.50% for the NEOs. The number listed in the maximum column (250% of the total performance units subject to the grant) is the number of performance units that would be earned if each metric pays out at maximum and the modifier is +25%. | | (3) | All Other Stock Awards – There were no RSUs or other stock awards granted to NEOs in 2020. | | (4) | All Other Option Awards – The amount in this column represents the number of non-qualified stock options granted on February 18, 2020, which vest and become exercisable on a three-year graded vesting schedule. One third of these options will become exercisable on February 18, 2021, February 18, 2022 and February 18, 2023. These options were granted with an exercise price equal to the closing stock price on the date of grant of $79.51. | | (5) | Grant Date Fair Value of Stock and Option Awards – The values in this column reflect the grant date fair value of performance units and non-qualified stock options granted in 2020, calculated in accordance with FASB ASC Topic 718 and, for performance units, based on the probable outcome of the performance conditions (which is the target). For more information and assumptions used in valuing these awards, see Note 4, Stock Plans and Share-Based Compensation in the Notes to the Consolidated Financial Statements in the 2020 Annual Report, which was filed with the SEC on February 10, 2021, and, for the grant date value of the performance units if maximum levels of performance are achieved, see footnote 3 to the Summary Compensation Table above. |
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Table of Contents COMPENSATION DISCUSSION AND ANALYSIS 2020 Outstanding Equity Awards at Fiscal Year End The table below presents information pertaining to all outstanding equity awards held by the NEOs as of December 31, 2020. Stock awards are provided ifcomprised of outstanding performance units, non-qualified stock options, restricted stock and RSUs. | | | Option Awards | | Stock Awards | | Name | | Number of
Securities
Underlying
Unexercised
Options (#)
(Exercisable) | | Number of
Securities
Underlying
Unexercised
Options (#)
(Unexercisable)(1) | | Option
Exercise
Price
($) | | Option
Expiration
Date | | Number
of Shares
or Units of
Stock That
Have Not
Vested(2) | | Market
Value of
Shares
or Units
of Stock
That Have
Not Vested
($)(3) | | Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units
or Other
Rights That
Have Not
Vested(4) | | Equity
Incentive
Plan Awards:
Market or
Payout Value
of Unearned
Shares,
Units or
Other Rights
That Have
Not Vested
($)(5) | | James M. Foote | | 76,040 | | — | | 52.92 | | 10/25/27 | | | | | | 127,206 | | 11,543,945 | | | | — | | 242,229 | | 53.82 | | 2/6/28 | | | | | | | | | | | | 75,515 | | 153,318 | | 68.09 | | 2/6/29 | | | | | | | | | | | | — | | 318,159 | | 79.51 | | 2/18/30 | | | | | | | | | | Kevin S. Boone | | 5,323 | | — | | 52.78 | | 10/1/27 | | 5,450 | | 494,588 | | 21,959 | | 1,992,779 | | | | — | | 5,028 | | 53.82 | | 2/6/28 | | | | | | | | | | | | 1,480 | | 3,005 | | 68.09 | | 2/6/29 | | | | | | | | | | | | — | | 82,169 | | 70.45 | | 12/4/29 | | | | | | | | | | | | — | | 72,309 | | 79.51 | | 2/18/30 | | | | | | | | | | Mark K. Wallace | | 47,966 | | — | | 47.28 | | 3/29/27 | | 30,765 | | 2,791,924 | | 26,469 | | 2,402,062 | | | | — | | 53,829 | | 53.82 | | 2/6/28 | | | | | | | | | | | | 15,103 | | 30,664 | | 68.09 | | 2/6/29 | | | | | | | | | | | | — | | 72,309 | | 79.51 | | 2/18/30 | | | | | | | | | | Jamie J. Boychuk | | 4,087 | | — | | 53.96 | | 5/26/27 | | 7,649 | | 694,147 | | 22,055 | | 2,001,491 | | | | — | | 4,286 | | 53.82 | | 2/6/28 | | | | | | | | | | | | 1,784 | | 3,622 | | 68.09 | | 2/6/29 | | | | | | | | | | | | — | | 80,000 | | 78.94 | | 4/17/29 | | | | | | | | | | | | — | | 72,309 | | 79.51 | | 2/18/30 | | | | | | | | | | Nathan D. Goldman | | 13,241 | | — | | 24.99 | | 12/8/25 | | | | | | 24,757 | | 2,246,698 | | | | 11,013 | | — | | 24.13 | | 2/10/26 | | | | | | | | | | | | 5,931 | | — | | 48.39 | | 2/22/27 | | | | | | | | | | | | — | | 53,829 | | 53.82 | | 2/6/28 | | | | | | | | | | | | 15,103 | | 30,664 | | 68.09 | | 2/6/29 | | | | | | | | | | | | — | | 70,431 | | 70.45 | | 12/4/29 | | | | | | | | | | | | — | | 57,847 | | 79.51 | | 2/18/30 | | | | | | | | |
| (1) | Number of Securities Underlying Unexercised Options (Unexercisable) – All stock options were granted 10 years prior to the Option Expiration Date listed in the table above. The stock options granted to all NEOs prior to 2019, to Mr. Boychuk on April 17, 2019 and to Messrs. Boone and Goldman on December 4, 2019, in each case, vest and become exercisable on the third anniversary of the date of grant, generally subject to the NEO’s continued service through the applicable vesting date. The other stock options granted to the NEOs in 2019, and the stock options granted to the NEOs in 2020, vest and become exercisable on a three-year graded vesting schedule on each of the first three anniversaries of the grant date, generally subject to the NEO’s continued service through the applicable vesting date. | | (2) | Number of Shares or Units of Stock That Have Not Vested – The units reflected in this column represent RSUs granted in February 2019 to Messrs. Boone and Boychuk that will vest in 2021, generally subject to the NEO’s continued service through the applicable vesting date. This column also includes 30,765 RSUs granted to Mr. Wallace on August 2, 2018, and restricted stock granted to Messrs. Boychuk and Boone on September 4, 2018. Each of these awards are scheduled to vest on the third anniversary of the date of grant, generally subject to the NEO’s continued service through the applicable vesting date. | | (3) | Market value of Shares or Units of Stock That Have Not Vested – The market values are based on the closing price of the Company’s common stock as of December 31, 2020, the last trading day of 2020, of $90.75. | | (4) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested – The amounts reflected in this column represent performance units granted under the 2019-2021 and 2020-2022 LTIPs. The number of performance units shown is equal to the target number of performance units granted under the 2019-2021 LTIP cycle and the threshold number of performance units granted under the 2020-2022 LTIP cycle. These performance units are eligible to be earned and vest based on achievement of Company performance measures over the applicable performance period. | | (5) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested – The market values are based on the closing price of the Company’s common stock as of December 31, 2020, the last trading day of 2020, of $90.75 per share. |
Table of Contents COMPENSATION DISCUSSION AND ANALYSIS 2020 Option Exercises and Stock Vested Table The table below presents the NEO is terminated?
Under the Change-of-Control Agreements, CSX will provide severance paymentsvalue of performance units, non-qualified stock options, RSUs and other benefits to NEOs upon their termination of employment during the Employment Period. The amount of benefits depends on the reason for termination as discussed below.restricted stock that vested in 2020.
