| The primary functions of the Audit Committee include oversight of: (i) the integrity of the Company’s financial statements and accounting methodology; (ii) the Company’s compliance with legal and regulatory requirements; (iii) the Independent Auditors’ qualifications and independence; (iv) the Company’s risk management processes; (v) the performance of the Independent Auditors; and (vi) the Company’s internal audit function.
The Audit Committee recommends the appointment of the Independent Auditors and the Board approves the selection. This appointment is then submitted to shareholders for ratification. The Audit Committee also approves compensation of the Company’s Independent Auditors, reviews the scope and methodology of the Independent Auditors’ proposed audits, reviews the Company’s financial statements, and monitors the Company’s internal control over financial reporting by, among other things, discussing certain aspects thereof with the Independent Auditors and management. The Audit Committee is responsible for the approval of all services performed by the Independent Auditors. Finally, the Committee maintains procedures for the receipt and treatment of complaints regarding the Company’s accounting, internal accounting controls or auditing matters.
The Audit Committee has five members, each of whom the Board has determined to be independent pursuant to the independence standards promulgated by Nasdaq and the SEC. Additionally, all members of the Audit Committee are “financially literate.”
The Board has determined that Messrs. Shepard and Whisler are audit committee financial experts, as that term is definedaudit committee financial experts, as that term is defined 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
|  |
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ITEM 1: ELECTION OF DIRECTORS
| Compensation
and Talent
Management
Committee | Meetings in 2021:8 | Independent Members: 5/5 | | | | | | | | |
| The primary functions of the Compensation Committee are to: (i) establish the Company’s philosophy with respect to executive compensation and benefits; (ii) review the Company’s compensation practices and policies, benefit plans, and perquisites applicable to all employees and executives to ensure consistency with the Company’s compensation philosophy; (iii) assure that the Company’s benefit plans, practices, programs and policies maintained for employees and directors comply with all applicable laws; (iv) in consultation with the Board, review and approve corporate goals and objectives relevant to compensation and benefits 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 benefits for key employees as determined by the 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) 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 Committee monitors the administration of certain executive and management compensation and benefit programs.
The Compensation Committee has five members, all of whom are: (i) “outside directors” within the meaning of regulations promulgated pursuant to Section 162(m); (ii) “non-employee directors” within the meaning of Rule 16b-3 of Securities and Exchange Act of 1934; and (iii) 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.
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.
Members | Steven T. Halverson
(Chair)
Donna M. Alvarado
EdwardLinda H. Riefler | James L. Wainscott
John J. Kelly, IIIZillmer |  | |
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; (ii) review the Company’s compensation practices and policies, benefit plans and perquisites applicable to all employees and executives to ensure consistency with the Company’s compensation philosophy; (iii) monitor the Company’s benefit plans, practices, programs and policies maintained for employees and directors for compliance with all applicable laws; (iv) in consultation with the Board, review and approve corporate goals and objectives relevant to compensation and benefits for the CEO, 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; and (v) 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. The Compensation and Talent Management Committee also is responsible for the oversight of human capital management including review of the Company’s leadership development, performance management and talent acquisition programs. In addition, the Compensation and Talent Management Committee has oversight responsibilities with respect to the Company’s plans and processes for promoting diversity, pay equity and inclusion. The Compensation and Talent Management Committee has also retained the services of an independent compensation consultant to advise on executive compensation matters. The role of the compensation consultant is described in the CD&A section of this Proxy Statement. The Compensation and Talent Management Committee has five members each of whom qualifies as: (i) a “non-employee director” within the meaning of Rule 16b-3 of Securities and Exchange Act of 1934; and (ii) independent pursuant to the independence standards promulgated by NASDAQ. | Finance
Donald J. ShepardCommittee | Meetings in 2021: 5 | Independent Members:5/5 | | | | | | | | |
| Committee
Members | J. Steven Whisler |
(Chair)
Thomas P. Bostick
Paul C. Hilal | | | | The Finance Committee provides general oversight and review of financial matters affecting the Company, including the monitoring of corporate debt, cash flow, and the assets and liabilities maintained by the Company and its affiliates in conjunction with employee benefit plans, including monitoring the funding and investment policies and performances of the assets. In addition, the Committee reviews and recommends policies and practices related to dividends and share repurchases programs.
| John D. McPherson
David M. Moffett
Timothy T. O’Toole
|  | |
The primary functions of the Finance Committee include: (i) providing general oversight with respect to the Company’s capital structure, cash flows and key financial ratios; (ii) reviewing and monitoring corporate debt, cash flow; (iii) recommending policies and practices related to dividends and share repurchase programs, and (iv) authorizing the issuance of debt or other securities, or other forms of financing; and (v) reviewing the assets and liabilities maintained by the Company and its affiliates in conjunction with employee benefit plans, including monitoring the funding and investment policies and performances of the assets. The Finance Committee has five members each of whom the Board has determined to be independent under the applicable NASDAQ rules. The Finance Committee may, under its charter, delegate all or a portion of its duties and responsibilities to a subcommittee of the Committee as appropriate and consistent with applicable regulations, laws and listing standards.
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ITEM 1: ELECTION OF DIRECTORS
| Governance and
Sustainability
Committee | Meetings in 2021: 6 | Independent Members:5/5 | | | | | | | | |
| Committee
Members | Linda H. Riefler (Chair)
Thomas P. Bostick
Paul C. Hilal | Suzanne M. Vautrinot
John J. Zillmer |  | |
The Governance and Sustainability Committee’s primary responsibilities include: (i) identifying individuals qualified to become Board members, consistent with criteria approved by the Board, and recommending candidates for election to the Board and its committees, (ii) evaluating the performance and effectiveness of the Board, (iii) recommending changes in Board size, composition and committee structure; and (iv) overseeing the CEO and senior management succession planning process. The Governance and Sustainability Committee is also responsible for reviewing the Company’s sustainability policies, strategies and programs, and sustainability performance and reporting, including an annual review of the Company’s Environmental, Social and Governance Report. In addition, the Governance and Sustainability Committee is also responsible for oversight of the Corporation’s political giving policy and community affairs activities, including the corporate philanthropy policy. The Governance and Sustainability Committee has five members each of whom the Board has determined to be independent under the applicable NASDAQ rules. | Executive
Committee | Meetings in 2021: 0 | Independent Members:6/7 | | | The Governance Committee of the Board identifies individuals qualified to become Board members and recommends candidates for election to the Board. In identifying and recommending director nominees, the Governance Committee uses criteria established by the Board with respect to qualifications for nominations to the Board and for continued membership on the Board. In considering potential director candidates, the Committee considers whether the individual has demonstrated leadership ability, integrity, values and judgment. The Governance 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 Committee generally identifies nominees for directors through its director succession planning process. The 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 identified directly by the Committee or from other sources. For more information on director nominees, see Item 1: Election of Directors.
The 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 Committee reviews and recommends changes to Board 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
| | | | |
| | |
Members | 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. CarterJames M. Foote (Chair)
John D. McPhersonSteven T. Halverson
Paul C. Hilal
David M. Ratcliffe
| Linda H. Riefler
J. Steven Whisler
John B. BreauxJ. Zillmer |  | |
The Executive Committee meets for the purpose of acting on behalf of the full Board between regularly scheduled meetings of the Board when time is of the essence. The Executive Committee has and may exercise all the authority of 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 Executive Committee charter, a notice of a meeting of the Executive Committee is required to be provided to all Board members. The Executive Committee has seven members, consisting of the CEO, Chair of the Board, Vice Chair of the Board and the chairs of each of the four other standing committees. | | | 26 | |
Table of Contents ITEM 1: ELECTION OF DIRECTORS Meetings of the Board and Executive Sessions During 2015,2021, there were sixeight meetings of the Board. Each of the current directorsdirector nominees attended at least 75%95% 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 are chairedwere led by the Presiding Director.Chair 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. 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 retainerElements 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 2021. Back to Contents
ITEM 1: ELECTION OF DIRECTORS
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.
| Annual Retainer | Cash | | Equity(1) | | Base Retainer | $ 122,500 | | $ 172,500 |
| (1) | Annual grant of CSX common stock in the amount of $172,500 granted on February 10, 2021, with the number of shares based on the average closing price of CSX common stock in the months of November 2020, December 2020 and January 2021. |
| | Incremental Amount Above Annual Retainer | | | | | Non-Executive Chair 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 | | $ | 20,000 | | | Governance and Sustainability Committee Chair | | $ | 20,000 |
Each non-employee director was eligible to defer all or a portion of his or her director’s fees in 2015,2021, 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 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 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 to 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 BenefitsBenefits
DirectorsNon-management directors may participate in the CSX Directors'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, 302021, nine philanthropic organizations in areas served by the Company collectively received $473,416$155,000 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.
In addition, CSX makes available toTable of Contents
ITEM 1: ELECTION OF DIRECTORS 2021 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 $1,300 for each participating non-employee director.2021. | Name | | Fees Earned or
Paid in Cash(1)
($) | | Stock
Awards(2)
($) | | All Other
Compensation(3)
($) | | Total
($) | | Donna M. Alvarado | | 127,500 | | 168,424 | | 0 | | 295,924 | | Thomas P. Bostick | | 122,500 | | 168,424 | | 0 | | 290,924 | | Steven T. Halverson | | 147,500 | | 168,424 | | 50,000 | | 365,924 | | Paul C. Hilal | | 122,500 | | 168,424 | | 10,000 | | 300,924 | | John D. McPherson | | 49,471 | | 168,424 | | 9,677 | | 227,572 | | David M. Moffett | | 147,500 | | 168,424 | | 0 | | 315,924 | | Linda H. Riefler | | 142,500 | | 168,424 | | 0 | | 310,924 | | Suzanne M. Vautrinot | | 127,500 | | 168,424 | | 20,000 | | 315,924 | | James L. Wainscott | | 122,500 | | 168,424 | | 50,000 | | 340,924 | | J. Steven Whisler | | 147,500 | | 168,424 | | 25,000 | | 340,924 | | John J. Zillmer | | 122,500 | | 412,506 | | 0 | | 535,006 |
| (1) | Fees Earned or Paid in Cash– Includes a cash retainer of $122,500 and any Committee Chair or Audit Committee fees earned in 2021. 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 10, 2021 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 $172,500 divided by the average closing price of CSX common stock in the months of November 2020, December 2020 and January 2021, which was $30.11 on a post-split basis. All such stock awards to directors vested immediately upon grant. Mr. Zillmer’s amount also includes a Non-Executive Chair of the Board stock grant based on the February 10, 2021 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 2020, December 2020 and January 2021. 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 and Wainscott, $25,000 for Mr. Whisler, and $20,000 for Maj. Gen. (ret.) Vautrinot. |
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.” | | | 28 | |
Table of Contents 
Anti-hedging / Anti-pledging PolicyItem 2:
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
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, 2022. 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 LLPEY 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 is also is expected they will be available to respond to appropriate questions.
The Board unanimously recommends that the shareholders vote FOR this proposal. 2022 Proxy Statement 29
Table of Contents ITEM 2: RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Fees Paid to Independent Registered Public Accounting Firm Ernst & Young LLPEY served as the Independent AuditorsRegistered Public Accounting Firm for the Company in 2015.2021. 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:
| | | 2020 | | | 2021 | | Audit Fees: | $ | 2,918,000 | | $ | 2,695,000 | | 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: | $ | 225,000 | | $ | 230,000 | | Includes audits of employee benefit plans and subsidiary audits. | | | | | | | Tax Fees: | $ | — | | $ | — | | Includes fees for tax compliance and tax advice and planning. | | | | | | | All Other Fees: | $ | 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. | | | | | |
| | | | | | | | | | | 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. | | | | | | |
Pre-Approval Policies and Procedures The Audit Committee is responsible for the approval of all services performed by Ernst & Young LLP.EY. The ChairmanChair 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 20142020 and 2015,2021, all services performed by Ernst & Young LLPEY were preapproved.pre-approved. | 30 |  THE BOARD UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE “FOR” THIS PROPOSAL.
|
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▸Report of the
Audit CommitteeREPORT OF THE AUDIT COMMITTEE
The Audit Committee of the CSX Board of Directors (the “Audit Committee”) oversees the Company’s financialaccounting and financial reporting processprocesses on behalf of the Board. The Audit Committee assists the Board with oversight of: (i) the integrity of Directors. the Company’s financial statements and accounting methods, (ii) the Company’s internal controls over financial reporting; (iii) the Company’s enterprise risk management process; (iv) the Company’s compliance with legal and regulatory requirements; (v) the independent auditors’ qualifications, independence and performance; and (vi) the performance of the Company’s internal audit function. 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. TheDuring 2021, 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 2021, together with appointment dates and meeting attendance, isare set forth below:
| Members | | Committee
Member Since | | Attendance at Full
Committee Meetings
During 2021 | | 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 2016.2022. 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 2015,2021, 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, 2021. In this context, the Audit Committee has: | (i) | | | reviewed and discussed with management, the audited financialfinancial statements for the year ended December 25, 2015; |
| 31, 2021; | | | | (ii) | 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; | | | | (iii) | discussed with EY Critical Audit Matters (CAMs) that arose during the year; | | |
2022 Proxy Statement 31
Table of Contents REPORT OF THE AUDIT COMMITTEE | (iv) | 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 | | | | (v) | 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’s2021 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
David Suzanne M. Moffett
Vautrinot J. Steven Whisler
February 9, 201615, 2022
| 32 | |
Back toTable of Contents
▸Letter from the Compensation
and Talent Management CommitteeCOMPENSATION DISCUSSION AND ANALYSIS
ThisEach year, the Compensation and Talent Management Committee (“Committee”) welcomes the opportunity to provide shareholders with critical insights into the Committee’s thought processes and deliberations with respect to its oversight of executive compensation and talent management. As a Committee, we take seriously our responsibility to help shape corporate culture and incent employee behaviors that drive Company performance and create long-term value for shareholders.