| | | Option Awards | | Stock Awards | Name | | Shares Acquired
on Exercise(1) | | Value Realized
on Exercise(2) | | Shares Acquired
on Vesting(3) | | Value Realized
on Vesting(4) | | James M. Foote | | — | | — | | 236,176 | | 20,451,805 | | Kevin S. Boone | | — | | — | | 4,469 | | 385,529 | | Mark K. Wallace | | — | | — | | 55,802 | | 4,515,855 | | Jamie J. Boychuk | | — | | — | | 6,667 | | 551,916 | | Nathan D. Goldman | | 25,000 | | 1,263,801 | | 45,195 | | 3,950,038 |
| (1) | Shares Acquired on Exercise – Reflects the number of shares acquired on the exercise of non-qualified stock options that were exercised by Mr. Goldman on August 11, 2020. | | (2) | Value Realized on Exercise – The value in this column reflects the number of non-qualified stock options exercised by Mr. Goldman, multiplied by the difference between the grant’s exercise price of $24.99 and the Company’s common stock price at the time of exercise on August 11, 2020 of $75.54 per share. | | (3) | Shares Acquired on Vesting – Shares acquired through stock awards include: (i) performance units that were paid out pursuant to the 2018-2020 LTIP; (ii) performance units that vested for Mr. Foote on October 25, 2020; (iii) RSUs that vested in February 2020 pursuant to the 2017-2019 LTIP; and (iv) restricted stock that vested for Mr. Wallace on March 29, 2020, Mr. Boychuk on May 26, 2020, and for Mr. Boone on October 1, 2020. Messrs. Foote, Boone and Boychuk did not receive awards under the 2017-2019 LTIP as they were not employed with CSX at the time of grant. | | (4) | Value Realized on Vesting – The values in this column reflect: (i) the number of performance units paid out pursuant to the 2018-2020 LTIP cycle multiplied by $87.64, the closing price of the Company’s common stock on January 22, 2021, the date the performance units were paid out; (ii) for Mr. Foote, it also include the value of his performance unit award that vested on October 25, 2020, which is based on the number of performance units paid out pursuant to the 2017-2019 LTIP cycle multiplied by $81.29, the closing price of the Company’s common stock on October, 23, 2020; and (iii) the aggregate number of shares of restricted stock and RSUs that vested in 2020 multiplied by the closing price of CSX common stock on the applicable vesting date. |
Termination Without “Cause,” Resignation for “Good 2020 Pension Benefits TableReason” or “Constructive Termination.” CSX will pay to the NEO the severance benefits
As described below, if, duringCSX maintains closed defined benefit pension plans (qualified and non-qualified) under which the Employment Period,NEOs are eligible for benefits. | Name | | Plan Name | | Number
of Years
Credited
Service | | Present
Value of
Accumulated
Benefits(1) | | Payments
During
Last Fiscal
Year | | James M. Foote | | Qualified CSX Pension Plan | | 3.250 | | $ | 96,169 | | | | | | Nonqualified Special Retirement Plan | | 3.250 | | $ | 1,226,955 | | | | Kevin S. Boone | | Qualified CSX Pension Plan | | 3.333 | | $ | 71,880 | | | | | | Nonqualified Special Retirement Plan | | 3.333 | | $ | 148,754 | | | | Mark K. Wallace | | Qualified CSX Pension Plan | | 3.833 | | $ | 95,948 | | | | | | Nonqualified Special Retirement Plan | | 3.833 | | $ | 377,510 | | | | Jamie J. Boychuk | | Qualified CSX Pension Plan | | 3.667 | | $ | 78,962 | | | | | | Nonqualified Special Retirement Plan | | 3.667 | | $ | 159,087 | | | | Nathan D. Goldman | | Qualified CSX Pension Plan | | 17.583 | | $ | 447,571 | | | | | | Nonqualified Special Retirement Plan | | 17.583 | | $ | 661,970 | | |
| (1) | For each of the NEOs, pension benefits accrue based on a “cash balance” formula. Under the cash balance formula, benefits are expressed in the form of a hypothetical account balance. For each month of service, the NEO’s account is credited with a percentage of the participant’s pay for that month. The percentage of pay credited is determined based on the participant’s age and years of service. |
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Table of Contents COMPENSATION DISCUSSION AND ANALYSIS 2020 Non-qualified Deferred Compensation Table The following table presents a summary of 2020 contributions made under the Executives’ Deferred Compensation Plan, as well as associated 2020 earnings, distributions and year-end balances. Two types of deferrals are represented below: cash and CSX terminates thestock deferrals. Cash deferrals include deferred portions of an NEO’s employment without “cause”, the NEO resigns for “good reason” or upon a “constructive termination.” An NEO whose employment is terminated without “cause” in anticipation of a change-of-control is also entitled to the following benefits. Cash Severance Payment—A lump sum cash payment equal to the sum of the following:
•
the executive’s accrued pay (unpaid salary and unused vacation) and pro-rated bonus determined using the current target bonus; and
•
2.99 times the sum of the NEO’s annual base salary and the NEO’s “target bonus” (the Company provides the best-net-benefit meaning that to the extent that an NEO would have a higher net benefit if he or she avoided excise taxes due to an excess parachute payment, the Change-of-Control Agreement provides for an automatic downward adjustment to prevent an excess parachute payment).
Medical and Other Welfare Benefits—The equivalentshort-term incentive payments. CSX stock deferrals include deferred portions of continued medical and life insurance and other welfare benefit plan coverage for three years after termination of employment at a level at least as favorable as the benefits provided to the NEO during the Employment Period (or the benefits then generally available to peer executives, whichever is more favorable).
Outplacement—Outplacement services at a cost to CSX not to exceed $20,000.
Termination for Other Reasons—If the executive’s employment is terminated due to the executive’s death or disability, or voluntarily by the executive, CSX will make a lump sum cash payment equal to the executive’s accrued pay (which includes unpaid base salary and unused vacation). If the executive’s employment is terminated by CSX for “cause,” CSX will pay the executive a lump-sum cash payment of any unpaid portion of his or her annual base salary through the date of termination.
“Cause” generally refers to: (i) the willful and continued failure of the NEO to perform his or her duties to CSX; or (ii) the willful engagement in illegal conduct or gross misconduct that is materially and demonstrably injurious to CSX.
“Constructive termination” appliescompensation payable in the case of a business combination subject to the approval of the Surface Transportation Board, and refers to the occurrence of any of the following during the portion of the Employment Period prior to that agency’s final decision:
•
the substantial diminution of the NEO’s duties or responsibilities;
•
a reduction in compensation payable during the Employment Period (other than a reduction in incentive opportunities, benefits and perquisites where the NEO’s peer executives suffer a comparable reduction);
•
CSX’s requiring the NEO to be based more than 35 miles from his or her location or to travel on business to a materially greater extent than before; or
•
any purported termination by CSX of the NEO’s employment other than for “cause.”
“Disability” generally refers to the NEO’s absence from duties for 180 consecutive business days as a result of total and permanent mental or physical illness.
“Good reason” generally refers to the occurrence of any of the following:
•
the assignment to the NEO of duties inconsistent with, or a diminution of his or her position, authority, duties or responsibilities;
•
any failureform of CSX to comply with its compensation obligations during the Employment Period;
•
CSX’s requiring the NEO to be based more than 35 miles from his or her location or to travel on business to a materially greater extent than before;
| Name | | Executive
Contributions
Last Fiscal
Year(1) | | Registrant
Contributions
Last Fiscal
Year(2) | | Aggregate
Earnings
Last Fiscal
Year(3) | | Aggregate
Withdrawals/
Distributions
Last Fiscal
Year | | Aggregate
Balance
Last Fiscal
Year End | | James M. Foote | | 75,000 | | 33,789 | | 66,800 | | — | | 419,113 | | Kevin S. Boone | | 11,425 | | 6,665 | | 485 | | -141,746 | | 35,728 | | Mark K. Wallace | | 15,925 | | 9,290 | | 9,478 | | — | | 58,523 | | Jamie J. Boychuk | | — | | — | | — | | — | | — | | Nathan D. Goldman | | 12,925 | | 7,539 | | 4,777 | | — | | 95,751 |
•
any purported termination by CSX of the NEO’s employment other than as permitted by the Change-of-Control Agreements; or
| (1) | Executive Contributions in Last Fiscal Year – The values in this column reflect salary deferred by the NEOs in 2020 under the EDCP. These amounts are also included in the Salary column of the Summary Compensation Table. | | (2) | Registrant Contributions in Last Fiscal Year – Company contributions in 2020 are also reported in the All Other Compensation column of the Summary Compensation Table. | | (3) | Aggregate Earnings in Last Fiscal Year – Earnings on cash deferrals include the total gains and losses credited in 2020 based on participant investment elections. |
•
any failure of CSX to require a successor to assume the Change-of-Control Agreement.
Back to Contents
COMPENSATION DISCUSSION AND ANALYSIS
Potential Payouts Under Change-of-Control Agreements The following table presents the severance benefitsbenefits to which each of the NEOs would be entitled as of December 25, 201531, 2020, under his or her Change-of-Control Agreement upon the hypothetical termination of employment following a change-of-control: (i) by CSX other than for “cause”cause or “disability”;disability; (ii) by the NEO for “good reason”;good reason; or (iii) upon a constructive termination. The definitions of “change of control”, “cause”, “disability”, “good reason” and “constructive termination.” A change-of-control would not resulttermination” are set forth in retirement benefit increases or excise tax gross ups. Further, the pro-rata bonus payment would be based on target bonus instead ofChange-of-Control Agreements. No payments have been made to any NEO pursuant to the highest annual bonus.Change-of-Control Agreements. | Name | | Severance(1) | | Pro-Rata
Bonus
Payment(2) | | Equity(3) | | Welfare
Benefit
Values(4) | | Outplacement
Benefits | | Aggregate
Payments | | James M. Foote | | 9,717,500 | | 1,500,000 | | 44,499,647 | | 22,392 | | 40,000 | | 55,779,539 | | Kevin S. Boone | | 2,698,475 | | 320,625 | | 6,411,362 | | 79,189 | | 40,000 | | 9,549,651 | | Mark K. Wallace | | 3,124,550 | | 371,250 | | 13,883,410 | | 79,452 | | 40,000 | | 17,498,662 | | Jamie J. Boychuk | | 2,840,500 | | 337,500 | | 5,868,881 | | 78,576 | | 40,000 | | 9,165,457 | | Nathan D. Goldman | | 2,840,500 | | 337,500 | | 11,818,524 | | 56,736 | | 40,000 | | 15,093,260 |
| (1) | | | Severance—Severance – Represents a cash severance payment equal to 2.99 times the sum of the NEO'sNEO’s annual base salary atand “target bonus”.
| | (2) | Pro-rata Bonus Payment – Represents the timeannual bonus that would have been payable based upon the NEO’s Target Incentive Opportunity and the plan’s payout percentage (75% of target for 2020, as described above). Because the hypothetical termination is occurring on the last day of the termination andyear, the “target bonus.” Mr. Lonegro’s severance multiple was 2 timesamount in 2015. It was increased to 2.99 times on February 9, 2016.the table is not prorated. | | (3) | Pro-rata Target Bonus Payment—The “target bonus” pro-rated forEquity – Represents the numbervalue of daysoutstanding equity awards that would vest in connection with the calendar year prior to a hypothetical termination of employment as of December 25, 2015.
| | Equity—Fulltransaction, including LTIP payoutperformance units based on 100% attainment of target levels under the 2013-2015, 2014-20162018-2020, 2019-2021 and 2015-2017 LTIP cycles, as well as payout based on full vesting of outstanding RSUs2020-2022 LTIPs and restricted stock awards as of December 25, 2015, at a stockthe closing price of $26.13.
| | Welfare Benefit Values—Benefit Values – Estimated values associated with the continuation of medical, prescription, dental, disability, employee life, group life, accidental death and travel accident insurance for three years post-termination following a change-of-control. |
Table of Contents COMPENSATION DISCUSSION AND ANALYSIS Benefits Provided Following a Change-of-Control Each Change-of-Control Agreement provides that for a period of three years after a change-of-control (or, if later, 12 months following the final decision by an agency of a regulated business combination) (the “Employment Period”), CSX is required to: | n | Pay the executive an annual base salary that is at least equal to the highest base salary payable to the executive in the 12-month period immediately preceding the Employment Period (although certain reductions in salary that are also applicable to similarly-situated Company executives may be permitted); | | | Provide the executive with an opportunity to earn an annual incentive payment at a minimum, target and maximum level that is provided with outplacement services not less favorable than the executive’s opportunity to exceed $20,000.earn such annual incentives prior to the Employment Period (although certain reductions also applicable to similarly-situated Company executives may be permitted); and | | n | Ensure the executive is eligible to participate in incentive, retirement, health and group benefits and other retirement–related benefit plans and to benefit from paid vacation and other policies of CSX and its affiliates, on a basis not less favorable than the benefits generally available to the executive before the Employment Period (or the benefits generally available to other executives at any time after the beginning of the Employment Period, whichever is more favorable). |
Does
Benefits Provided if the Company provide tax gross-upsNEO’s Employment is Terminated Following a Change-of-Control Each Change-of-Control Agreement provides that CSX will pay to the NEO the severance benefits described below if, during the Employment Period, CSX terminates the NEO’s employment other than for excess parachute payments?
No. The Company does not provide gross-up paymentscause or disability, if the NEO resigns for excess parachute excise taxes.
Is theregood reason or upon a confidentiality clauseconstructive termination (as such terms are defined in the Change-of-Control Agreements?
Agreements). An NEO whose employment is terminated without cause in anticipation of a change-of-control is also entitled to the following benefits.Yes. Each
Cash Severance Payment—A lump sum cash severance payment equal to the sum of the Change-of-Control Agreements requires the NEO to keep confidential any proprietary information or data relating to CSXfollowing: | n | NEO’s “annual bonus” based upon the NEO’s target incentive opportunity and the plan’s achievement percentage pro-rated for the number of days in the calendar year prior to a termination of employment; and | | n | 2.99 times the sum of the NEO’s annual base salary and the NEO’s “target annual bonus”. |
Medical and its affiliates. AfterOther Group Benefits—The equivalent of continued medical and life insurance and other health and group benefits coverage for three years after termination of employment anat a level at least as favorable as the benefits provided to the NEO may not disclose confidential information without prior written permission from CSX. Are there any other “change-of-control” rightsduring the Employment Period (or the benefits then generally available to the NEOs other than those contained in the executives’executives, whichever is more favorable).
Outplacement—Outplacement services at a cost to CSX not to exceed $40,000. Other Change-of-Control Agreements?
BenefitsYes.
Pursuant to the terms of the Stock Plan,Plans, in the event of a change-of-control combined with involuntarytermination of employment termination, equity awards are impacted as follows: •
Performance grants at target levels and RSUs are payable immediately(i) by CSX without cause; (ii) by the NEO for good reason, in cash; and
•
Restricted stock immediately vests.
| n | Performance-based equity awards are deemed earned at target levels and cancelled in exchange cash payment equal to the fair market value of a share multiplied by the shares subject the awards at target levels; | | n | RSUs and unvested stock options are cancelled in exchange for a cash payment equal to the fair market value of a share, minus the exercise price, if applicable, multiplied by the number of shares subject to the award; and | | n | Restricted stock vests in full. |
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What is the impactTable of Contents
COMPENSATION DISCUSSION AND ANALYSIS Impact of a change-of-controlChange-of-Control on deferred compensationDeferred Compensation (EDCP) and retirement plan benefits?
Retirement Plan BenefitsIn accordance with the terms of the EDCP, distribution of the entire account balance shall be made to participants upon a change-of-control unless the individual participant elects otherwise. As discussed(as defined in the narrative accompanying the Pension Benefits Table, theEDCP). The Special Retirement Plan also contains certain change-of-control provisions. Back to ContentsNo Tax Gross-Ups for Excess Parachute Payments
▸REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee has reviewed and discussedCompany does not provide gross-up payments for excess parachute excise taxes. Rather, the Compensation Discussion and Analysis with management. Based on its review and onChange-of-Control Agreements provide that the discussion described above,Company will provide the Compensation Committee recommendedbest-net-benefit, meaning that to the full Board thatextent an NEO would have a higher net after-tax benefit if his or her payments were reduced so as to avoid excise taxes due to an excess parachute payment, the Compensation Discussion and Analysispayments will be includedautomatically adjusted downward to prevent an excess parachute payment. No amounts are reduced in this Proxy Statement.any of the tables to give effect to any such reduction. Steven T. Halverson, Chair
Donna M. Alvarado
Edward J. Kelly, III
Donald J. Shepard
J. Steven Whisler
Post-Employment Compensation - Termination Without Cause by the Company or by the Executive for Good Reason (Other than in connection with a Change-of-Control) The following table presents the severance benefits to which each of the NEOs would be entitled as of December 31, 2020, under the applicable severance arrangement assuming the NEO was terminated “without cause” by the Company or by the executive for “good reason.” | Name | | Severance(1) | | Stock
Awards(2) | | Option
Awards(2) | | Non-Equity
Incentive Plan
Compensation(3) | | Other
Compensation(4) | | Total
Compensation