The Company’s ongoing business transformation, which began in 2017, initially focused on improving operating performance, driving efficiencies and delivering industry leading customer service. While the Company remains focused on efficiency, safety and service, it is now executing on its strategies to drive profitable growth and deliver significant value for customers. In 2021, these efforts included the Company’s acquisition of Quality Carriers, Inc., the largest provider of bulk liquid chemicals truck transportation in North America. In addition, the Company continued to work through the regulatory process for approval of the acquisition of Pan Am Systems, Inc., which was announced in late 2020. These acquisitions are expected to open new markets and provide complementary service offerings to customers. More details about these acquisitions are included in the Compensation Discussion and Analysis (“CD&A”) describesbelow. The Committee believes the Company is well-positioned for growth and analyzeswe are excited about the principlesopportunities that lie ahead for CSX. Consistent with the Company’s goal of being the best run railroad in North America, CSX continues to evolve its strategy and leadership position around sustainable business operations. Environmental, social and governance (“ESG”) efforts at CSX are not only reflective of responsible corporate stewardship, they are embedded within and integral to the Company’s growth strategy. Environmental Advantages of Rail Railroads offer a unique opportunity within the freight transportation sector to reduce carbon emissions, as trains are the most efficient, environmentally friendly mode of transportation by land. On average, freight railroads are three to four times more fuel efficient than trucks and produce 75% fewer greenhouse gas (“GHG”) emissions. As such, CSX expects sustainability to be even more important to the Company’s long-term business strategy going forward, offering substantial benefits for all stakeholders and a significant competitive advantage over trucks. In addition to reducing CSX’s carbon footprint, these environmental advantages provide the Company with a strategic opportunity to convert truck traffic to rail and help customers significantly reduce their GHG emissions. We are extremely proud of the leadership the Company has shown and continues to demonstrate in this area. In 2020, CSX became the first railroad in the United States to align with the Science Based Targets initiative, setting a goal to reduce GHG emissions intensity by 37.3% by 2030, using 2014 as a baseline. The Company’s efforts have been recognized by multiple environmental groups and business publications. Among these recognitions, for the 11th straight year, CSX was included in the Dow Jones Sustainability Index, as the sole U.S. railroad to receive this recognition. Furthermore, CDP, a global environmental non-profit organization, named CSX to its “A List” for climate leadership in 2021, and Forbes included CSX as the only transportation company of any kind on its “Green Growth 50” list. Human Capital Management The Committee continues to focus on initiatives to drive a cultural transformation at CSX that inspires employee engagement and excellence. The Company has adopted the term “One-CSX” to describe a culture that emphasizes cooperative innovation and the value of each individual’s contributions to achieving shared objectives. Expanded learning and development opportunities, growth of employee-led business resource groups and implementation of a social justice action plan all have strengthened the Company’s commitment to valuing and developing employees. While the Company has made great strides to date, the Committee remains focused on supporting initiatives to build an even more diverse, engaged and motivated workforce that will continue to deliver sustainable returns for shareholders. While One-CSX applies to the entire corporate culture, safety improvement represents a significant early success of the initiative. The “put people first” emphasis has included fundamental shifts in CSX’s approach to its CSX safety culture, resulting in reforms to Operational Testing policies, with the involvement of labor organizations that have contributed to a more cooperative environment. Sharing a common understanding of safety rules and expectations, frontline leaders and union-covered employees can work together to identify risks and strategies for avoiding workplace hazards, injuries and accidents. The cultural transformation is evident in the Company’s safety performance. CSX had no employee fatalities in 2021, achieved the lowest Federal Railroad Administration (“FRA”) reportable injury rate among Class 1 peers in two of the past three years, and recorded new lows for accident costs over the past three years. 2022 Proxy Statement 33
Table of Contents LETTER FROM THE COMPENSATION AND TALENT MANAGEMENT COMMITTEE Hiring for Growth CSX continues to transform its business and advance critical strategic objectives, despite significant challenges created by the novel coronavirus pandemic, including supply chain disruption and a tight labor market. Given these challenges, the Committee recognizes the critical importance of winning the competition for the small number of successful railroaders with scheduled railroading expertise. CSX has responded aggressively to fill the Company’s hiring pipeline for frontline railroaders. Recruiting for a wide range of positions, including train crews and mechanical and engineering department employees, the Company has expanded training capacity, offered referral bonuses to current employees and increased pay for new conductors in training. These efforts resulted in the Company hiring and retaining nearly three times as many conductors in 2021 as in the previous two years combined. In addition, ensuring that we have a competitive, performance-based compensation structure is the key to retaining what we believe is a best-in-class management and operating team. This will be especially important as the Company advances its One-CSX culture and continues to grow, whether that be through strategic acquisitions or innovative new service products. Focus on Sustainable Growth The Committee is focused on designing and implementing compensation programs that advance the Company’s strategy to drive long-term sustainable growth. From year-to-year, the Committee’s ability to set appropriate and challenging performance goals is impacted by market and economic volatility, including impacts from the pandemic, global trade and supply chain 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. For both 2021 and 2022, the Committee designed the annual incentive program, which applies to all management employees, to align with the Company’s business strategies. In addition to operating income, operating ratio and initiative-based revenue growth, we included sustainability goals related to safety and fuel efficiency. With respect to the long-term incentive plans (“LTIP”), in 2021, the Committee began to shift its focus from efficiency measures to growth-oriented measures. More specifically, for the 2021 – 2023 LTIP, the Committee utilized average annual operating income growth rate percentage and free cash flow on an equally weighted basis, as the performance measures for the performance units. The average annual operating income growth rate percentage measure aligns with the Company’s objective of profitable growth. For the 2022 – 2024 LTIP, the Committee approved the use of CSX cash earnings (“CCE”) and average annual operating income growth rate on an equally weighted basis, as the performance measures for the performance units. The transition to CCE is designed to measure whether returns on new investments exceed an expected rate of return and to encourage investments in growth projects. Based on back-testing of historical data, CCE has shown a high correlation to stock price appreciation. We look forward to this year’s Annual Meeting and continued engagement with shareholders. You may provide feedback to the Committee by sending correspondence to CSX Corporation, Office of the Corporate Secretary, 500 Water Street, C160, Jacksonville, Florida 32202. | 34 | |
Table of Contents 
Report of the Compensation and
Talent Management Committee The Compensation and Talent Management Committee has reviewed and discussed the Compensation Discussion and Analysis with management. Based on its review of the disclosures, the Compensation and Talent 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 | | Linda H. Riefler | | James L Wainscott | | John J. Zillmer | | Chair | | | | | | | | | | March 22, 2022 | | | | | | | | | | | | | | | | | |
2022 Proxy Statement 35
Table of Contents 
Compensation Discussion
and Analysis Key Business Highlights for 2021 In 2021, despite ongoing disruption caused by COVID-19 and its variants, the Company was able to generate earnings of $1.68 per share, a 40% increase from 2020, and a Company-record operating ratio of 55.3%. While supply chain impediments and crew availability continued to present operating challenges, the Company remained focused throughout the year on adding the resources necessary to provide a high level of customer service, creating value for shareholders and setting the course for future growth. In 2021, the Company hired more than 1,000 conductors, which will improve network fluidity and allow us to drive additional customer service improvements.  | $5.59B |  | 55.3% |  | $1.68 |  | 26% |  | $3.725B | | Operating Income | Operating Ratio | Fully-Diluted EPS | Total Shareholder Return | Capital Returned to Shareholders |
Despite the supply chain challenges and their impacts on freight volumes in 2021, 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 $3.833 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 $1.8 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. Growth Initiatives In 2021, CSX continued to execute on its growth strategy, including the advancement of regulatory procedures necessary to finalize the proposed acquisition of Pan Am Systems, Inc. (“Pan Am”), which was announced in late 2020. Pan Am owns and operates a highly integrated, nearly 1,200-mile rail network and has a joint interest in the more than 600-mile Pan Am Southern system. This acquisition, if approved, will expand CSX’s reach in Connecticut, New York and Massachusetts while adding Vermont, New Hampshire and Maine to the Company’s existing network. On February 25, 2021, the Company began the process of seeking approval from the Surface Transportation Board (“STB”), which can take up to a year or more. While this transaction requires regulatory approval, the Company has garnered significant support among key stakeholders. | | | 36 | |
Table of Contents COMPENSATION DISCUSSION AND ANALYSIS In May 2021, CSX announced the acquisition of Quality Carriers, Inc. (“Quality Carriers”), the largest provider of bulk liquid chemicals truck transportation in North America. Through a network of over 100 company-owned, and affiliate terminals and facilities in key locations throughout the United States, Canada and Mexico, Quality Carriers provides transportation services to many of the leading chemical producers and shippers in North America. This transaction, which closed on July 1, 2021, enables CSX to extend the reach of its network and gain access to new products, markets, and regions through a unique and competitive multimodal solution that leverages the reach of truck transportation with the cost and environmental advantage of rail-based services. As such, CSX is now able to provide more comprehensive transportation services to customers throughout various supply chains. Environmental Advantages of Rail At CSX, we recognize rail plays an integral role in keeping our customers’ businesses and the broader economy moving across North America. As the most fuel-efficient mode of land-based freight transportation, railroads like CSX also have a tremendous responsibility to lead by example in how we address climate change – both in terms of our own operations and our broader engagement. On average, freight railroads are three to four times more fuel efficient than trucks and produce 75% fewer GHG emissions. As such, sustainability at CSX continues to be an important component of the Company’s long-term business strategy going forward. | | | CSX helped our customers avoid CO2 emissions equivalent to: | | | | 1.9M | 2.3M | | Homes’ Electricity Use for One Year | Passenger Vehicles Driven for One Year | | |
CSX remains dedicated to advancing innovative solutions and progressive action in our operations to reduce our impact on the environment, while working closely with customers and stakeholders in support of the transition to a low-carbon economy. As detailed in the chart below, the Company has continued to improve its fuel efficiency reducing the Company’s carbon footprint while providing a compelling opportunity for customers moving freight via truck to reduce their GHG emissions by transitioning to rail. To continue the focus on improved fuel efficiency and reduced carbon emissions, the Company has incorporated a fuel efficiency measure in its 2021 and 2022 annual incentive compensation plans, as described below under 2021 Short-Term Incentive Compensation. 
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: | ■ | Engage and reward executives for extraordinary results that create shareholder value; | | ■ | Reinforce a pay-for-performance culture with a significant portion of the named executive officer’s (“NEO’s”) total compensation at risk; and | | ■ | Chairman of the BoardImplement short and Chief Executive Officer
|
| | | 2022 Proxy Statement | | | Executive Vice President 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”)
|
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: | ✓
High Significant percentage of executive compensation that is performance-based
| XDividends or dividend equivalents on unvested performance shares
| ✓
Performance measures that are highly correlated to shareholder value creation | XExcise tax gross ups
| ✓
Engagement of an independent compensation consultant to review compensation programs and provide an annual risk assessment | XRepricing of underwater options
| ✓
Significant Significant share ownership requirements for officersVice President-level executives and above and non-employee directors
Double-trigger in change of control agreements for severance payouts (i.e., change of control plus termination) Clawback policy applicable to all incentive compensation plans Multiple financial measures in short and long-term incentive compensation plans Use of payout caps on short and long-term incentives | | X Re-pricing of underwater options without shareholder approval
Excise tax gross ups Recycling of shares withheld for taxes | ✓
Change of control agreements requiring a double-trigger (i.e., change of control plus termination) for severance
| X
Hedging or pledging of CSX securities by officers or directorscommon stock | ✓
Clawbacks in short- and long-term incentive plans
| X
Pledging of CSX securities by officers or directors
| ✓
Inclusion of multiple financial measures in long-term incentive program
| |
AligningFactors Considered in Determining Executive Compensation with Company Performance
The Committee’s performance-based compensation philosophy is designed to attract, retain and motivate executives to deliver superior performance results. The Committee structures the Company’s executive compensation program to reward short- and long-term performance that creates value for shareholders. The compensation program is designed to provide an appropriate allocation between fixed 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 comprising the majority of the target compensation.
Long-Term Incentive Compensation. From 2006 to 2012, the Company used Operating Ratio as the sole performance measureannually evaluates competitive market data 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 asNEOs, including base salary and annual incentive compensation, as well as targetshort and 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 performanceincentives with that of similar positions at peer railroads 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 amountgeneral industry companies that are part of the LTIP payout. In 2014, LTIP participants did not receive a payout, andcomparator group 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:
•
base salary of $1.2 million paid during 2015;
•
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);
•
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
•
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.
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COMPENSATION DISCUSSION AND ANALYSIS
Executive Compensation Practices
What is CSX’s executive compensation philosophy?
purposes (the “Comparator Group”). 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:
•
balanced, performance-basedfactors, among others, in evaluating target compensation is essential to enhancing shareholder value; and
levels: •
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:
•
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.
•
Drive business and financial performance. Inspire leaders to achieve or exceed annual business goals.
•
Focus on long-term success. Mitigate risk and hold leaders accountable for long-term results that provide strong returns for shareholders over time.
•
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.
| ■ | Effectiveness in developing and implementing the Company’s business strategy to support operating and financial performance; | | ■ | Contribution to the Company’s financial results; | | ■ | Individual performance, criticality of the role and experience; | | ■ | Contribution to creating a culture that aligns with transformational business goals and reinforces the Company’s guiding principles; and | | ■ | The nature, scope and level of the executive’s responsibilities internally relative to other executives and externally based on the Comparator Group. |
In establishing individual executive compensation opportunitieskeeping with past practices, and awarding actual payouts, the Committee considers analyses and recommendations fromin consultation with 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 affectingdeveloped the Committee’s determinations include: •
Comparator Group for 2021, which was comprised of 20 primarily U.S.-based companies and North American railroads to help guide executive compensation decisions at CSX. The Committee annually assesses and approves the nature, scope and levelComparator Group to ensure that it reflects market characteristics comparable to those of the executive’s responsibilities internally relative to other executives,Company, including revenue, assets, net income, market capitalization, number of employees, industry type and externally based onbusiness 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 2021, organized by market comparisons; capitalization and revenue. | | | 38 | |
performance compared to the specific goals and objectives determined for CSX and for the individual executive at the beginningTable of the year;Contents
•
the executive’s contribution to CSX’s financial results;
•
the executive’s contribution to CSX’s safety performance;
•
the executive’s effectiveness in leading CSX’s initiatives to improve customer service, productivity, and employee development and engagement; and
•
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 role2021 COMPARATOR GROUP
Air Products and Chemicals, Inc. Dominion Energy, Inc. J.B. Hunt Transport Services, Inc. United Parcel Service, Inc. | C.H. Robinson Worldwide, Inc. FedEx Corporation Norfolk Southern Corporation Waste Management, Inc. | Canadian National Railway Company Illinois Tool Works Inc. PPG Industries, Inc. | Canadian Paci c Railway Limited Ingersoll Rand Inc. Union Pacific Corporation | Market Capitalization
as of December 31, 2021
(in millions) |  | Revenue
as of Fiscal Year-end 2021
(in millions) |
Role of the independent compensation consultant?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 fulfillingfulfilling its duties, including the authority to approve or ratify payments and other retention terms to any consultant. duties. The Committee has retained an independent compensation consultant, Meridian Compensation Partners, LLC (the “Consultant”), to provide objective analysesanalysis and to assist in the developmentevaluation and evaluationdevelopment of the Company’s executive compensation programs. The Consultant reports directly to the Chairperson of the Committee Chair, 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. CONSULTANT’S ROLE AND RESPONSIBILITIES ■ Analyzing competitive practices, financial information, total shareholder return, 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 ■ Benchmarking executive and director compensation | ■ Assessing compensation plan design in the context of the Company’s business goals, shareholder value creation, employee engagement, and market and governance practices ■ 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 compensation and performance comparator groups each year ■ Consulting with the Committee Chair to plan and prioritize Committee agenda items |
The Committee reviews the performance and independence of the Consultant on an annual basis, at which time they make a determination asit decides whether to the renewal ofrenew 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 2015,2021, the Committee determined that: (i) the relationships and work of the Consultant and its professionals did not present any conflictconflict of interest; and (ii) the Consultant and its professionals arewere 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 2015,addition, management has retained a separate consultant, Willis Towers Watson, which advises management (but not the Consultant’s dutiesCommittee) on market trends in executive compensation, provides ad hoc analysis and responsibilities included:recommendations, and reviews and comments on compensation proposals.
assisting in the developmentTable of a peer group of companies for comparison purposes;Contents
COMPENSATION DISCUSSION AND ANALYSIS analyzing competitive practices, financial information, stock priceCompensation Risk Evaluation and other performance data;Mitigation
•
assessing compensation plan design in the context of the Company’s strategic business needs and shareholder impact;
•
reviewing performance targets for the Company’s short-term and long-term incentive plans;
•
providing regular updates to the Committee with respect to current trends and developments in legislative and regulatory activity, compensation program design and governance;
•
consulting with the Committee Chair to plan and prioritize Committee agenda items; and
•
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 plansprograms should take into consideration enterprise risks and discourage behavior that leads to inappropriate increases in the Company’s overall risk profile.profile. Accordingly, management, the Committee and theits Consultant routinelyregularly review the Company’s enterprise risks and executive compensation plan design to consider whether the plans motivate the appropriate levels of riskbehaviors and mitigate unnecessary or excessive risk-taking. On an annual basis, management preparesEach year, the Committee reviews a risk assessment prepared by management and the Consultant that focuses primarily on the structure, key features and risk mitigating factors included in the Company’s cash and stock incentiveexecutive 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
| ■ | Describes the process for establishing the Company’s executive compensation programs; | | ■ | Reviews potential risks and mitigating factors related to the Company’s executive compensation programs; | | ■ | Analyzes the relationship between the executive compensation programs and the Company’s risks identified through the Company’s enterprise risk management process; and | | ■ | 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 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. Back to Contents
COMPENSATION DISCUSSION AND ANALYSIS
The risk assessmentparticipation, 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.
How doesIn 2021, this assessment led to a conclusion by management, which was affirmed by the executive compensation program mitigate excessive risk taking?
The Committee believes the following elements ofConsultant, that the Company’s executive compensation program serveprograms were appropriately designed to mitigate risk:
•
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 haverisk. As 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,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’s approach to goal setting, establishment of targets with payouts at differing levelsCompany.
| 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 ■ Long-term incentive compensation plans utilize performance units, non-qualified stock options and restricted stock units with overlapping vesting periods for outstanding plan cycles ■ 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 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 |
Say-on-Pay 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.Shareholder Engagement 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,annual say-on-pay vote provides 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. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Revenue as of fiscal year-end 2015.
| | Market Cap as of December 31, 2015.
|
What are the elements ofwith important shareholder feedback on the Company’s executive compensation program?
programs. The Committee evaluates the results of the annual say-on-pay vote as it evaluates the structure of the executive compensation programs. In 2021, approximately 93% of the shares represented at the Annual Meeting were voted in favor of the say-on-pay proposal. During the year, CSX actively sought feedback from shareholders on executive compensation, corporate governance, sustainability and other matters to better understand what motivated their votes. These conversations help inform executive compensation plan design, as well as governance policies and disclosures.
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Table of Contents The various componentsCOMPENSATION DISCUSSION AND ANALYSIS
Elements of the Company’s 2021 Executive Compensation Programs CSX provides competitive total compensation program include base salaryopportunities in line with similar Comparator Group companies with a focus on pay for performance. The Committee and short-the Board monitor compensation of the CEO and long-term incentivethe other NEOs very closely. All compensation (“Total Direct Compensation”).decisions for the CEO are made by the non-management members of the Board, and all compensation decisions for the other NEOs are made by the Committee. This rigorous review process is designed to ensure that executive compensation reflects considerations based on market practice, internal equity and the business needs of CSX. The Company also provides retirementCommittee realizes that the CEO’s compensation is materially higher than the compensation for the other NEOs. Mr. Foote’s compensation is commensurate with his extensive experience as a high-performing rail industry executive, while certain other NEOs are much newer to their executive roles. Mr. Foote’s compensation is benchmarked with Comparator Group CEO’s, and other employee benefits, nonqualified deferred compensation plans and limited perquisites (“Indirect Compensation”).is reflective of the Company’s strong performance during his tenure as CEO. The Committee makes its decisions concerning the specificspecific compensation elements and total compensation paid or awarded to the Company’s NEOs within the framework described below and after consultation with the Consultant.herein. The objective is to provide total paycompensation opportunities that are competitive with those providedoffered by peer companies in the railroad industryComparator Group and general industry, withthat appropriately incentivize individual performance. The actual paymentamount of incentive compensation paid is dependent upon both the achievement of Company performance goals and individual performance. The Committee bases its specific decisionsreviews the performance and judgments on whetheraccomplishments of each award or payment provides an appropriateNEO to ensure incentive and reward for individual performance that ispayouts are consistent with the Company’s overall executive compensation program objectives. | Pay Element | Form | Performance | Objective | Salary
| Cash | Based on assessment of scope of responsibilities, individual performance, experience and value creation | Recruit, engage and retain talented high-performing leaders | Short-Term Incentives  | Cash | The Company’s performance measures for the 2021 short-term incentive awards and weightings at target are: ■ Operating Income (30%) ■ Operating Ratio (30%) ■ Initiative-Based Revenue Growth (10%) ■ Safety (10%) ■ Fuel Efficiency (10%) ■ Trip Plan Compliance (10%) 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 (25%) ■ Restricted Stock Units (25%) | The performance measures and weightings for the performance units issued as part of the 2021-2023 long- term incentive plan are: ■ Average Annual Operating Income Growth Rate Percentage (50%) ■ Free Cash Flow (50%) Performance units are subject to a formulaic linear Relative Total Shareholder Return modifier of +/- 25% with 250% maximum Non-qualified Stock Options vest ratably over three years and only have value if the price of CSX’s common stock increases after grant Restricted stock units cliff vest three years from the grant date | Motivate and reward executives to drive strategic initiatives that create shareholder value over a three-year period |
The CommitteeCompany also periodically reviewsprovides retirement and other health and group benefits, non-qualified deferred compensation plans, and limited perquisites. The NEOs generally participate in the competitivenesssame benefit programs as all eligible management employees.
Table of indirect pay. Were there any adjustments to NEO compensation in 2015?Contents
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 mix2021 Target Compensation Mix for the CEO and other NEOs?
Other NEOsThe Company’s executive compensation philosophy requires that a substantial portion of total compensation should be at-risk and consist of performance-based incentives that linkare linked to CSX’s financialfinancial and strategicoperating results. In addition, the Committee strives to strikeprovide an appropriate balance between short-short and long-term compensation. The mix between fixedfixed and variable (performance-based) compensation and short-short and long-term compensation is designed to align the NEOs’ financialfinancial incentives with shareholder interests. In 2015, approximately 70%2021, 72% of the CEO’s targeted Total Direct Compensation was performance-based and an average of 64%at-risk. The target compensation mix for each of the other NEOs’ targeted Total Direct Compensation was at-risk. The at-risk componentNEOs is shown below. Mr. Wallace tragically passed away in November 2021, but is included as an NEO for SEC disclosure purposes since he would have been one 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.next three most highly compensated executives had he remained employed through year end. | | | | James M. Foote
President and Chief Executive Officer | Age 68
Tenure 4.4 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. |
2021 ACCOMPLISHMENTS | n | Advanced CSX’s long-term strategy through acquisitions, key growth initiatives, customer transactions and federal and state partnerships. | | | | n | Progressed the One-CSX culture for all employees while leading the organization through a dynamic and challenging environment that included severe supply chain issues, labor shortages and an evolving political and social landscape. | | | | n | Led the organization through safety efforts that resulted in zero fatalities. | | | | n | Launched social justice and racial equity partnership with City Year called “10,000 Steps Towards Social Justice”, engaging employees in key communities across the rail network. | | | | n | Ensured business continuity through hiring efforts that resulted in a 700% increase in conductor hires. |
The chart below illustrates the amount2021 TARGET COMPENSATION
| Base Salary: | $ | 1,500,000 | | Target Annual Bonus: | $ | 2,625,000 | | Target Long-Term Incentives: | $ | 12,500,000 | | Target Total Direct Compensation: | $ | 16,625,000 | | 50% of 2021 LTI was performance-based | | |
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Table 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. Back to Contents
COMPENSATION DISCUSSION AND ANALYSIS
| | | | Sean R. Pelkey
Executive Vice President and Chief Financial Officer | Age 42
Tenure 16 years | | Responsibilities In June, 2021, Mr. Pelkey was named Vice President and Acting Chief Financial Officer. In January 2022, Mr. Pelkey was promoted to Executive Vice President and Chief Financial Officer. 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. Pelkey has more than 16 years of experience in finance, investor relations and financial planning. Since joining CSX in 2005, he has held a variety of finance management roles, including Vice President - Finance, Assistant Vice President of Capital Markets, as well as several director and managerial roles in investor relations, financial planning and IT finance. |
2021 ACCOMPLISHMENTS | n | Added almost $200 million in value to the Company through various initiatives across all departments. |
| n | Assisted intermodal operations by identifying and acquiring container yards and negotiating contracts for variable storage off property. |
| n | Supported the diligence and closing process for the acquisition of Quality Carriers. |
| n | Realized over $500 million for real estate sales, including the multi-year Virginia transaction. |
2021 TARGET COMPENSATION 
| Base Salary: | $ | 516,000 | | Target Annual Bonus: | $ | 361,200 | | Target Long-Term Incentives: | $ | 342,261 | | Target Total Direct Compensation: | $ | 1,219,461 | | 50% of 2021 LTI was performance-based | | |
Table of Contents COMPENSATION DISCUSSION AND ANALYSIS | | | | Kevin S. Boone
Executive Vice President – Sales & Marketing | Age 45
Tenure 4.5 years | | Responsibilities Mr. Boone has served as Executive Vice President – Sales and Marketing since June 2021. In this role, he is responsible for developing and implementing the Company’s commercial strategy. Mr. Boone previously served as Executive Vice President and Chief Financial Officer from October 2019 until June 2021. Mr. Boone has more than 20 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. |
2021 ACCOMPLISHMENTS | n | Led Sales & Marketing team that delivered $900 million in line haul revenue growth versus 2020, despite supply side constraints. |
| n | Increased TRANSFLO footprint by creating new terminal in Atlanta and establishing a franchise model in West Virginia. |
| n | Led efforts to help East Coast ports reduce congestion at their terminals. |
| n | Provided key leadership in the integration of Quality Carriers and partnered to secure incremental intermodal and chemical multi-modal volumes. |
2021 TARGET COMPENSATION 
| Base Salary: | $ | 700,000 | | Target Annual Bonus: | $ | 700,000 | | Target Long-Term Incentives: | $ | 3,000,000 | | Target Total Direct Compensation: | $ | 4,400,000 | | 50% of 2021 LTI was performance-based | | |
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Table of Contents COMPENSATION DISCUSSION AND ANALYSIS | | | | Jamie J. Boychuk
Executive Vice President – Operations | Age 44
Tenure 4.8 years | | Responsibilities Mr. Boychuk has served as CSX Transportation, Inc.’s (“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. |
2021 ACCOMPLISHMENTS | n | Led the Operations team that achieved improvements in train accident safety and the third best year of train velocity in CSX history. |
| n | Responded to economic recovery and volume resurgence with subsequent increase in locomotive fleet and corresponding headcount increases. |
| n | Worked with key public stakeholders towards an Amtrak Gulf Coast service solution. |
| n | Led Intermodal team that opened 13 additional container yards to adapt to global supply chain challenges helping keep terminals fluid while generating supplemental revenue. |
| n | Improved public safety by closing 79 at-grade crossings and eight grade separated structures. |
2021 TARGET COMPENSATION 
| Base Salary: | $ | 700,000 | | Target Annual Bonus: | $ | 700,000 | | Target Long-Term Incentives: | $ | 3,000,000 | | Target Total Direct Compensation: | $ | 4,400,000 | | 50% of 2021 LTI was performance-based | | |
Table of Contents COMPENSATION DISCUSSION AND ANALYSIS | | | | Nathan D. Goldman
Executive Vice President – Chief Legal Officer and Corporate Secretary | Age 64
Tenure 18.7 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. 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. |
2021 ACCOMPLISHMENTS | n | Supported key strategic growth initiatives (such as the acquisition of Quality Carriers and the proposed acquisition of Pan Am Systems, Inc.) with strategic communications and regulatory compliance. |
| n | Leveraged advanced data analytics to increase effectiveness and efficiency of audits, investigations and SOX testing. |
| n | Achieved 1,000+ days injury free in CSX Police Department for first time in Company history. |
| n | Successfully petitioned STB to consider adoption of an acceptable small shipper dispute resolution process. |
2021 TARGET COMPENSATION 
| Base Salary: | $ | 550,000 | | Target Annual Bonus: | $ | 495,000 | | Target Long-Term Incentives: | $ | 2,200,000 | | Target Total Direct Compensation: | $ | 3,245,000 | | 50% of 2021 LTI was performance-based | | |
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Table of Contents COMPENSATION DISCUSSION AND ANALYSIS | | | | Diana B. Sorfleet
Executive Vice President and Chief Administrative Officer | Age 57
Tenure 10.7 years | | Responsibilities Ms. Sorfleet has served as Executive Vice President and Chief Administrative Officer since July 2018. In this role, she is responsible for information technology, human resources, labor relations, people systems and analytics, medical, total rewards and aviation. She joined the Company in 2011, and has previously served as Chief Human Resources Officer. Prior to joining CSX, she served as vice president for diversity and development at Exelon, one of the nation’s leading competitive energy providers. |
2021 ACCOMPLISHMENTS | n | Drove productivity, efficiency, safety and customer service through technology solutions that included new ShipCSX tools, and autonomous inspection analytics. |
| n | Completed multiple security assessments to baseline the Company’s security posture and reduce risk. |
| n | Advanced culture change initiatives in support of CSX’s business strategy and supported launch of social justice and racial equity partnerships. |
| n | Expanded employee hiring, training and development opportunities to support business results. Hiring included over 1,000 conductors in 2021. |
2021 TARGET COMPENSATION 
| Base Salary: | $ | 550,000 | | Target Annual Bonus: | $ | 495,000 | | Target Long-Term Incentives: | $ | 2,200,000 | | Target Total Direct Compensation: | $ | 3,245,000 | | 50% of 2021 LTI was performance-based | | |
Table of Contents COMPENSATION DISCUSSION AND ANALYSIS 2021 Base Salary How is base salary determined?