Payable | | James M. Foote | | 6,500,000 | | 23,916,074 | | 20,583,573 | | 1,500,000 | | 59,464 | | 52,559,111 | | Kevin S. Boone | | 118,750 | | 1,755,983 | | 2,970,212 | | 320,625 | | 58,599 | | 5,224,169 | | Mark K. Wallace | | 2,090,000 | | 5,837,914 | | 5,922,820 | | 371,250 | | 78,484 | | 14,300,468 | | Jamie J. Boychuk | | 125,000 | | 1,947,207 | | 2,188,696 | | 337,500 | | 58,548 | | 4,656,951 | | Nathan D. Goldman | | 375,000 | | 3,487,553 | | 6,960,586 | | 337,500 | | 66,184 | | 11,226,823 |
| (1) | Severance – Per their employment agreements, Messrs. Foote and Wallace would each receive two times his annual salary plus two times his target annual bonus. All other NEOs have their severance payment determined by the management employee severance pay schedule based on tenure. Under the management severance policy, Mr. Goldman would receive nine months’ salary and Messrs. Boone and Boychuk would receive three months’ salary. | | (2) | Stock and Option Awards – This includes a prorated amount of all outstanding equity awards as of December 31, 2020, except for Mr. Foote, who would receive his full award (not prorated) per his respective employment agreement. However, all equity would be settled according to each grant’s original vesting schedule. All performance unit calculations in the table assume a target performance; however, actual vesting would be based on Company performance. All equity awards have been valued using the closing stock price on December 31, 2020 (the last trading day of 2020) of $90.75. The Option Awards have been calculated using the difference between the respective grant’s exercise price and the closing stock price on December 31, 2020, multiplied by the prorated number of Options held by the NEO. The prorated Options would remain outstanding until the end of their originally scheduled term. | | (3) | Non-Equity Incentive Plan Compensation - Represents the annual bonus that would have been payable based upon the NEO’s Target Incentive Opportunity and the plan’s payout percentage (75% of target for 2020, as described above). Because the hypothetical termination is occurring on the last day of the year, the amount in the table is not prorated. | | (4) | Other Compensation – Each NEO would be eligible to receive outplacement and financial planning services not to exceed $40,000 and $12,000, respectively. In addition, each would also have the option to continue their medical and dental benefits if they elected to receive their severance as monthly installments over the period their monthly severance payments are made. |
Back toTable of Contents
▸ITEM 3: ADVISORY VOTE TO APPROVE THE COMPENSATION OF CSX’S NAMED EXECUTIVE OFFICERS
In accordance with
As required by Section 951953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), and Item 402(u) of Regulation S-K, the Company is providing the following information about the ratio of the annual total compensation of CSX’s median employee and the annual total compensation of Mr. Foote. The pay ratio included in this information is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K. For 2020, the last completed fiscal year: | n | The annual total compensation of the individual identified as the Company’s median employee, other than the CEO, was $107,000. | | n | The annual total compensation of the CEO was $15,314,179. | | n | Based on this information, the ratio for 2020 of the annual total compensation of Mr. Foote to the annual total compensation of the median employee was 143 to 1. |
The Company identified a new median employee as of year-end 2020. To identify the median employee, as well as to determine the annual total compensation of Mr. Foote, the following analysis occurred: | 1. | As of December 31, 2020, the Company’s employee population consisted of approximately 19,300 employees. | | 2. | The median employee was identified by using 2020 Medicare Wages for all individuals, excluding Mr. Foote, that were reflected in the Company’s payroll records as reported to the Internal Revenue Service on Forms W-2 for 2020. | | 3. | All employees who were full-time, part-time, or seasonal, including management and union, as well as furloughed employees who received any wages within the calendar year were included in the analysis. Employees from the Company’s consolidated subsidiaries were also included. In accordance with SEC rules, all non-U.S. employees were excluded from the analysis. As of December 31, 2020, we employed 49 non-U.S. employees, all in Canada, which represented less than 1% of our overall employee population. | | 4. | Annualized compensation was determined for any full or part-time employees who were employed at year-end but did not work for the Company the entire fiscal year, including those who were furloughed for part of the year. No cost of living or other adjustments were made to compensation. | | 5. | The use of Medicare Wages is a consistently applied measure that includes all forms of taxable compensation, which we believe is most representative of the Company’s employee base since there are union and management workforces. | | 6. | Once the median employee was identified, the Company determined the sum of all elements of such employee’s compensation for 2020 in accordance with Item 402(c)(2)(x) of Regulation S-K, which resulted in annual total compensation of $107,000. The difference between such employee’s base salary, wages, and overtime pay ($85,001) and the employee’s total annual compensation was the value of the health care benefits for the employee and eligible dependents, which was $21,999. | | 7. | The annual total compensation for Mr. Foote includes the amount reported in the “Total” column of the Summary Compensation Table included in this Proxy Statement, which was determined in accordance with Item 402(c)(2)(x) of Regulation S-K, plus the added value of his health care benefits, which was $7,464. |
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| ITEM 3: Advisory (Non-Binding) Vote to Approve the Compensation of CSX’s Named Executive Officers | |
In accordance with the Dodd-Frank Act and Section 14A of the Securities Exchange Act of 1934, CSX is providing shareholders with the opportunity to vote on a non-binding, advisory resolution to approve the compensation of the Company'sCompany’s NEOs, which is disclosed pursuant to Item 402 of Regulation S-K and described in the CD&A section, the accompanying compensation tables and the related narrative disclosures in this Proxy Statement. Accordingly, the following resolution will be submitted for a shareholder vote at the Annual Meeting:
“RESOLVED, that the shareholders of CSX Corporation (the ”Company““Company”) approve, on an advisory (non-binding) basis, the compensation of the Company’s named executive officers,officers, as disclosed in the Compensation Discussion and Analysis, the accompanying compensation tables and the related narrative disclosure in the Proxy Statement.” The Company currently holds an advisory vote on the compensation of the Company’s NEOs on an annual basis (in accordance with the results of the advisory shareholder vote held at the Company’s 2017 Annual Meeting to determine the frequency of an advisory vote on NEO compensation), and will continue to hold the vote annually until the next frequency vote is held (which is not required until 2023). As described in the CD&A, the Company’s executive compensation program is designed to align executive pay with the Company’s financialfinancial performance and the creation of sustainable long-term shareholder value. The compensation program is structured to provide a competitive level of compensation necessary to attract and retain talented and experienced executives and to motivate them to achieve short-short and long-term strategic goals. In order to align executive pay with the Company’s financialfinancial performance and the creation of sustainable shareholder value, a significantsignificant portion of compensation paid to our NEOs is allocated to performance-based, long-term equity incentive awards. The Company makes compensation payout decisions based on an assessment of the Company’s performance, as well as the performance of each executiveNEO against goals that promote CSX’s success by focusing on shareholders, customers, employees and the communities in which we operate. Shareholders are urged to read the CD&A, the accompanying compensation tables and the related narrative disclosure in this Proxy Statement, which more thoroughly discuss the Company’s compensation policies and procedures. The Compensation and Talent Management Committee and the Board believe that these policies and procedures are effective in implementing the Company’s overall pay-for-performance compensation philosophy. While this advisory vote is required by law, it will neither be binding on the Company, the Compensation and Talent Management Committee or the Board, nor will it create or imply any change in the fiduciaryfiduciary duties of, or impose any additional fiduciaryfiduciary duties on, the Company or the Board. The Board and the Compensation and Talent Management Committee which is comprised entirely of independent directors, will consider the outcome of the vote when developing future executive compensation programs. The Company currently intends to hold the next advisory (non-binding) vote to approve NEO compensation at its 20172022 Annual Meeting, of Shareholders, unless the Board modifiesmodifies its policy of holding an advisory (non-binding) vote to approve the compensation of the Company’s NEOs on an annual basis.  | The Board unanimously recommends that the shareholders vote FOR this proposal. |
Table of Contents 
| Equity Compensation
Plan Information | THE BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” THIS PROPOSAL.