The Committee determines a base salary for each NEO annually based on its assessment of the individual’s experience,scope of responsibilities, performance, and contribution to CSX. For purposes of recruiting and retention, base salaries are determined following a review ofexperience. The Committee also considers salary data for similar positions within the Comparator Group. After considering this information and in light of the economic environment, the Committee made the following adjustments for certain NEOs. Base salary may represent a larger or smaller percentage of Total Direct Compensation iftotal compensation actually paid, depending on whether actual Company and individual performance under the short and long-term incentive plans discussed below exceeds or fallsherein fall short of or exceed the applicable performance targets. In 2021, the Committee reviewed the annual compensation of the Company’s NEOs and approved, or recommended Board approval for the CEO, changes to base salaries that considered market data, individual performance, overall responsibilities, internal equity and functional experience. For Mr. Foote, the Committee recommended, and the Board approved, an increase to his annual base salary to $1,500,000. The Committee approved increases to the base salaries for Mr. Boone, Executive Vice President – Sales and Marketing (EVP - CFO at the time of approval), Mr. Boychuk, Executive Vice President – Operations, Mr. Goldman, Executive Vice President – Chief Legal Officer and Corporate Secretary, Ms. Sorfleet, Executive Vice President and Chief Administrative Officer, and Mr. Pelkey, Executive Vice President and Chief Financial Officer (Vice President and Acting Chief Financial Officer at the time of approval). The new base salaries were as follows: Messrs. Boone and Boychuk – $700,000; and Mr. Goldman and Ms. Sorfleet - $550,000. These adjustments were effective as of January 1, 2021. In June 2021, the Committee approved a base salary for Mr. Pelkey of $516,000 in connection with his promotion to Vice President and Acting Chief Financial Officer. 2021 Short-Term Incentive Compensation How is short-term incentive compensation determined?Goal Setting Process for 2021 MICP
Short-term incentive compensation isIn January 2021, the Committee established the goals and measures under the 2021 Management Incentive Compensation Plan (the “2021 MICP”) and developed a performance structure to drive business results and create value for shareholders. The 2021 MICP was designed to deliver results that improve safety, enhance customer service and grow revenue while optimizing assets and controlling costs. In addition to the safety goals, the Committee included an ESG-focused measure related to fuel efficiency, which can help the Company and customers reduce carbon emissions. The 2021 MICP was structured 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 unlessfor driving Company performance over a pre-set Operating Income level is achieved, regardless of achievement of strategic goals. Applying the methodology utilized under the MICP, eachone-year period. Each NEO haswas provided an incentive opportunity based on the goals established by the Committee expressed as a percentpercentage of base salary earned during the year (“Target Incentive Opportunity”). In 2015,2021, the Target Incentive Opportunity levelslevel for Mr. Foote was 175% of base salary, 100% of base salary for Messrs. Boone, Boychuk and Wallace, 90% of base salary for Ms. Sorfleet and Mr. Goldman, and 70% for Mr. Pelkey.
2021 MICP Performance Measures In January 2021, the Committee approved the performance measures for the NEOs that were promoted were adjusted2021 MICP, which included financial performance measures, safety improvement, operational and ESG-related targets. These measures have proven to be critical drivers of CSX’s business success. In an effort to enhance focus on sustainable growth, the Committee approved weightings for each of the performance measures 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 reflectset forth below.  | | Operating Income | | Directly tied to Operating Ratio targets and gauges the general health of the core business – quantifying our profitability. | | | Operating Ratio | | 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 | | FRA Personal Injury and Train Accident rates underscore the critical importance of intensifying our focus on injury and accident prevention. | | | Trip Plan Compliance | | Trip Plan Compliance is a measure of successfully executing the trip plan for freight cars (including lntermodal) based on commitments to our customers. | | | Fuel Efficiency | | Fuel Efficiency measures our fuel productivity using gallons of fuel divided by gross ton miles. | | | Initiative-based Revenue Growth | | Initiative-based Revenue Growth measures our ability to gain new business. |
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Table of Contents COMPENSATION DISCUSSION AND ANALYSIS To determine 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. Theunder the MICP, the Committee reviewsassesses the Company’s performance against each of the preapproved performance goals for the year. TheThese Company performance goals are divided between: (i) the financial measurement—Operating Income—which is based upon the Company’s business plan andmeasures 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%200% of the NEO’s Target Incentive Opportunity. Therefore,In addition, upward or downward payout adjustments may be made based on individual performance. As shown in the actual payout can range between 0%Summary Compensation Table, the 2021 MICP payouts reflect the Company’s financial and 160%operational performance.
2021 MICP Targets and Payout Percentages In light of the NEO’s Target Incentive Opportunity. continuing economic uncertainties and widespread supply chain challenges that existed in January 2021, when the plan was adopted, the Committee approved annual incentive targets with a wider range than recent years. The 2021 MICP Operating Income target for 2015 was set at $3.85 billion baseddesigned to continue to build on the Company’s strong customer service levels, to create new business plan. Achievementopportunities and drive revenue growth. The Committee believes that sustained improvements in operating efficiencies and the focus on growth will continue to play a critical role in the continued creation of this Operating Incomeshareholder value. The specific threshold, target would have producedand maximum payout goals and applicable weighting for each performance measure is set forth below. | Performance Measure1 | | Weighting | | | Threshold1 | | Target | | Maximum | | Financial Goals – 60% | | Operating Income | | 30% | | $ | 3,800M | | $ | 4,540M | | $ | 4,830M | | Operating Ratio2 | | 30% | | | 61.5% | | | 58.8% | | | 57.2% | | Initiative-based Revenue Growth | | 10% | | $ | 150M | | $ | 200M | | $ | 275M | Operational and ESG Goals – 30%
(Customer Service, Environment & Growth) | | Trip Plan Compliance | | 10% | | | 80% | | | 82.5% | | | 85% | | Fuel Efficiency | | 10% | | | 1.03 | | | 0.98 | | | 0.95 | | FRA Personal Injury Rate | | 5% | | | 0.99 | | | 0.90 | | | 0.85 | | FRA Train Accident Rate | | 5% | | | 2.65 | | | 2.40 | | | 2.35 | | Total Payout Opportunity | | | | | 2.5% - 50%1 | | | 100% | | | 200% |
| | | 1 | Performance measure payouts are independent and could result in a threshold payout range from 2.5% to 50%. | | 2 | The 2021 MICP allowed a formulaic adjustment to the operating ratio performance goal by a pre-determined amount if the average cost of highway diesel fuel was outside the range of $2.25 to $2.75 per gallon. This adjustment is designed to account for the potential impact that volatile fuel prices have on expenses and operating ratio. Because the 2021 average price per gallon was $3.28 for highway diesel fuel, which was outside the top end of the range, the operating ratio goals were adjusted as follows: threshold of 62.1%, target of 59.4% and maximum of 57.8%. |
The Committee believes that the measures for the 2021 MICP were directly aligned with the Company’s strategic short-term goals, were directly impacted by executive leadership actions, supported our long-term strategy, helped deliver shareholder value and ensured retention of critical talent. For 2021, the Company achieved above-maximum operating income of $5.594 billion and above-maximum operating ratio of 55.3%. FRA Personal Injuries were slightly below target at 0.92, while FRA Train Accidents fell below threshold at 2.90. For the Operational and ESG goals, the Company achieved: 76.5% trip plan compliance, which was below threshold; fuel efficiency of 0.960, which was just below maximum; and $341 million of initiative-based revenue growth, which was well ahead of maximum. As such, the Company’s performance on each of these goals for 2021, resulted in 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 assessesevaluates the performance of all eligible employees, the Committee annually assesses the individual performance of each NEO and determines payout amounts, which were capped at the maximum Company payout of 250% of target for 2021. Based on the 2021 accomplishments for each NEO as described above, the Committee approved a 160% annual incentive payout for each of the NEOs other than Mr. Foote. For Mr. Foote, the Committee recommended, and the Board approved, a 200% annual incentive payout, which included a 25% upward adjustment based on individual performance. These payouts are reportedreflected in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table.. As in prior years, 2022 Proxy Statement 49
Table of Contents COMPENSATION DISCUSSION AND ANALYSIS 2022 MICP Design The 2022 MICP design continues to emphasize safety, operating income and operating ratio, as well as operational and ESG-focused performance measures, including trip plan compliance (a customer service measure), fuel efficiency and initiative-based revenue growth. These measures are designed to enhance focus on items that employees have the payouts forability to directly influence, align to shareholder expectations, and support the NEOs were calculated pursuantOne-CSX strategy. The goal of the One-CSX strategy is to promote a culture that positions the methodology appliedCompany to be an employer of choice to attract and retain the MICPbest talent 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 basedassure that every employee understands and delivers on individual performance. However, no such adjustments were made for the NEOs for 2015. Accordingly, the Committee approved an annualstrategic priorities. Long-Term Incentive Compensation The Company’s long-term 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.program is intended to: 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) | | | | | | | | | | | | | | | |
| ■ | Engage and reward employees for extraordinary results that will maximize shareholder value; | | ■ | Actual results reflect Operating IncomeReinforce a pay-for-performance culture with a significant portion of total compensation at time of payout approvalrisk; 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 basedAlign NEO interests with those of shareholders with a focus 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 isThese goals are 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 optionswith shareholder interests and stock appreciation rights.drive value creation. HowElements of Long-Term Incentive Compensation
A significant portion of the NEOs’ target compensation is comprised of the LTIP structured?
New LTIP cycles are approved eachLong-Term Incentive Plan (“LTIP”) awards. Each year, when the Committee, grants performance units to participants. These grants are made followingas part of its 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’s 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.
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COMPENSATION DISCUSSION AND ANALYSIS
Each year,process, determines a market competitive long-term incentive target grant value (in dollars) is identified for each position level andNEO, which is then converted into the appropriatecorresponding value of equity-based awards. For 2021, the LTIP grants for the NEOs were comprised of performance units, restricted stock 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. The number of performance units and restricted stock 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, and by the Board for the CEO. 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.