|
The following table sets forth information about the Company’s equity compensation plans as of December 31, 2020. | Plan category | | Number of securities to
be issued upon exercise
of outstanding options,
warrants and rights
(in thousands) | | Weighted-average
exercise price
of outstanding
options, warrants
and rights | | Number of securities
remaining available
for future issuance
under equity
compensation plans
(in thousands)(1) | | Equity compensation plans approved by security holders | | 4,217 | | $ 60.88 | | 12,470 | | Equity compensation plans not approved by security holders | | 0 | | 0 | | — | | TOTAL | | 4,217 | | $ 60.88 | | 12,470 |
| (1) | The number of shares remaining available for future issuance under plans approved by shareholders includes 12,470,120 shares available for grant in the form of stock options, performance grants, restricted stock, RSUs, stock appreciation rights and stock awards pursuant to the 2019 Stock Plan. |
| 64 | |
Table of Contents 
Back to Contents
Neither the BoardSecurity Ownership of Directors nor Management intends to bring before the Annual Meeting any business other than the matters referred to in the Notice of Meeting and this Proxy Statement. If any other matters are properly brought before the Annual Meeting, or any adjournment thereof, the persons appointed in the accompanying proxy will vote the shares represented thereby in accordance with their best judgment.Certain Beneficial Owners
▸SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of March 14, 2016,8, 2021, the beneficialbeneficial ownership of the Company’sCSX common stock by each director, director nominee and NEO, and the directors and executive officersofficers of the Company as a group. The business address of each of the Company’s directors and executive officersofficers is CSX Corporation, 500 Water Street, Jacksonville, FLFlorida 32202. | Name of Beneficial Owner(1) | | Amount of
Beneficial
Ownership | | Shares for which
Beneficial Ownership
can be Acquired
within 60 Days | | Total
Beneficial
Ownership | | Percent of
Class(2) | | Donna M. Alvarado | | 119,813 | | — | | 119,813 | | * | | Thomas P. Bostick | | 1,910 | | — | | 1,910 | | * | | James M. Foote | | 184,313 | | 567,235 | | 751,548 | | * | | Steven T. Halverson | | 96,846 | | — | | 96,486 | | * | | Paul C. Hilal(3) | | 2,521,735 | | — | | 2,521,735 | | * | | John D. McPherson | | 123,087 | | — | | 123,087 | | * | | David M. Moffett | | 19,599 | | — | | 19,599 | | * | | Linda H. Riefler | | 18,257 | | — | | 18,257 | | * | | Suzanne M. Vautrinot | | 4,168 | | — | | 4,168 | | * | | James L. Wainscott | | 1,910 | | — | | 1,910 | | * | | J. Steven Whisler | | 55,887 | | — | | 55,887 | | * | | John J. Zillmer | | 157,217 | | — | | 157,217 | | * | | Kevin. S. Boone | | 18,754 | | 37,444 | | 56,198 | | * | | Jamie J. Boychuk | | 21,106 | | 36,080 | | 57,186 | | * | | Nathan D. Goldman | | 95,787 | | 133,807 | | 229,594 | | * | | Mark K. Wallace | | 62,910 | | 156,409 | | 219,319 | | * | | All current executive officers and directors as a group (a total of 18) | | 3,567,246 | | 1,012,191 | | 4,579,437 | | * |
| | | | | | | Name of Beneficial Owner(1)
| Amount of
Beneficial
Ownership(2)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | All current executive officers and directors as a group (a total of 19)(10)
| | | | | | |
| | | Except as otherwise noted, the persons listed have sole voting power as to all shares reported, including shares held in trust under certain deferred compensation plans, and also have investment power except with respect to certain shares held in trust under deferred compensation plans, investment of which is governed by the terms of the trust. | | There were no options outstanding for any executive officer or director that was exercisable within 60 days of December 25, 2015.
| | Based on 957,310,947759,495,860 shares outstanding on March 14, 2016.8, 2021. An asterisk (*) indicates that ownership is less than 1% of class. | | (3) | The ownershipBy virtue of ultimately controlling the managing member of Mantle Ridge GP LLC, the general partner of Mantle Ridge LP, which is in turn the sole member of both MR S and P Index Annual Reports LLC and MR Argent Advisor LLC, and MR Employee Incentive Pool LLC, which holds shares of the Issuer on behalf of certain employees of Mantle Ridge LP, and MR GP HoldCo MM LLC, which hold shares of the Issuer on behalf of Mr. Ward excludes 74,722 restricted stock units vesting in May 2016; 62,322 restricted stock units vesting in May 2017; 49,143 restricted stock units vesting in February 2018; 87,277 restricted stock units vesting in February 2019;Hilal and 64,048his trust, Mr. Hilal may be deemed to have the shared power to vote or direct the vote of the shares of restricted stock vesting in May 2016.
|
| 2021 Proxy Statement | The ownership of Mr. Gooden excludes 21,349 restricted stock units vesting in May 2016; 17,806 restricted stock units vesting in May 2017; 14,041 restricted stock units vesting in February 2018; 24,244 restricted stock units vesting in February of 2019; and 21,349 shares of restricted stock vesting in May 2016.
| | The ownership of Mr. Lonegro excludes 2,135 restricted stock units vesting in May 2016; 1,781 restricted stock units vesting in May 2017; 1,404 restricted stock units vesting in February 2018; 14,546 restricted stock units vesting in February 2019; and 19,395 shares of restricted stock vesting in February 2021.
| | The ownership of Mr. Eliasson excludes 21,349 restricted stock units vesting in May 2016; 17,806 restricted stock units vesting in May 2017; 14,041 restricted stock units vesting in February 2018; 19,395 restricted stock units vesting in February 2019; 21,349 shares of restricted stock vesting in May 2018; and 19,395 shares of restricted stock vesting in February 2021.
| | The ownership of Ms. Sanborn excludes 3,202 restricted stock units vesting in May 2016; 2,671 restricted stock units vesting in May 2017; 10,531 restricted stock units vesting in February 2018; 19,395 restricted stock units vesting in February 2019; 20,670 shares of restricted stock vesting in April 2016; and 19,395 shares of restricted stock vesting in February 2021.
| | The ownership of Ms. Fitzsimmons excludes 16,012 restricted stock units vesting in May 2016; 13,355 restricted stock units vesting in May 2017; 10,531 restricted stock units vesting in February 2018; and 14,546 restricted stock units vesting in February 2019.
| | Excludes 715,576 unvested shares of restricted stock and restricted stock units.
|
Table of Contents OWNERSHIP OF OUR STOCK Back to Contents
The following table sets forth information regarding the beneficialbeneficial ownership of CSX common stock as of March 14, 20168, 2021 for each person known to us to be the beneficialbeneficial owner of more than 5% of the outstanding shares of CSX common stock. | | | | | | | | Name and Address of Beneficial Owner | Amount of
Beneficial
Ownership | | Capital Research Global Investors(1) | | | | | | | | | | | | | |
Name and Address of Beneficial Owner | | Amount of
Beneficial Ownership | | Percent of
Class | BlackRock, Inc.(1)
55 East 52nd Street
New York, NY 10055 | | 47,701,700 | | 6.2 | Capital Research Global Investors(2)
333 South Hope Street
Los Angeles, CA 90071 | | 52,107,116 | | 6.8 | Capital World Investors(2)
333 South Hope Street
Los Angeles, CA 90071 | | 70,004,980 | | 9.2 | The Vanguard Group(3)
100 Vanguard Blvd.
Malvern, PA 19355 | | 62,475,594 | | 8.17 |
| (1) | | | As disclosed in its Schedule 13G/A filedfiled on February 16, 2016. | | As disclosed in its Schedule 13G/A filedfiled on February 16, 2021. | | (3) | As disclosed in its Schedule 13G/A filed on February 10, 2016.2021. |
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▸Table of ContentsSECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company’s directors and executive officers, and any certain persons owning more than 10% of the Company’s common stock, to file certain reports of ownership and changes in ownership with the SEC. Based solely on its review of the copies of Forms 3, 4 and 5, the Company believes that all reports required to be filed under Section 16(a) were made on a timely basis with respect to transactions that occurred during fiscal 2015, except as previously disclosed in our 2015 Proxy Statement.
▸EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth information about the Company’s equity compensation plans as of December 25, 2015.
| | | | | | | | | | | | Number of securities to
be issued upon exercise
of outstanding options,
warrants and rights
(in thousands) | Weighted-average
exercise price of
outstanding options,
warrants and rights | Number of securities
remaining available for
future issuance under equity
compensation plans(1)
(in thousands) | Equity compensation plans approved by security holders | | | | | | | | | | Equity compensation plans not approved by security holders | | | | | | | | | | | | | | | | | | | |
| Additional Information | | | The number of shares remaining available for future issuance under plans approved by shareholders includes 31,488,431 shares available for grant in the form of stock options, performance grants, restricted stock, RSUs, stock appreciation rights and stock awards pursuant to the 2010 CSX Stock and Incentive Award Plan.
|
Back to Contents
▸“HOUSEHOLDING” OF PROXY MATERIALS
The SEC’s rules permit companies and intermediaries (e.g., brokers, banks and other nominees) to satisfy the delivery requirements for proxy statements with respect to two or more security holders sharing the same address by delivering a single proxy statement addressed to those security holders. This process, which is commonly referred to as “householding,” potentially means extra convenience for security holders and cost savings for companies.
As in prior years, a number of brokers with account holders who are CSX shareholders will be “householding” our proxy materials. As indicated in the notice previously provided by these brokers to CSX shareholders, a single copy of the proxy materials will be delivered to multiple shareholders sharing an address unless contrary instructions have been received from an affected shareholder. Once you have received notice from your broker that it will be “householding” communications to your address, “householding” will continue until you are notified otherwise or until you revoke your consent. Shareholders who participate in “householding” continue to receive separate proxy cards, voting instructions or notice of internet availability, as applicable, which will allow each individual to vote independently.
If you are a registered shareholder currently participating in householding and wish to receive a separate copy of the proxy materials, or if you would like to opt out of householding for future deliveries of your annual proxy materials, please contact us at CSX Corporation, Office of the Corporate Secretary, 500 Water Street, C160, Jacksonville, FL 32202, or by telephone at (904) 366-4242. If a separate copy of this Proxy Statement and the 2015 Annual Report is requested for the Annual Meeting, it will be mailed promptly following receipt of the request.