Since the three-year performance cycles run concurrently, the Company may have up to three active LTIP cycles during a given year. For example, the 2019-2021 performance cycle closed on December 31, 2021, and was paid out in January 2022. The 2020 – 2022, 2021 – 2023 and 2022 – 2024 cycles remain in progress, which help ensure that our employees remain focused on sustainable long-term performance. Performance Units. Performance units are granted at the beginning of the applicable performance cycle, 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. For the 2019 – 2021 LTIP cycle, upon death, disability or retirement, participants or their estates received a prorated portion of their award based on the number of months completed in the cycle. Beginning in 2020, upon death or disability, participants are eligible to earn the performance units that they would otherwise have earned at the end of the performance period had there been no death or disability. Upon retirement, participants receive a prorated 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 Company performance through the end of the applicable LTIP cycle. 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 inconclusion of the three-year performance cycle. These payouts can vary significantly from the target grants in terms of bothof: (i) the number of shares paid out due to financial performance; and (ii) 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%250% of the target grants. The Executive Team’s awardslevels, 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. | 50 | |
Table of Contents COMPENSATION DISCUSSION AND ANALYSIS Non-qualified Stock Options. Non-qualified stock options vest ratably over three years and 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 generally provide participants with the right to buy CSX stock at a pre-set price for a period of 10 years. 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 toother limited circumstances, as approved by the Committee. For the 2019 – 2021 LTIP cycle, upon death, disability or retirement, participants or their estates received a prorated portion of their award based on the number of months completed in the cycle. Beginning in 2020, all options will vest per the original vesting schedule in the case of death or disability. Upon retirement, participants will receive a pro-rataprorated portion of the award based on the number of months completed in the LTIP cycle.
What were the performance measures for the 2013-2015 LTIP cycle?
Operating Ratio and ROA served as the performance measures for the 2013-2015 LTIP cycle. The Committee chose Operating Ratio dueemployment agreement for Mr. Foote provides that, in connection with his retirement, the full awards will continue to its historically high correlation to Company stock price, alignment with shareholder value and the ability 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 indicator of how efficiently Company assets are being utilized.
Operating Ratio is defined as operating expense divided by operating revenue adjusted by excluding non-recurring items that are disclosed in the Company’s financial statements. ROA is calculated using tax-adjusted operating income, excluding non-recurring items as disclosed in the Company’s financial statements, divided by net property. The tax-adjusted operating income uses a flat 38% tax rate to eliminate volatility of one-time tax issues. Net property is calculated by subtracting accumulated depreciation from gross property. Operating Ratio and ROA each comprised 50% of the total payout opportunity for participants, and each was measured independently of the other.
| | | | | | | | Tax-Adjusted Operating Income
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The threshold, target and maximum payouts for each measure are 10%, 50% and 100%, respectively, generating a target payout of 100% and a maximum possible payout of 200% for the 2013-2015 LTIP cycle. While plans prior to 2013 measured Operating Ratio in the final year of the LTIP cycle, the 2013-2015 LTIP cycle measured cumulative Operating Ratio and average ROA over an 11-quarter period from April 2013 to December 2015. The first quarter of 2013 was not included in the performance period due to timing of approval of the LTIP cycle.
In addition to Operating Ratio and ROA, the Committee maintains downward discretion on the payouts for Executive Team members based on relative total shareholder return (“Relative TSR”). If CSX’s 2013-2015 Relative TSR is in the bottom quartile of any of the comparison groups 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.
What were the financial goals for the 2013-2015 LTIP cycle?
The LTIP targets for the 2013-2015 LTIP cycle were set to provide incentives to continue growing 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 levels were subject to adjustment based on the price per gallon of highway diesel fuel, as discussed below. For ROA, the threshold, target and maximum payout goals were set at 7.69%, 8.25% and 8.78%, respectively.
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COMPENSATION DISCUSSION AND ANALYSIS
How are the performance levels adjusted for the price of fuel?
At the time of adoption of the 2013-2015 LTIP cycle, a provision was made for the adjustment of the Operating Ratio performance goals by a pre-determined amount if the cost of highway diesel fuel was outside the range of $3.67 - $4.17 per gallon. This adjustment is included in the plan design for each LTIP cycle due to the significant impact volatile fuel prices have on expenses and Operating Ratio. Based on the price per gallon of highway diesel fuel during the 2013-2015 cycle, the adjusted threshold, target and maximum payout targets were 72.0%, 70.5% and 69.0%, respectively.
What was the actual payout for the 2013-2015 LTIP cycle?
Based on the cumulative Operating Ratio of 70.8% and an average ROA of 7.86% for the cycle, the payout for the 2013-2015 LTIP cycle was 64%.
What types of long-term incentive compensation were granted to the NEOs in 2015?
In 2015, the Company continued to provide long-term incentives in the form of both performance units and RSUs in order to provide a stable 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% of such value to performance units 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 cyclevest in accordance with their terms.
Restricted Stock Units. Restricted stock units are time-based awards that vest three years from the Company’s LTIP.grant date (“the restricted period”). Awards are paid in the form of CSX common stock at the end of the period based on attainment of pre-established performance goals. RSUs represent a promise to issue shares of commonrestricted period. Restricted 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 aregenerally subject to forfeiture if a participant’s employment terminates before the end of the restrictionrestricted period for any reason other than death, disability, retirement or retirement. If employment terminates due toother limited circumstances, as approved by the Committee. For the 2019 – 2021 LTIP cycle, upon death, disability or disability, the award fully vests and the shares are distributed to the participantretirement, participants or the participant’s estate. Upon retirement, the participant receivestheir estates received a pro-rataprorated portion of their award based on the number of months completed in the restriction period.cycle. Beginning in 2020, all restricted stock units will vest per the original vesting schedule in the case of death or disability. Upon retirement, participants will receive a prorated 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 restricted stock units will remain outstanding and eligible to vest at the end of the restricted period for any outstanding LTIP cycles.
Further information regarding the LTIP grants made to our NEOs in 2021 can be found under the “2021 Grants of Plan-Based Awards Table” below. Performance Measures for the 2019 - 2021 LTIP For performance units granted under the 2019 – 2021 LTIP cycle, cumulative operating ratio and cumulative free cash flow were selected to measure the Company’s performance. Operating ratio has a historically high correlation to the Company’s stock price and serves as a key financial performance measure for CSX and the railroad industry. As such, the use of operating ratio has strengthened participants’ understanding of how they can impact Company performance and drive operating efficiency. Long-term improvements in operating ratio have increased operating income and earnings, creating value for shareholders. Free cash flow was chosen as a performance measure as it is a key measure of the financial health of the business, has a high correlation to shareholder returns and aligns with CSX’s financial business plan. Operating ratio and free cash flow were each weighted 50% of the total payout opportunity and were measured independently of the other. 
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 2019 – 2021 LTIP. The 2019 – 2021 LTIP measured operating ratio and free cash flow over a 12-quarter period from January 2019 through December 2021. In addition to operating ratio and free cash flow, the performance units for this LTIP cycle for the President and Chief Executive Officer and all Executive Vice Presidents had a formulaic linear upward or downward relative total shareholder return (“Relative TSR”) modifier of up to 25% (subject to the 250% overall cap) based on CSX’s stock price performance compared to the peer group (weighted 80% core peers and 20% additional correlated companies) for the 12-quarter period from January 2019 through December 2021. This modifier did not apply to Mr. Pelkey for this LTIP cycle as he was not promoted to Executive Vice President until January 2022. The Committee recognizes that operating ratio is a measure in the short and long-term plans, but believes inclusion in both plans reflects the criticality of the alignment 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. This overlap was eliminated starting with the 2020 – 2022 LTIP consistent with CSX’s strategic initiatives focused on growth. 2022 Proxy Statement 51
Table of Contents COMPENSATION DISCUSSION AND ANALYSIS Financial Goals for the 2019 - 2021 LTIP The LTIP targets for the performance units granted under the 2019 – 2021 LTIP were set in February 2019, based on the three-year business plan at the time of its adoption. The targets under the 2019-2021 LTIP were as follows: | Cumulative Operating Ratio (100% maximum payout) | | Cumulative Free Cash Flow (100% maximum payout) | Threshold
(10% payout) | | Target
(50% payout) | | Maximum
(100% payout) | | Threshold
(10% payout) | | Target
(50% payout) | | Maximum
(100% payout) | | 60.0% | | 59.0% | | 58.0% | | $9.0B | | $9.725B | | $10.325B |
At the time the 2019 – 2021 LTIP was approved by the Committee, a provision was made for the adjustment of the operating ratio performance goals by a pre-determined amount if the average cost of highway diesel fuel was outside the range of $2.85 - $3.35 per gallon. This potential adjustment is designed to mitigate the positive and negative impact volatile fuel prices may have on expenses and operating ratio. There was no adjustment to the cumulative operating ratio targets as the average price per gallon of highway diesel fuel of $2.96 was within the range of $2.85 – $3.35 per gallon, which was the collar set at the time of adoption of the plan. Payout for the 2019 - 2021 LTIP Performance Units Based on a cumulative operating ratio of 57.4% and a cumulative free cash flow of $9.96 billion for the cycle, the payout for the performance units, which comprised 60% of the 2019 – 2021 LTIP, was 169% of target. The Company’s Relative TSR performance against the peer group was below median for the cycle, resulting in a downward modifier of 15%, and a total payout of 144% for each of the NEOs other than Mr. Pelkey, who was not an Executive Vice President as of December 31, 2021. 
Performance Measures for the Outstanding LTIPs In determining the numberperformance 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 2020 – 2022 LTIP uses operating income and free cash flow on an equally weighted basis to be granted under each long-term incentive vehicle,measure the target award valueCompany’s performance. The 2021 – 2023 LTIP uses average annual operating income growth rate percentage and free cash flow on an equally weighted basis, as the performance measures for the performance units. The average annual operating income growth rate percentage measure aligns with the Company’s objective of profitable growth and provides the ability to recover and potentially receive a payout in the event of an economic downturn in one year of the program. For the 2022 – 2024 LTIP, the Committee approved the use of average annual operating income growth rate percentage and CSX cash earnings (“CCE”) on an equally weighted basis, as the performance measures for the performance units. CCE is divided bydesigned to measure whether returns on new investments exceed an expected rate of return and to encourage investments in growth projects. This measure was incorporated to drive earnings growth and better align compensation to the average of CSX’sOne-CSX strategy. Historically, CCE has had a high correlation to stock price appreciation. The changes in performance measures for the performance units have been designed to reward long-term performance during the three full months priora period of transformation and change, and to the grant date is used, rather than the stock pricefocus on the dateCompany’s strategic initiatives to drive growth. | 52 | |
Table of grant. Using the three-month average reduces the impactContents COMPENSATION DISCUSSION AND ANALYSIS The 2020 – 2022 LTIP is comprised of daily fluctuations in stock price. How many performance units and RSUs were granted tonon-qualified stock options for the NEOs, in 2015?
After establishingand the market-competitive, annual long-term incentive award value (in dollars) for each NEO, the dollar value was then converted into a2021 – 2023 and 2022 –2024 LTIPs are comprised of performance units, non-qualified stock options and restricted stock units. 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 2014the full three-month period prior to the grant. The number of options awarded is calculated based on the Black-Scholes value for the same period. For the 2020 – 2022 LTIP, the Committee approved a market competitive LTIP grant value for the NEOs (the Board approved for the CEO) allocating 50% of the value to performance units, and 50% for non-qualified stock options. The allocation for the 2021 – 2023 and 2022 – 2024 LTIPs was 50% performance units, 25% restricted stock units and 25% for non-qualified stock options. The performance units for these three LTIP cycles have a formulaic linear upward or downward Relative TSR modifier of up to 25% with a maximum payout of 250%, which applies only to the CEO and Executive Vice Presidents. This modifier is designed to appropriately align NEO payouts with share price performance relative to a transportation-related peer group. This modifier does not apply to Mr. Pelkey for the 2020 – 2022 and 2021 – 2023 LTIP cycles, as he was not promoted to Executive Vice President until January 2015,2022.
Clawback Provision Payouts made under the MICP and LTIP programs are subject to recovery or clawback in certain circumstances. Under the applicable 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 $35.61. The table below indicates the numbersuperseded 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 performance units granted under the 2013-2015 LTIP cyclelong-term incentive awards after retirement; and the number(iii) employment benefits following a change of RSUs granted to each NEO on February 11, 2015.control, as further described below.
| | | | | | | | | | | | | | | 2015 Long-Term
Incentive Value | 2015-2017
Performance Units
(75% of Value) | | Total Performance
Units and RSUs | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Mr. Lonegro’s long-term incentives were granted prior to his promotion to Executive Vice President and Chief Financial Officer.
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COMPENSATION DISCUSSION AND ANALYSIS
Does the Company have non-compete agreements and clawback provisions?
Yes. The Company utilizes non-compete agreements and clawback provisions in connection with its compensation plans.
Vice Presidents and above (“Senior Management”)Non-Solicitation Agreements
The President and CEO, executive vice presidents, senior vice presidents, vice presidents, heads of department, 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. The non-solicitation provisions generally 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. Clawbacks:Severance Agreements
Short-term Incentive Plan. The short-term incentive plan contains provisions requiring NEOs to repay toMr. Foote is eligible for the following severance benefits under his employment letter agreement with the Company portionsdated December 22, 2017:
| ■ | Lump sum cash payment equal to two times his base salary plus two times his target MICP; | | ■ | Pro-rata payment of MICP award; and | | ■ | 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. |
As of any payment received if: (i) within the two-year period following the receipt of the payment, the Company is required to restate its financial statements due to accounting irregularities;December 31, 2021, Messrs. Pelkey, 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, and Ms. Sorfleet 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, 2021 are described further in the section Post-Employment Compensation table. Back toTable of Contents
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 on the Company’s website at http://investors.csx.com under the heading “Corporate Governance.” All of the NEOs’ Change-of-Control Agreements are in compliance with the Policy.
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COMPENSATION DISCUSSION AND ANALYSIS
Does the Company have stock ownership guidelinesbonus 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 established the following formal stock ownership guidelines.
| | | | | | | | 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.all NEOs other than Mr. Pelkey. As of December 25, 2015, all NEOs but31, 2021, Mr. Lonegro, whoPelkey’s Change-of-Control Agreement provided a potential benefit of 2.0 times his annual base salary and bonus, as he was not 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 promotionuntil January 2022.