A street name shareholder who received a copy of the proxy materials at a shared address may request a separate copy of the Proxy Statement and the 2015 Annual Report by contacting us at CSX Corporation, Office of the Corporate Secretary, 500 Water Street, C160, Jacksonville, FL 32202, or by telephone at (904) 366-4242.
Street name shareholders sharing an address who received multiple copies of the annual proxy materials and wish to receive a single copy of these materials in the future should contact their broker, bank or other nominee to make this request. If you would like to opt out of householding for future deliveries of your annual proxy materials, please contact your broker, bank or other nominee.
Back to Contents
▸NOTICE OF ELECTRONIC AVAILABILITY OF PROXY MATERIALS
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders Meeting to be held on May 11, 2016.7, 2021. This Proxy Statement and 2015the 2020 Annual Report on Form 10-K are available at www.proxyvote.com. As permitted by rules adopted by the SEC, we are making our proxy materials available to our shareholders electronically via the Internet. We have mailed many of our shareholders a Notice containing instructions on how to access this Proxy Statement and ourthe 2020 Annual Report and vote online. If you received a Notice by mail, you will not receive a printed copy of the proxy materials in the mail. Instead, the Notice instructs you on how to access and review all of the important information contained in the Proxy Statement and the 2020 Annual Report. The Notice also instructs you on how you may submit your voting instructions over the Internet. If you received a Notice by mail and would like to receive a printed copy of our proxy materials, you should follow the instructions for requesting such materials included in the Notice.
Annual Report on Form 10-K Our 2015
The 2020 Annual Report (without exhibits) is available on www.csx.com. Our 2015The 2020 Annual Report (with exhibits) is also available on the website maintained by the SEC (www.sec.gov(www.sec.gov)). The information on or accessible through our website is not part of this Proxy Statement. You may submit a request for a printed version of the 20152020 Annual Report in one of the following manners: •
Send your request by mail to CSX Corporation, Investor Relations, 500 Water Street, Jacksonville, Florida 32202; or
•
Call CSX Investor Relations at (904) 366-5353.
| n | Send your request by mail to CSX Corporation, Shareholder Relations, 500 Water Street, Jacksonville, Florida 32202; or | | n | Call CSX Shareholder Relations at (904) 359-3256. |
By Order of the Board of Directors Ellen M. Fitzsimmons
Nathan D. Goldman Executive Vice President-Law and Public AffairsPresident-Chief Legal Officer
General Counsel and Corporate Secretary Table of Contents Back to ContentsA street name shareholder who received a copy of the proxy materials at a shared address may also request a separate copy of the Proxy Statement and the 2020 Annual Report by contacting us at CSX Corporation, Office of the Corporate Secretary, 500 Water Street, C160, Jacksonville, Florida 32202, or by telephone at (904) 359-3256.
Street name shareholders sharing an address who received multiple copies of the annual proxy materials and wish to receive a single copy of these materials in the future should contact their broker, bank or other nominee to make this request. If you would like to opt out of householding for future deliveries of your annual proxy materials, please contact your broker, bank or other nominee. | 68 | |
Table of Contents 
| Annual Meeting
Questions & Answers | |
| Q: What is the purpose of the Annual Meeting? | | A: At the Annual Meeting, shareholders will act upon the matters outlined in the Notice of Annual Meeting of Shareholders above, including the election of the 11 director nominees named in this Proxy Statement, the ratification of the appointment of EY as the Independent Registered Public Accounting Firm of CSX for 2021 and the consideration of an advisory (non-binding) vote on compensation for our Named Executive Officers. | | | Q: How can I participate in the Annual Meeting? | | A: This year, CSX will host its virtual Annual Meeting at 10:00 a.m. (EDT) on Friday, May 7, 2021. There will be no physical location for shareholders to attend. Shareholders may participate online at www.virtualshareholdermeeting.com/CSX2021. The Annual Meeting will begin promptly at 10:00 a.m. (EDT). We encourage you to access the Annual Meeting prior to the start time. Online access will be available beginning at 9:45 a.m. (EDT). | | To participate in the Annual Meeting, including to vote your shares electronically and submit questions during the Annual Meeting, you will need the 16-digit control number included on your proxy card or on your Notice. Even if you plan to participate in the Annual Meeting, we recommend that you vote by proxy prior to the Annual Meeting so that your vote will be counted if you later decide not to participate in the Annual Meeting. | | The virtual meeting platform is fully supported across browsers (Internet Explorer, Firefox, Chrome and Safari) and devices (desktops, laptops, tablets and cell phones) running the most updated version of applicable software and plugins. Participants should ensure that they have a strong internet connection wherever they intend to participate in the Annual Meeting. | | | Q: How can I submit a question? | | A: If you would like to submit a question, you may do so before or during the Annual Meeting. If you would like to submit your question any time before the start of the meeting, you may log in to www.proxyvote.com and enter your 16-digit control number. Once past the login screen, click on “Question for Management,” type in your question, and click “Submit.” Alternatively, if you would like to submit your question during the Annual Meeting, you may log in to the virtual meeting website at www.virtualshareholdermeeting.com/CSX2021 using your 16-digit control number, type your question into the “Ask a Question” field, and click “Submit,” or call 1-877-328-2502. | | We do not place restrictions on the type or form of questions that may be asked; however, we reserve the right to edit or reject redundant questions or questions that we deem profane or otherwise inappropriate. During the live Q&A session of the Annual Meeting, we will answer questions as they come in and address those asked in advance, as time permits. Shareholders will be limited to one question each unless time otherwise permits. |
Table of Contents ANNUAL MEETING QUESTIONS & ANSWERS | Q: What is the benefit of a virtual meeting? | | A: The Board believes that a virtual meeting format will provide the opportunity for full and equal participation by all shareholders, from any location around the world, while substantially reducing the costs associated with hosting an in-person meeting. Additionally, a virtual meeting format reduces health and safety risks associated with the ongoing COVID-19 pandemic to our officers, directors, employees and shareholders. | | In order to encourage shareholder participation and transparency, CSX will: | | n | provide shareholders with the ability to submit appropriate questions in advance of the Annual Meeting to ensure thoughtful responses from management and the Board; | | n | provide shareholders with the ability to submit appropriate questions in real-time during the Annual Meeting through the virtual meeting website; | | n | provide management with the ability to answer as many questions as possible in accordance with the meeting rules of conduct in the time allotted for the Annual Meeting without discrimination; and | | n | publish all appropriate questions submitted in accordance with the Annual Meeting rules of conduct with answers following the Annual Meeting, including those not addressed directly during the Annual Meeting. | | CSX has considered concerns raised by investor advisory groups and other shareholder rights advocates that virtual meetings may diminish stockholder voice or reduce accountability. Accordingly, we have designed our virtual meeting format to enhance, rather than constrain, shareholder access, participation and communication. CSX believes its virtual meeting will afford a greater number of our shareholders the opportunity to participate in the Annual Meeting while (i) still affording participants the same rights they would have had at an in-person meeting, (ii) substantially reducing the time and expense associated with holding an in-person meeting and (iii) substantially reducing the health and safety risks in connection with the ongoing COVID-19 pandemic. | | | Q: What if I have technical difficulties or trouble accessing the virtual meeting? | | A: We will have technicians ready to assist you with any technical difficulties you may have accessing the virtual meeting. If you encounter any difficulties accessing the virtual meeting during the check-in or meeting time, please call the technical support number that will be posted on the Virtual Shareholder Meeting log-in page or at www.proxyvote.com. Technical support will be available starting at 9:00 a.m. EDT on May 7, 2021. | | | Q: Why did I receive a notice in the mail regarding the Internet availability of proxy materials instead of a full set of proxymaterials? | | A: In accordance with rules adopted by the SEC, we may furnish proxy materials, including this Proxy Statement and our 2020 Annual Report, to our shareholders by providing access to such documents on the Internet instead of mailing printed copies. Most shareholders will not receive printed copies of the proxy materials unless requested. Instead, the Notice, which was mailed to most of our shareholders, instructs you as to how you may access and review all of the proxy materials on the Internet. The Notice also instructs you as to how you may submit your proxy on the Internet. If you would like to receive a paper or email copy of our proxy materials, you should follow the instructions for requesting such materials in the Notice. | | | Q: How do I get electronic access to the proxy materials? | | A: The Notice provides you with instructions on how to: | | n | view CSX’s proxy materials for the Annual Meeting on the Internet; and | | n | instruct CSX to send future proxy materials to you electronically by email. | | Choosing to receive your future proxy materials by email will save us the cost of printing and mailing documents to you and will reduce the impact of the printing and mailing of these materials on the environment. If you choose to receive future proxy materials by email, you will receive an email next year with instructions containing a link to those materials and a link to the proxy voting site. Your election to receive proxy materials by email will remain in effect until terminated. |