Our NEOs are subject 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 completionterms of the restriction period before entering into any transaction involving such stock.change-of-control agreements described above and as further detailed under the section entitled Potential Payouts Under Change-of-Control Agreements.
Benefits WhatRetirement 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 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 paidprovided to the NEOs. However, performance-based compensation paidNEOs 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.following plans:
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 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| ■ | The CSX Corporation 401(k) Plan (“CSXtra Plan”); | | ■ | Stock Awards—Amounts disclosed in this column are related to LTIP performance units, RSUsCSX Pension Plan (the “Pension Plan”); 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.
|
QualifiedCSXtra 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 2021 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 $210,0002021 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$290,000 for 20152021 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. | ■ | Vesting — Benefits under this 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 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 2021 Annual Report. |
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Transfer Benefits—The Pension Plan provides an enhancement to the pension benefitsTable of those participantsContents
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.
•
Early Retirement—The Pension Plan final average pay formula has a normal retirement age 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.
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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 $290,000 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 2021 Pension Benefits Table Benefits Tablefor the Special Retirement Plan are described in CSX’s 2015the 2021 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 $1 million. The Company also provides NEOs, on Form 10-K.the same basis as other management employees, salary continuance in the event of short-term or long-term disability, travel accident insurance and vacation based on length of service. Back to Contents
COMPENSATION DISCUSSION AND ANALYSIS
NonqualifiedExecutive Deferred Compensation TablePlan
The NonqualifiedCSX offers a voluntary, non-qualified Executive Deferred Compensation Table presents a summaryPlan (“EDCP”) for the benefit of 2015 contributions madeits executives and other eligible employees. Under the EDCP, the NEOs may defer compensation in excess of qualified plan limits until retirement or another specified date or event. Participating employees with base salary above the qualified plan limits, may defer compensation to allow them to receive the full Company matching contribution of up to 3.5% of base salary not otherwise available to them under the EDCP, CSX’s current executive nonqualified deferral program, as well as 2015 earnings, distributions and year-end balances. Two types of deferrals are represented below: cash deferrals and stock deferrals. Cash deferrals include deferred portions of an NEO’s base salary and short-term incentive payments. Stock deferrals include deferred portions of compensation payable in the form of CSX common stock.CSXtra Plan.
| | | | | | | | | | | | | | | | | | Executive
Contributions
Last Fiscal Year(1)
($) | 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.
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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?Employee Stock Purchase Plan
The Company covers its NEOs underCSX Employee Stock Purchase Plan (“ESPP”) provides eligible employees the same severance plan availableright to allpurchase shares of CSX common stock in accordance with the terms of the ESPP. 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,who have been employed by the Company currently does not have any severance agreements in place with its NEOs that would provide special termination payments or benefits. Back to Contents
COMPENSATION DISCUSSION AND ANALYSIS
Do the NEOs participate in Change-of-Control Agreements?
Yes. Each 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?
Under the agreements described below, a “change-of-control” generally includes any of the following:
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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;
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if individuals, who as of the date of the Change-of-Control Agreement, constitute the Board (the “Incumbent Board”) cease for any reason to constitute 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);
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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
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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:
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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);
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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
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causebeginning of the executive to beenrollment period are eligible to participate in incentive, retirement, welfare and other benefit plans and to benefit from paid vacation and other policiesthe ESPP.Under the ESPP, employees may purchase shares at the lesser of: (i) 85% of the fair market value of a share of CSX and its affiliates,common stock 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 beginningfirst day of an offering; or (ii) 85% of the Employment Period, whichever is more favorable). 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. Back toTable of Contents
COMPENSATION DISCUSSION AND ANALYSIS
What benefitsOther Benefits
The perquisites provided to NEOs in 2021 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 provided ifdisclosed in the NEOSummary Compensation Table. Stock Ownership Guidelines CSX believes that, in order to align the interests of management with those of its shareholders, it is terminated?
Under the Change-of-Control Agreements, CSX will provide severance paymentsimportant that NEOs and other benefitssenior 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 do so. The types of equity that apply towards these ownership guidelines are vested and unvested restricted stock units, vested performance units, and any other CSX 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 Stock 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. | 56 | |
Table of Contents COMPENSATION DISCUSSION AND ANALYSIS 2021 Summary Compensation Table The Summary Compensation Table and the accompanying footnotes describe the amount and type of compensation for the NEOs upon their terminationfor 2021 and, if applicable, 2020 and 2019. | Name | | Year | | Salary
($) | | Bonus
($) | | Stock
Awards
($)(2) | | Option
Awards
($)(3) | | Non-Equity
Incentive Plan
Compensation
($)(4) | | Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
($)(5) | | All Other
Compensation
($)(6) | | Total
($) | | James M. Foote | | 2021 | | 1,500,000 | | — | | 9,150,899 | | 3,041,960 | | 5,250,000 | | 798,423 | | 265,524 | | 20,006,806 | | | | 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 | | Kevin S. Boone | | 2021 | | 700,000 | | — | | 2,203,699 | | 734,236 | | 1,120,000 | | 168,881 | | 40,085 | | 4,966,901 | | | | 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 | | Sean R. Pelkey(1) | | 2021 | | 427,826 | | — | | 774,847 | | 258,359 | | 479,165 | | 95,725 | | 16,270 | | 2,052,192 | | Jamie J. Boychuk | | 2021 | | 700,000 | | — | | 2,203,699 | | 734,236 | | 1,120,000 | | 169,530 | | 35,137 | | 4,962,602 | | | | 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 | | Nathan D. Goldman | | 2021 | | 550,000 | | — | | 1,616,082 | | 538,440 | | 792,000 | | 226,459 | | 57,577 | | 3,780,558 | | | | 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 | | Diana B. Sorfleet(1) | | 2021 | | 550,000 | | — | | 1,616,082 | | 538,440 | | 792,000 | | 167,636 | | 35,112 | | 3,699,270 | | Mark K. Wallace(1) | | 2021 | | 655,417 | | — | | 2,203,699 | | 734,236 | | 1,048,667 | | 182,076 | | 175,254 | | 4,999,349 | | | | 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 |
| (1) | Mr. Boone is an NEO by virtue of having served as our principal financial officer during a portion of 2021. No amounts are included for Mr. Pelkey or Ms. Sorfleet as they were not NEOs for 2019 or 2020. Mr. Wallace tragically passed away in November 2021, but is included as an NEO for SEC disclosure purposes since he would have been one of the next three most highly compensated executives had he remained employed through year end. | | (2) | Stock Awards – Amounts disclosed in this column are related to LTIP performance units, restricted stock units and restricted stock granted in 2019, 2020 and 2021, 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 2021 Annual Report, which was filed with the SEC on February 16, 2022. 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, restricted stock units or restricted stock) for each NEO by year of grant would be: 2021: Mr. Foote - $15,251,441, Mr. Pelkey - $1,230,538, Messrs. Boone, Boychuk and Wallace - $3,672,832, Mr. Goldman and Ms. Sorfleet - $2,693,469; 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. | | (3) | 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 2021 Annual Report, which was filed with the SEC on February 16, 2022. | | (4) | Non-Equity Incentive Plan Compensation – The 2021 short-term incentive compensation (MICP) was paid on February 18, 2022 based on a 160% Company payout of the Target Incentive Opportunities for each NEO under the 2021 MICP. | | (5) | 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 an increase in the pension discount rate from 2.43% to 2.78%. CSX measured its pension values as of December 31, 2021. | | (6) | All Other Compensation – The values in this column for 2021 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 2021 include, along with the other items discussed above, $201,739 for Company-mandated aircraft usage, as described in the CD&A, and a $41,635 nonqualified deferred contribution Company match. For Mr. Wallace, the values in this column for 2021 include, along with the other items discussed above, $136,296 for personal usage of Company aircraft, as well as a tax gross-up in the amount of $7,025 for use of Company aircraft for two flights to and from Houston, Texas for the purposes of medical treatment. |
Table of employment duringContents COMPENSATION DISCUSSION AND ANALYSIS 2021 Grants of Plan-Based Awards Table In 2021, the Employment Period. NEOs received grants of the plan-based awards as shown in the table below. | | | | | Estimated Possible Payouts
Under Non-Equity Incentive Plan
Awards(1) | | Estimated Future Payouts
Under Equity Incentive
Awards (# units)(2) | | All
Other
Stock | | All Other
Option | | Exercise
Price of
Option | | Grant
Date Fair
Value of
Stock and
Option | | | Name | | Grant Date | | Threshold
($) | | Target
($) | | Maximum
($) | | Threshold
(units) | | Target
(units) | | Maximum
(units) | | Awards
(units)(3) | | Awards
(#)(4) | | Awards
($) | | Awards
($)(5) | | | James M. Foote | | Feb. 10, 2021 | | | | | | | | 38,920 | | 207,573 | | 518,933 | | 103,788 | | | | | | 9,150,899 | | | | Feb. 10, 2021 | | | | | | | | | | | | | | | | 388,119 | | 29.39 | | 3,041,960 | | | | | | | 65,625 | | 2,625,000 | | 5,250,000 | | | | | | | | | | | | | | | | | Sean R. Pelkey | | Feb. 9, 2021 | | | | | | | | 772 | | 4,119 | | 8,238 | | 2,061 | | | | | | 182,248 | | | | | Feb. 9, 2021 | | | | | | | | | | | | | | | | 7,701 | | 29.49 | | 60,702 | | | | | June 4, 2021 | | | | | | | | 2,230 | | 11,895 | | 23,790 | | 5,949 | | | | | | 592,599 | | | | | June 4, 2021 | | | | | | | | | | | | | | | | 22,173 | | 33.21 | | 197,657 | | | | | | | 7,487 | | 299,478 | | 598,956 | | | | | | | | | | | | | | | | | Kevin S. Boone | | Feb. 9, 2021 | | | | | | | | 9,341 | | 49,818 | | 124,545 | | 24,909 | | | | | | 2,203,699 | | | | | Feb. 9, 2021 | | | | | | | | | | | | | | | | 93,150 | | 29.49 | | 734,236 | | | | | | | 17,500 | | 700,000 | | 1,400,000 | | | | | | | | | | | | | | | | | Jamie J. Boychuk | | Feb. 9, 2021 | | | | | | | | 9,341 | | 49,818 | | 124,545 | | 24,909 | | | | | | 2,203,699 | | | | Feb. 9, 2021 | | | | | | | | | | | | | | | | 93,150 | | 29.49 | | 734,236 | | | | | | | 17,500 | | 700,000 | | 1,400,000 | | | | | | | | | | | | | | | | | Nathan D. Goldman | | Feb. 9, 2021 | | | | | | | | 6,850 | | 36,534 | | 91,335 | | 18,267 | | | | | | 1,616,082 | | | | Feb. 9, 2021 | | | | | | | | | | | | | | | | 68,310 | | 29.49 | | 538,440 | | | | | | | 12,375 | | 495,000 | | 990,000 | | | | | | | | | | | | | | | | | Diana B. Sorfleet | | Feb. 9, 2021 | | | | | | | | 6,850 | | 36,534 | | 91,335 | | 18,267 | | | | | | 1,616,082 | | | | | Feb. 9, 2021 | | | | | | | | | | | | | | | | 68,310 | | 29.49 | | 538,440 | | | | | | | 12,375 | | 495,000 | | 990,000 | | | | | | | | | | | | | | | | | Mark K. Wallace | | Feb. 9, 2021 | | | | | | | | 9,341 | | 49,818 | | 124,545 | | 24,909 | | | | | | 2,203,699 | | | | | Feb. 9, 2021 | | | | | | | | | | | | | | | | 93,150 | | 29.49 | | 734,236 | | | | | | | 16,385 | | 655,417 | | 1,310,833 | | | | | | | | | | | | | | | |
| (1) | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards – The amounts in these columns reflect the threshold, target and maximum payout opportunities for 2021 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 2021 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 2021-2023 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 2021-2023 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 2021-2023 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 – The amount in this column represents the number of restricted stock units granted to Messrs. Boone, Boychuk, Goldman, Pelkey and Wallace and Ms. Sorfleet on February 9, 2021. Restricted stock units were granted to Mr. Foote on February 10, 2021. These units will vest on February 9, 2024 and February 10, 2024, respectively, subject to the NEO’s continued employment through the applicable vesting date. The amount for Mr. Pelkey includes additional restricted stock units granted on June 4, 2021 in connection with his promotion to the position of Vice President and Acting Chief Financial Officer. |
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Table of Contents COMPENSATION DISCUSSION AND ANALYSIS | (4) | All Other Option Awards – The amount in this column represents the number of non-qualified stock options granted to Messrs. Boone, Boychuk, Goldman, Pelkey and Wallace and Ms. Sorfleet on February 9, 2021, which vest and become exercisable on a three-year graded vesting schedule. One third of these options will become exercisable on February 9, 2022, February 9, 2023 and February 9, 2024. These options were granted with an exercise price equal to the closing stock price on the date of grant of $29.49. Nonqualified stock units were granted to Mr. Foote on February 10, 2021. One third of these options will become exercisable on February 10, 2022, February 10, 2023 and February 10, 2024. These options were granted with an exercise price equal to the closing stock price on the date of grant of $29.39. The amount for Mr. Pelkey includes additional non-qualified stock options granted on June 4, 2021 as a result of being named Vice President and Acting Chief Financial Officer. These options were granted with an exercise price equal to the closing stock price on the date of grant of $33.21. | | (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 2021, 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 2021 Annual Report, which was filed with the SEC on February 16, 2022, 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. |
Table of Contents COMPENSATION DISCUSSION AND ANALYSIS 2021 Outstanding Equity Awards at Fiscal Year End The amounttable below presents information pertaining to all outstanding equity awards held by the NEOs as of benefits dependsDecember 31, 2021. Stock awards are comprised of outstanding performance units, non-qualified stock options, restricted stock and restricted stock units. | | | Option Awards | | Stock Awards | | Name | | Options
Exercisable | | Options
Unexercisable(1) | | Option
Price | | Option
Expiration
Date | | Shares
Not
Vested(2) | | Market
Value(3) | | Equity
Incentive
Awards
Not
Vested(4) | | Market
Value(5) | | | James M. Foote | | 228,120 | | — | | $17.64 | | 10/25/27 | | 103,788 | | $3,902,429 | | 690,447 | | $25,960,807 | | | | | 726,687 | | — | | 17.94 | | 2/6/28 | | | | | | | | | | | | | 453,090 | | 233,409 | | 22.70 | | 2/6/29 | | | | | | | | | | | | | 318,159 | | 636,318 | | 26.50 | | 2/18/30 | | | | | | | | | | | | | — | | 388,119 | | 29.39 | | 2/10/31 | | | | | | | | | | | Sean R. Pelkey | | 2,223 | | — | | 16.13 | | 2/22/27 | | 9,063 | | 340,769 | | 34,850 | | 1,310,360 | | | | | 10,632 | | — | | 17.94 | | 2/6/28 | | | | | | | | | | | | | 6,222 | | 3,207 | | 22.70 | | 2/6/29 | | | | | | | | | | | | | 6,615 | | 13,233 | | 26.50 | | 2/18/30 | | | | | | | | | | | | | — | | 7,701 | | 29.49 | | 2/9/31 | | | | | | | | | | | | | — | | 22,173 | | 33.21 | | 6/4/31 | | | | | | | | | | | Kevin S. Boone | | 15,969 | | — | | 17.59 | | 10/1/27 | | 26,412 | | 993,091 | | 161,483 | | 6,071,761 | | | | | 15,084 | | — | | 17.94 | | 2/6/28 | | | | | | | | | | | | | 8,880 | | 4,575 | | 22.70 | | 2/6/29 | | | | | | | | | | | | | — | | 246,507 | | 23.48 | | 12/4/29 | | | | | | | | | | | | | 72,309 | | 144,618 | | 26.50 | | 2/18/30 | | | | | | | | | | | | | — | | 93,150 | | 29.49 | | 2/9/31 | | | | | | | | | | | Jamie J. Boychuk | | 12,261 | | — | | 17.99 | | 5/26/27 | | 26,721 | | 1,004,710 | | 161,483 | | 6,071,761 | | | | | 12,858 | | — | | 17.94 | | 2/6/28 | | | | | | | | | | | | | 10,704 | | 5,514 | | 22.70 | | 2/6/29 | | | | | | | | | | | | | — | | 240,000 | | 26.31 | | 4/17/29 | | | | | | | | | | | | | 72,309 | | 144,618 | | 26.50 | | 2/18/30 | | | | | | | | | | | | | — | | 93,150 | | 29.49 | | 2/9/31 | | | | | | | | | | | Nathan D. Goldman | | 161,487 | | — | | 17.94 | | 2/6/28 | | 18,267 | | 686,839 | | 123,452 | | 4,641,795 | | | | | 90,618 | | 46,683 | | 22.70 | | 2/6/29 | | | | | | | | | | | | | — | | 211,293 | | 23.48 | | 12/4/29 | | | | | | | | | | | | | 57,846 | | 115,695 | | 26.50 | | 2/18/30 | | | | | | | | | | | | | — | | 68,310 | | 29.49 | | 2/9/31 | | | | | | | | | | | Diana B. Sorfleet | | 13,344 | | — | | 16.13 | | 2/22/27 | | 18,267 | | 686,839 | | 123,452 | | 4,641,795 | | | | | 25,434 | | — | | 17.94 | | 2/6/28 | | | | | | | | | | | | | 90,618 | | 46,683 | | 22.70 | | 2/6/29 | | | | | | | | | | | | | 57,846 | | 115,695 | | 26.50 | | 2/18/30 | | | | | | | | | | | | | — | | 68,310 | | 29.49 | | 2/9/31 | | | | | | | | | | | Mark K. Wallace | | 90,618 | | 44,089 | | 22.70 | | 2/6/29 | | 24,909 | | 936,578 | | 161,483 | | 6,071,761 | | | | | 72,309 | | 144,618 | | 26.50 | | 2/18/30 | | | | | | | | | | | | | — | | 93,150 | | 29.49 | | 2/9/31 | | | | | | | | | |
| (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 2020, and the stock options granted to the NEOs in 2021, 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 restricted stock units granted in February 2019 to Messrs. Boone, Boychuk and Pelkey that will vest in 2022, generally subject to the NEO’s continued service through the applicable vesting date. This column also includes restricted stock units granted in February 2021 pursuant to the 2021-2023 LTIP cycle. | | (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, 2021, the last trading day of 2021, of $37.60. |
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Table of Contents COMPENSATION DISCUSSION AND ANALYSIS | (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 2020-2022 and 2021-2023 LTIPs. The number of performance units shown is equal to the target number of performance units granted under the 2020-2022 LTIP cycle and the threshold number of performance units granted under the 2021-2023 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, 2021, the last trading day of 2021, of $37.60 per share. |
2021 Option Exercises and Stock Vested Table The table below presents the reason for termination as discussed below.value of performance units, non-qualified stock options, restricted stock units and restricted stock that vested in 2021. | | | 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 | | — | | — | | 368,808 | | 12,576,353 | | | Kevin S. Boone | | — | | — | | 72,725 | | 2,444,386 | | | Sean R. Pelkey | | 4,131 | | 106,842 | | 15,902 | | 518,260 | | | Jamie J. Boychuk | | — | | — | | 79,428 | | 2,660,394 | | | Nathan D. Goldman | | 90,555 | | 2,248,500 | | 77,362 | | 2,638,044 | | | Diana B. Sorfleet | | 24,780 | | 647,031 | | 80,323 | | 2,725,443 | | | Mark K. Wallace | | 305,385 | | 4,944,867 | | 167,509 | | 5,526,544 | |
| (1) | Shares Acquired on Exercise – Reflects the number of shares acquired on the exercise of non-qualified stock options that were exercised by Mr. Pelkey on April 22, 2021, Mr. Goldman on April 22, 2021 and October 22, 2021, Ms. Sorfleet on April 26, 2021, and Mr. Wallace on May 10, 2021 and September 8, 2021. | | (2) | Value Realized on Exercise – The value in this column reflects the number of non-qualified stock options exercised by Messrs. Pelkey, Goldman, Wallace and Ms. Sorfleet multiplied by the difference between the grant’s exercise price and the Company’s common stock price at the time of exercise. | | (3) | Shares Acquired on Vesting – Shares acquired through stock awards include: (i) performance units that were paid out pursuant to the 2019-2021 LTIP; (ii) restricted stock units that vested in February 2021 pursuant to the 2018-2020 LTIP; and (iii) restricted stock that vested for Messrs. Pelkey, Boone and Boychuk on September 4, 2021, and for Mr. Wallace on August 2, 2021. | | (4) | Value Realized on Vesting – The values in this column reflect: (i) the number of performance units paid out pursuant to the 2019-2021 LTIP cycle multiplied by $34.10, the closing price of the Company’s common stock on January 21, 2022, the date the performance units were paid out; (ii) the aggregate number of shares of restricted stock and restricted stock units that vested in 2021 multiplied by the closing price of CSX common stock on the applicable vesting date. |
Table of Contents COMPENSATION DISCUSSION AND ANALYSIS Termination Without “Cause,” Resignation for “Good 2021 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 | | Years
Credited
Service | | Present Value
Accumulated
Benefits(1) | | Payments
During
Last FY | | | James M. Foote | | Qualified CSX Pension Plan | | 4.250 | | $ 131,189 | | | | | | | Nonqualified Special Retirement Plan | | 4.250 | | 1,990,358 | | | | | Kevin S. Boone | | Qualified CSX Pension Plan | | 4.333 | | 100,098 | | | | | | | Nonqualified Special Retirement Plan | | 4.333 | | 289,417 | | | | | Sean R. Pelkey | | Qualified CSX Pension Plan | | 16.500 | | 232,697 | | | | | | | Nonqualified Special Retirement Plan | | 16.500 | | 117,670 | | | | | Jamie J. Boychuk | | Qualified CSX Pension Plan | | 4.667 | | 107,444 | | | | | | | Nonqualified Special Retirement Plan | | 4.667 | | 300,135 | | | | | Nathan D. Goldman | | Qualified CSX Pension Plan | | 18.583 | | 503,522 | | | | | | | Nonqualified Special Retirement Plan | | 18.583 | | 832,478 | | | | | Diana B. Sorfleet | | Qualified CSX Pension Plan | | 10.583 | | 297,422 | | | | | | | Nonqualified Special Retirement Plan | | 10.583 | | 499,359 | | | | | Mark K. Wallace | | Qualified CSX Pension Plan | | 4.833 | | 125,096 | | | | | | | Nonqualified Special Retirement Plan | | 4.833 | | 530,438 | | | |
| (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. |
2021 Non-qualified Deferred Compensation Table The following table presents a summary of 2021 contributions made under the Executives’ Deferred Compensation Plan, as well as associated 2021 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;
common stock.| Name | | Executive
Contributions
Last Fiscal
Year(1) | | Registrant
Contributions
Last Fiscal
Year(2) | | Aggregate
Earnings
Last Fiscal
Year(3) | | Aggregate
Distributions
Last Fiscal
Year | | Aggregate
Balance
Last Fiscal
Year End | | | James M. Foote | | 87,500 | | 41,635 | | 138,356 | | — | | 686,605 | | | Sean R. Pelkey | | — | | — | | — | | — | | — | | | Kevin S. Boone | | 23,500 | | 13,708 | | 8,971 | | — | | 81,907 | | | Jamie J. Boychuk | | 22,550 | | 13,154 | | 6,023 | | — | | 41,727 | | | Nathan D. Goldman | | 15,375 | | 8,969 | | 4,004 | | — | | 124,099 | | | Diana B. Sorfleet | | 15,250 | | 8,896 | | 29,460 | | — | | 187,949 | | | Mark K. Wallace | | 24,700 | | 14,408 | | 17,337 | | — | | 3,557 | |
| (1) | Executive Contributions in Last Fiscal Year – The values in this column reflect salary deferred by the NEOs in 2021 under the EDCP. These amounts are also included in the Salary column of the Summary Compensation Table. | | (2) | Company Contributions in Last Fiscal Year – Company contributions in 2021 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 2021 based on participant investment elections. |
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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;
•
any purported termination by CSXTable of the NEO’s employment other than as permitted by the Change-of-Control Agreements; orContents
•
any failure of CSX to require a successor to assume the Change-of-Control Agreement.
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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, 2021, 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 wouldtermination” are set forth in the Change-of-Control Agreements. No payments have been made to any NEO pursuant to the Change-of-Control Agreements. Mr. Wallace is not resultincluded in retirement benefit increases or excise tax gross ups. Further, the pro-ratatable below due to his untimely passing on November 28, 2021. He received a prorated bonus payment would be based on target bonus instead ofand all outstanding equity, which will vest per the highest annual bonus.original vesting schedules. | Name | | Severance
($)(1) | | Pro-Rata
Bonus
Payment
($)(2) | | Equity
($)(3) | | Welfare
Benefit
Values
($)(4) | | Outplacements
($) | | Aggregate
Payments
($) | | | James M. Foote | | 12,333,750 | | 5,250,000 | | 73,152,498 | | 22,752 | | 40,000 | | 90,799,000 | | | Sean R. Pelkey | | 1,754,400 | | 479,165 | | 2,029,133 | | 54,648 | | 20,000 | | 4,337,346 | | | Kevin S. Boone | | 4,186,000 | | 1,120,000 | | 13,767,839 | | 81,972 | | 40,000 | | 19,195,811 | | | Jamie J. Boychuk | | 4,186,000 | | 1,120,000 | | 12,937,635 | | 80,942 | | 40,000 | | 18,364,577 | | | Nathan D. Goldman | | 3,124,550 | | 792,000 | | 16,309,120 | | 58,392 | | 40,000 | | 20,324,062 | | | Diana B. Sorfleet | | 3,124,550 | | 792,000 | | 10,938,054 | | 81,972 | | 40,000 | | 14,976,576 | |
| (1) | | | Severance—Severance – Represents a cash severance payment equal to 2.99 times the sum of the NEO'sNEO’s (except Mr. Pelkey) annual base salary atand “target bonus”. The cash severance payment for Mr. Pelkey is equal to 2 times the timesum of his annual base salary and “target bonus”.
| | (2) | Pro-rata Bonus Payment – Represents the annual bonus that would have been payable based upon the NEO’s Target Incentive Opportunity and the plan’s payout percentage (160% of target for 2021, 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, 2014-20162019-2021, 2020-2022 and 2015-2017 LTIP cycles, as well as payout based on full vesting of outstanding RSUs2021-2023 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. |
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: | ■ | 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); | | ■ | Outplacement—ExecutiveProvide 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.
| | ■ | 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). |
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COMPENSATION DISCUSSION AND ANALYSIS 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. EachCash 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:
| ■ | NEO’s “annual bonus” based upon the NEO’s target incentive opportunity and the plan’s achievement percentage prorated for the number of days in the calendar year prior to a termination of employment; and | | ■ | 2.99 times (2 times for Mr. Pelkey) 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 involuntary employment termination equity awards are impacted as follows:
•
Performance grants at target levels and RSUs are payable immediatelyof employment: (i) by CSX without cause; or (ii) by the NEO for good reason, in cash; and
| ■ | Performance-based equity awards are deemed earned at target levels and cancelled in exchange for a cash payment equal to the fair market value of a share multiplied by the shares subject to the awards at target levels; | | ■ | Restricted stock units 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 | | ■ | Restricted stock vests in full. |
•
Restricted stock immediately vests.