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Table of Contents ANNUAL MEETING QUESTIONS & ANSWERS | Q: Who is soliciting my vote? | | A: The Board of Directors is soliciting your vote on the matters being submitted for shareholder approval at the Annual Meeting. The Company will pay the costs of preparing proxy materials and soliciting proxies, including the reimbursement, upon request, of trustees, brokerage firms, banks and other nominee record holders for the reasonable expenses they incur to forward proxy materials to beneficial owners. In addition to using mail, proxies may be solicited in person, by telephone or by electronic communication by officers and employees of the Company acting without special compensation. | | | Q: Who is entitled to vote? | | A: Only shareholders of record at the close of business on March 8, 2021 (the “Record Date”) are entitled to notice of, and to vote at, the Annual Meeting or any adjournments or postponements thereof, unless a new record date is set in connection with any such adjournments or postponements. On March 8, 2021, there were issued and outstanding 759,495,860 shares of CSX common stock, the only outstanding class of voting securities of the Company. | | | Q: How many votes do I have? | | A: You will have one vote for every share of CSX common stock you owned at the close of business on the Record Date. | | | Q: How many shares must be present to hold the Annual Meeting? | | A: The Company’s bylaws provide that a majority of the outstanding shares of stock entitled to vote constitutes a quorum at any meeting of shareholders. If a share is represented for any purpose at the Annual Meeting, it is deemed to be present for the transaction of all business. Abstentions and shares held of record by a broker, bank or other nominee that are voted on any matter are included in determining the number of shares present. | | Shares held by a broker, bank or other nominee that are not voted on any matter at the Annual Meeting (“broker non-vote”) will not be included in determining whether a quorum is present. | | Your vote is important and we urge you to vote by proxy even if you plan to participate in the Annual Meeting. | | | Q: What are the vote requirements for each proposal? | | A:Election of Directors. In an uncontested election, a director is elected by a majority of votes cast for his or her election by the shares entitled to vote at a meeting at which a quorum is present. In accordance with the Company’s Corporate Governance Guidelines, in an uncontested election, any incumbent director nominated for re-election as a director who is not re-elected in accordance with the Company’s bylaws is required to promptly tender his or her resignation for consideration following certification of the shareholder vote. For more information on the procedures in these circumstances, see Principles of Corporate Governance. | | Other Proposals. The proposal to ratify the appointment of EY as the Company’s Independent Registered Public Accounting Firm for 2021 (Item 2) and the proposal to approve, on an advisory (non-binding) basis, of the compensation of the Company’s NEOs (Item 3) will be approved if the votes cast in favor of the proposal exceed the votes cast against the proposal. | | Abstentions are not considered votes cast on any proposal and will have no effect on the outcome of the vote for Items 1, 2, or 3. “Broker non-votes” are not considered votes cast on Items 1 or 3, and will have no effect on the outcome of the vote. Brokers will have discretionary voting power regarding Item 2 in the event that beneficial owners, who own their shares in “street name,” do not provide voting instructions regarding Item 2. |
Table of Contents ANNUAL MEETING QUESTIONS & ANSWERS | Q: How do I vote? | | A: To vote by proxy, you must do one of the following: | | Vote by Internet.If you are a shareholder of record, you can vote your shares via the Internet 24 hours a day by following the instructions in the Notice. The website address for Internet voting is indicated in the Notice. If you are a beneficial owner, or you hold your shares in “street name” (that is, through a bank, broker or other nominee), please check your voting instruction card or contact your bank, broker or nominee to determine whether you will be able to vote via the Internet. | | Vote by Telephone.If you are a shareholder of record, you can vote your shares by telephone 24 hours a day by calling 1-800-690- 6903 on a touch-tone telephone. Easy-to-follow voice prompts enable you to vote your shares and confirm that your instructions have been properly recorded. If you are a beneficial owner, or you hold your shares in “street name,” please check your voting instruction card or contact your bank, broker or nominee to determine whether you will be able to vote by telephone. | | Vote by Mail.If you requested printed proxy materials and choose to vote by mail, complete, sign, date and return your proxy card in the postage-paid envelope provided if you are a shareholder of record or your voting instruction card if you hold your shares in “street name.” Please promptly mail your proxy card or voting instruction card to ensure that it is received prior to the Annual Meeting. | | To vote during the Annual Meeting, you must visit www.virtualshareholdermeeting.com/CSX2021 at the time of the Annual Meeting and enter the 16-digit control number included on your proxy card or on your Notice. Even if you plan to participate in the Annual Meeting, we recommend that you vote by proxy as described above prior to the Annual Meeting so that your vote will be counted if you later decide not to participate in the Annual Meeting. | | | Q: Can I change my vote? | | A: Yes. If you are a shareholder of record, you may change your vote or revoke your proxy any time before it is voted (i) by delivering written notice to CSX Corporation, Office of the Corporate Secretary, 500 Water Street, C160, Jacksonville, Florida 32202, (ii) by timely delivering a later-dated signed proxy card or written revocation, or (iii) by a later vote via the Internet, by telephone or by voting at the Annual Meeting using the 16-digit control number included on your proxy card or your Notice. If you hold your shares in “street name,” you should follow the instructions provided by your bank, broker or other nominee if you wish to change your vote. | | | Q: Will my shares be voted if I do not provide voting instructions to my broker? | | A: If you hold your shares in “street name” through a bank, broker or other nominee, the bank, broker or other nominee is required to vote those shares in accordance with your instructions. If you do not give instructions to the banker, broker or other nominee, the bank, broker or other nominee will be entitled to vote your shares with respect to “discretionary” items but will not be permitted to vote your shares with respect to “non-discretionary” items (those shares are treated as “broker non-votes”). | | The proposal to ratify the appointment of EY as CSX’s Independent Registered Public Accounting Firm for 2021 is considered a routine matter for which a bank, broker or other nominee will have discretionary voting power if you do not give instructions with respect to this proposal. The proposals to: (i) elect directors; and (ii) vote on an advisory (non-binding) resolution on executive compensation are non- routine matters for which a bank, broker or other nominee will not have discretionary voting power and for which specific instructions from owners who hold their shares in “street name” are required in order for a broker to vote your shares. | | | Q: What happens if I return my proxy card but do not give voting instructions? | | A: If you are a shareholder of record and sign, date and return the proxy card but do not give voting instructions, the shares represented by that proxy will be voted as recommended by the Board. | | The Board unanimously recommends a vote: | | 1. | FORthe election of the 11 director nominees named in this Proxy Statement; | | 2. | FOR the ratification of the appointment of EY as CSX’s Independent Registered Public Accounting Firm for 2021; and | | 3. | FOR the approval, on an advisory (non-binding) basis, of the compensation of the Named Executive Officers as disclosed in these materials. |