What is the impactImpact 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. No Tax Gross-Ups for Excess Parachute Payments The Company does not provide gross-up payments for excess parachute excise taxes. Rather, the Change-of-Control Agreements provide that the Company will provide the best-net-benefit, meaning that to the extent 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 payments will be automatically adjusted downward to prevent an excess parachute payment. No amounts are reduced in any of the tables to give effect to any such reduction. | 64 | |
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COMPENSATION DISCUSSION AND ANALYSIS 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, 2021, under the applicable severance arrangement assuming the NEO was terminated “without cause” by the Company or by the executive for “good reason.” Mr. Wallace is not included in the table below due to his untimely passing on November 28, 2021. | Name | | Severance
($)(1) | | Stock
Awards
($)(2) | | Option
Awards
($)(2) | | Non-Equity
Incentive Plan
Compensation
($)(3) | | Other
Compensation
($)(4) | | Total
Compensation
Payable
($) | | | James M. Foote | | 8,250,000 | | 30,304,735 | | 42,847,763 | | 5,250,000 | | 57,832 | | 86,710,330 | | | Sean R. Pelkey | | 387,000 | | 510,660 | | 777,391 | | 479,165 | | 55,172 | | 2,209,388 | | | Kevin S. Boone | | 175,000 | | 3,755,751 | | 7,459,048 | | 1,120,000 | | 75,172 | | 12,584,971 | | | Jamie J. Boychuk | | 175,000 | | 3,777,822 | | 6,606,397 | | 1,120,000 | | 74,829 | | 11,754,048 | | | Nathan D. Goldman | | 412,500 | | 3,711,797 | | 10,683,559 | | 792,000 | | 67,312 | | 15,667,168 | | | Diana B. Sorfleet | | 412,500 | | 3,711,797 | | 5,312,493 | | 792,000 | | 75,172 | | 10,303,962 | |
| (1) | Severance – Per his employment agreement, Mr. Foote would 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, Messrs. Goldman and Pelkey and Ms. Sorfleet 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, 2021, 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, 2021 (the last trading day of 2021) of $37.60. The Option Awards have been calculated using the difference between the respective grant’s exercise price and the closing stock price on December 31, 2021, 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 (160% of target for 2021, 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. |
Table of Contents ▸ REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with management. Based on its review and on the discussion described above, the Compensation Committee recommended to the full Board that the Compensation Discussion and Analysis be included in this Proxy Statement.
Steven T. Halverson, Chair
Donna M. Alvarado
Edward J. Kelly, III
Donald J. Shepard
J. Steven Whisler
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▸ITEM 3: ADVISORY VOTE TO APPROVE THE COMPENSATION OF CSX’S NAMED EXECUTIVE OFFICERS
In accordance withAs 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 2021, the last completed fiscal year: | | | ■ | The annual total compensation of the individual identified as the Company’s median employee, other than the CEO, was $107,772. | | ■ | The annual total compensation of the CEO was $20,014,390. | | ■ | Based on this information, the ratio for 2021 of the annual total compensation of Mr. Foote to the annual total compensation of the median employee was 186 to 1. |
The Company identified a new median employee as of year-end 2021. 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, 2021, the Company’s employee population consisted of approximately 20,100 employees. | | 2. | The median employee was identified by using 2021 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 2021. | | 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, 2021, we employed 39 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 2021, in accordance with Item 402(c)(2)(x) of Regulation S-K, which resulted in annual total compensation of $107,772. The difference between such employee’s base salary, wages, and overtime pay ($84,652) and the employee’s total annual compensation was the value of the health care benefits for the employee and eligible dependents, which was $23,120. | | 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 $7,584. | | | |
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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 20172023 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 SHAREHOLDERS VOTE “FOR” FORTHIS PROPOSAL.
|
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▸Equity Compensation
OTHER MATTERSPlan Information
The following table sets forth information about the Company’s equity compensation plans as of December 31, 2021. | 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 | | 12,512 | | $22.42 | | 33,737 | | Equity compensation plans not approved by security holders | | 0 | | 0 | | 0 | | TOTAL | | 12,512 | | $22.42 | | 33,737 |
| (1) | The number of shares remaining available for future issuance under plans approved by shareholders includes 33,737,114 shares available for grant in the form of stock options, performance units, restricted stock, restricted stock units, stock appreciation rights and stock awards pursuant to the 2019 Stock Plan. |
| 68 | |
Table of Contents Neither the Board
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. ▸
Our StockSECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
Security Ownership of Management and Certain Beneficial Owners The following table sets forth, as of March 14, 2016,1, 2022, 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 | | 368,733 | | - | | 368,733 | | * | | Thomas P. Bostick | | 10,533 | | - | | 10,533 | | * | | James M. Foote | | 879,716 | | 2,349,149 | | 3,228,865 | | * | | Steven T. Halverson | | 297,598 | | - | | 297,598 | | * | | Paul C. Hilal(3) | | 1,594,893 | | - | | 1,594,893 | | * | | David M. Moffett | | 46,619 | | - | | 46,619 | | * | | Linda H. Riefler | | 60,012 | | - | | 60,012 | | * | | Suzanne M. Vautrinot | | 17,451 | | - | | 17,451 | | * | | James L. Wainscott | | 10,533 | | - | | 10,533 | | * | | J. Steven Whisler | | 177,475 | | - | | 177,475 | | * | | John J. Zillmer | | 336,763 | | - | | 336,763 | | * | | Kevin. S. Boone | | 109,653 | | 220,176 | | 329,829 | | * | | Jamie J. Boychuk | | 114,847 | | 221,005 | | 335,852 | | * | | Nathan D. Goldman | | 237,816 | | 437,252 | | 675,068 | | * | | Sean R. Pelkey | | 67,318 | | 44,699 | | 112,017 | | * | | Diana B. Sorfleet | | 157,319 | | 314,543 | | 471,862 | | * | | All current executive officers and directors as a group (a total of 17) | | 4,517,718 | | 3,608,352 | | 8,126,070 | | * |
| | | | | | | 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 957,310,9472,182,474,121 shares outstanding on March 14, 2016.1, 2022. An asterisk (*) indicates that ownership is less than 1% of class. | | (3) | The ownershipBy virtue 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; and 64,048ultimately controlling various entities that hold shares of restrictedcommon stock vesting in May 2016.
| | The ownershipthe Company, Mr. Hilal may be deemed to have the power to vote or direct the vote 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 21,349the 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.
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OWNERSHIP OF OUR STOCK The following table sets forth information regarding the beneficialbeneficial ownership of CSX common stock as of March 14, 20161, 2022 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 | Capital World Investors(1)
333 South Hope Street
Los Angeles, CA 90071 | | 184,488,460 | | 8.3% | The Vanguard Group(2)
100 Vanguard Blvd.
Malvern, PA 19355 | | 183,589,803 | | 8.28% | BlackRock, Inc.(3)
55 East 52nd Street
New York, NY 10055 | | 151,615,861 | | 6.8% | Capital Research Global Investors(1)
333 South Hope Street
Los Angeles, CA 90071 | | 111,241,858 | | 5.0% |
| (1) | | | As disclosed in its Schedule 13G/A filedfiled on February 16, 2016. | | As disclosed in its Schedule 13G/A filedfiled on February 10, 2016. |
▸SECTION 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 | | | | | | | | | | | | | | | | | | | |
| 9, 2022. | | (3) | The number of shares remaining available for future issuance under plans approved by shareholders includes 31,488,431 shares available for grantAs disclosed 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.
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▸
“HOUSEHOLDING” OF PROXY MATERIALSAdditional Information
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 numberNotice 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 copyElectronic Availability 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.Materials
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.
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▸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, 2016.4, 2022. This Proxy Statement and 2015the 2021 Annual Report on Form 10-K are available at www.proxyvote.com.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 2021 Annual Report, and how to 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 2021 Annual Report. The Notice also instructs you on how you may submit your voting instructions over the Internet.instructions. 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 2015The 2021 Annual Report (without exhibits) is available on www.csx.com. Our 2015The 2021 Annual Report (with exhibits) is also available on
the website maintained by the SEC (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 20152021 Annual Report in one of the following manners: | ■ | Send your request by mail to CSX Corporation, Shareholder Relations, 500 Water Street, Jacksonville, Florida 32202; or | | ■ | Call CSX Shareholder Relations at (904) 359-3256. |
•
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.
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 2022 Proxy Statement 71
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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 2022, 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 Wednesday, May 4, 2022. There will be no physical location for shareholders to attend. Shareholders may participate online at www.virtualshareholdermeeting.com/CSX2022. 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 voting your shares electronically and submitting 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 (Microsoft Edge, 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 48 hours 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/ CSX2022 using your 16-digit control number, type your question into the “Ask a Question” field, and click “Submit.” 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. |
2022 Proxy Statement 73
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: ■ provide shareholders with the ability to submit appropriate questions in advance of the Annual Meeting to ensure thoughtful responses from management and the Board; ■ provide shareholders with the ability to submit appropriate questions in real-time during the Annual Meeting through the virtual meeting website; ■ provide management with the ability to answer as many questions as possible in accordance with the meeting rules of conduct in the time allotted without discrimination; and ■ 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 shareholder 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 4, 2022. | | | Q: Why did I receive a notice in the mail regarding the Internet availability of proxy materials instead of a full set of proxy materials? | | A: In accordance with rules adopted by the SEC, we may furnish proxy materials, including this Proxy Statement and our 2021 Annual Report, to our shareholders by providing access to such documents on the Internet instead of mailing printed copies (the “Notice”). 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: ■ view CSX’s proxy materials for the Annual Meeting on the Internet; and ■ 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, 2022 (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, 2022, there were issued and outstanding 2,178,580,270 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. In a contested election, where the number of nominees for director election exceeds the number of directors to be elected, directors are elected by a plurality of the votes cast. Because there are 11 seats on our Board of Directors, this means that if there are more than 11 persons properly nominated for election, the 11 nominees receiving the most “for” votes will be elected, even if the number of votes cast “for” the director do not exceed those cast “against” him or her. As described in Other Matters above, management has received notice from a shareholder that he intends to present himself for nomination as a director at the Annual Meeting. If this shareholder does properly present himself as a nominee at the Annual Meeting, the number of nominees for director will exceed the number of directors to be elected, and directors will be elected by a plurality of the votes cast, rather than by majority vote. Other Proposals.The proposal to ratify the appointment of EY as the Company’s Independent Registered Public Accounting Firm for 2022 (Item 2) and the proposal to approve, on an advisory (non-binding) basis, 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. |
2022 Proxy Statement75
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/CSX2022 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 on 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 2022 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. FORthe ratification of the appointment of EY as CSX’s Independent Registered Public Accounting Firm for 2022; and 3. FORthe 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 person named as proxy on the enclosed proxy card will have discretion to vote on those matters for you. Management and the Board are not aware of any matters that may properly be brought before the Annual Meeting other than the matters disclosed in this Proxy Statement, except that management has received notice from a shareholder that he intends to present himself for nomination as a director at the Annual Meeting. If this shareholder does properly present himself as a nominee at the Annual Meeting, the number of nominees for director will exceed the number of directors to be elected, and directors will be elected by a plurality of the votes cast, rather than by majority vote. In this situation, the person voting the proxies solicited by the Board for the Annual Meeting will vote as directed by you with respect to the election of the 11 directors named in this Proxy Statement and will vote against or abstain from voting on the shareholder’s director nominee. If any other matters not disclosed in this Proxy Statement are properly presented at the Annual Meeting for consideration, the person voting the proxies solicited by the Board for the Annual Meeting will vote them in accordance with his best judgment. | | | 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 2023 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 2023 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, 2022, unless the date of the 2023 Annual Meeting is changed by more than 30 days from May 4, 2023, in which case the proposal must be received a reasonable time before the Company begins to print and mail its proxy materials for the 2023 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 2023 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 4, 2023, nor later than the close of business on February 3, 2023, unless the date of the 2023 Annual Meeting is more than 30 days before or more than 70 days after May 4, 2023, in which case the nomination or proposal must be received no earlier than the 120th day prior to the date of the 2023 Annual Meeting and no later than the close of business on the later of the 90th day prior to the date of the 2023 Annual Meeting or the 10th day following the day on which the Company first publicly announces the date of the 2023 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 2023 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, 2022. |
2022 Proxy Statement 77
Table of Contents ANNUAL MEETING QUESTIONS & ANSWERS | 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 2023 Annual Meeting must be delivered to the Company within the time periods described above and set forth in the Company’s bylaws. |
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Table of Contents Awards and Achievements CSX continues to be recognized with several high-profile awards, rankings and selections for its business practices, long-term investment value and commitment to excellence, including the following: Forbes Green Growth 50: CSX was named to the 2021 Forbes Green Growth 50 list of corporations that have successfully cut greenhouse gas emissions while increasing earnings. Fortune Most Admired Companies: CSX was named one of the World’s Most Admired Companies by Fortune magazine in 2022. 2021 Dow Jones Sustainability Index (DJSI): CSX received this top sustainability honor for the eleventh consecutive year for high performance in environmental management, corporate governance, supply chain management, and corporate citizenship and philanthropy. Wall Street Journal – World’s Top Transportation Company for Sustainability: CSX is the most sustainably run transportation company in the world, according to a 2020 analysis by the Wall Street Journal. CDP A List: 2021 marked the ninth consecutive year CSX has ranked among CDP’s corporate sustainability leaders. National Defense Transportation Association Service Award The National Defense Transportation Association (NDTA) presented CSX with a Corporate Distinguished Service Award at its 19th Fall Meeting in 2021. | | Newsweek Most