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Table of Contents ANNUAL MEETING QUESTIONS & ANSWERS | Q: What happens if other matters are properly presented at the Annual Meeting? | | A: If any other matters are properly presented for consideration at the Annual Meeting, the persons named as proxies on the enclosed proxy card will have discretion to vote on those matters for you. On the date we filed this Proxy Statement with the SEC, the Board did not know of any other matters to be brought before the Annual Meeting. | | | Q: How are votes counted? | | A: Votes are counted by an independent inspector of elections appointed by the Company. | | | Q: What happens if the Annual Meeting is postponed or adjourned? | | A: Unless a new record date has been fixed, your proxy will still be in effect and may be voted at the reconvened meeting. You will still be able to change your vote or revoke your proxy with respect to any item until the polls have closed for voting on such item. | | | Q: What is the deadline for consideration of shareholder proposals for the 2022 Annual Meeting of Shareholders? | | A:Shareholder Proposals for Inclusion in Next Year’s Proxy Statement.A shareholder who wants to submit a proposal to be included in the proxy statement for the 2022 Annual Meeting must send the proposal to CSX Corporation, Office of the Corporate Secretary, 500 Water Street, C160, Jacksonville, Florida, 32202, so that it is received on or before November 22, 2021, unless the date of the 2022 Annual Meeting is changed by more than 30 days from May 7, 2022, in which case the proposal must be received a reasonable time before the Company begins to print and mail its proxy materials for the 2022 Annual Meeting. | | Shareholder Proposals or Director Nominees Not to be Included in Next Year’s Proxy Statement. A shareholder who wants to nominate a director or submit a proposal that will not be in the proxy statement but will be considered at the 2022 Annual Meeting, pursuant to the CSX bylaws, must send notice and the required information to CSX Corporation, Office of the Corporate Secretary, 500 Water Street, C160, Jacksonville, FL 32202, so that it is received no earlier than the close of business on January 6, 2022, nor later than the close of business on February 6, 2022, unless the date of the 2022 Annual Meeting is more than 30 days before or more than 70 days after May 7, 2022, in which case the nomination or proposal must be received no earlier than the 120th day prior to the date of the 2022 Annual Meeting and no later than the close of business on the later of the 90th day prior to the date of the 2022 Annual Meeting or the 10th day following the day on which the Company first publicly announces the date of the 2022 Annual Meeting. | | Director Nominees for Inclusion in Next Year’s Proxy Statement (Proxy Access).The Company’s bylaws provide “proxy access” by allowing a shareholder, or a group of up to 20 shareholders, owning 3% or more of the Company’s outstanding common stock continuously for at least three years to submit director nominees (up to the greater of two directors or the number of directors representing 20% of the Board) for inclusion in the Company’s proxy statement, subject to the other requirements set forth in the bylaws. To include a director nominee in the Company’s proxy statement for the 2022 Annual Meeting, the proposing shareholder(s) must send notice and the required information to CSX Corporation, Office of the Corporate Secretary, 500 Water Street, C160, Jacksonville, Florida, 32202, so that it is received by November 22, 2021. | | | Q: Does the Board consider director nominees recommended by shareholders? | | A: Yes. The Governance and Sustainability Committee of the Board will review recommendations as to possible nominees received from shareholders and other qualified sources. The Governance and Sustainability Committee will evaluate possible nominees received from shareholders using the same criteria it uses for other director nominees. Shareholder recommendations should be submitted in writing addressed to the Chair of the Governance and Sustainability Committee, CSX Corporation, 500 Water Street, C160, Jacksonville, Florida 32202, and should include a statement about the qualifications and experience of the proposed nominee. Shareholders who wish to nominate a director nominee should do so in accordance with the nomination provisions of the Company’s bylaws. A shareholder nomination for the 2022 Annual Meeting must be delivered to the Company within the time periods described above and set forth in the Company’s bylaws. |
Table of Contents 
Table of Contents 
CSX CORPORATION
C/O BROADRIDGE
P.O. BOX 1342
BRENTWOOD, NY 11717 VOTE BY INTERNET
Before The Meeting - Go to www.proxyvote.com/csx or scan the QR Barcode above
Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. Eastern Time on May 10, 2016.6, 2021. Follow the instructions to obtain your records and to create an electronic voting instruction form. ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS
If you would likeDuring The Meeting - Go to reducewww.virtualshareholdermeeting.com/CSX2021
You may attend the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronicallymeeting via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and when prompted, indicatevote during the meeting. Have the information that you agree to receive or access proxy materials electronicallyis printed in future years.the box marked by the arrow available and follow the instructions. VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. Eastern Time on May 10, 2016.6, 2021. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: | | | | D37347-P51086 | E06413-P72320
| KEEP THIS PORTION FOR YOUR RECORDS | | | DETACH AND RETURN THIS PORTION ONLY | THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. |
CSX CORPORATION
| | CSX CORPORATION | | | | | | | The Board of Directors recommends you vote FOR
Proposals 1, 2 and 3.
| | | | | | | | | | | | | The Board of Directors recommends you vote FOR Proposals 1, 2 and 3. | | | | | | | | | | | | | | | | | | 1. | Election of Directors | | | | | | | | | | | | | | | | |
| | Nominees: | | For | | Against | | Abstain | | | | | | | | | | | | 1a. | Donna M. Alvarado | | o | | o | | o | | | | | | | | | | | | | 1b. | Thomas P. Bostick | | o | | o | | o | | | | | | | | | | | | | 1c. | James M. Foote | | o | | o | | o | | | | | | | | | | | | | 1d. | Steven T. Halverson | | o | | o | | o | | | | | | | | | | | | | 1e. | Paul C. Hilal | | o | | o | | o | | | | | | | | | | | | | 1f. | David M. Moffett | | o | | o | | o | | | | | | | | | | | | | 1g. | Linda H. Riefler | | o | | o | | o | | | | | | | | | | | | | 1h. | Suzanne M. Vautrinot | | o | | o | | o | | | | | | | | | | | | | 1i. | James L. Wainscott | | o | | o | | o | | | | | | | | | | | | | | | 1a. 1j. | D. M. Alvarado | | ☐ | | ☐ | | ☐ | | J. Steven Whisler | | o | | o | | | | | | | | 1b. | J. B. Breaux | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | 1c. | P. L. Carter | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | 1d. | S. T. Halverson | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | 1e. | E. J. Kelly, III | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | 1f. | J. D. McPherson | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | 1g. | D. M. Moffett | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | 1h. | T. T. O'Toole | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | 1i. | D. M. Ratcliffe | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | 1j. | D. J. Shepard | | ☐ | | ☐ | | ☐ |
| For address changes and/or comments, please check this box and write them on the back where indicated. | | ☐ | | | | | | | | | | Please indicate if you plan to attend this meeting. | | ☐ | | ☐ | | | | | | | | | | | | Note: Please sign as name appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such. | | Yes | | No | | |
| | | | | | | | | | | | | For
| | Against
| | Abstain
o | | | | | | | | | | | | | | | 1k. | M.John J. WardZillmer | | ☐o | | ☐o | | ☐o | | | | | | | | | | | |
| | 1l. | J. S. Whisler | | ☐ | | ☐ | | | ☐ | | | | For | | Against | | Abstain | | | | | | | | | | | | | | | | | | | | 2. | | The ratification of the appointment of Ernst & Young LLP as the Independent Registered Public Accounting Firm for 2016;2021; and | | ☐o | | ☐ | | ☐ | | | o | | o | | | | | | | | | | | 3. | | Advisory (non-binding) resolution to approve compensation for the company'sCompany’s named executive officers. | | ☐ | | ☐o | | ☐o | | o | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
 | | 
In appreciation for submitting your vote for the CSX Annual Meeting and to further our commitment to environmental stewardship, a tree will be planted on your behalf in a protected park or wildlife refuge. | | | | Thank You! |
| Note: Please sign as name appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such. | | | | | | | | | | | | | | | Signature [PLEASE SIGN WITHIN BOX] | Date | | Signature (Joint Owners) | Date | |
Table of Contents Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The Notice and Proxy Statement and Annual Report are available at www.proxyvote.com/csx.
E06414-P72320
| | D37348-P51086 |
CSX CORPORATION
This Proxy is solicitedSolicited on Behalf of the Board of Directors for the Annual Meeting of Shareholders
to be held on May 11, 20167, 2021 The undersigned hereby appoints MICHAEL J. WARD, ELLEN M. FITZSIMMONSNATHAN D. GOLDMAN and MARK D. AUSTIN, and each of them, as proxies, each with full power of substitution, to act and vote the shares which the undersigned is entitled to vote at the Annual Meeting of Shareholders to be heldhosted online at www.virtualshareholdermeeting.com/CSX2021 on May 11, 2016,7, 2021, at 10:00 a.m. (EDT), at The St. Regis Atlanta, Eighty-Eight West Paces Ferry Road, Atlanta, Georgia 30305, and at all adjournments or postponements thereof, and authorizes them to represent and to vote all stock of the undersigned on the proposals listed on the reverse side of this card as directed and, in their discretion, upon such other matters as may properly come before the meeting, all as more fully described in the Proxy Statement. The proxy will be voted as directed. If no direction is made, the proxy will be voted: (a) "FOR" the election of the director nominees“FOR” Proposals 1, 2 and (b) in accordance with the recommendations of the Board of Directors on the other matters referred to on the reverse side.3. Your Internet or telephone vote authorizes the named proxies to vote the shares in the same manner as if you marked, signed and returned your proxy card. If you vote your proxy via the Internet or by telephone, please DO NOT mail back this proxy card. Proxies submitted by telephone or the Internet must be received by 11:59 P.M.p.m. Eastern Time on Tuesday,Thursday, May 10, 2016.6, 2021. Address Changes/Comments: | | | |
(If you noted any Address Changes/Comments above, please mark corresponding box on the reverse side.)
Continued and to be signed on reverse side
|
Significant percentage of executive compensation that is performance-based
Re-pricing of 
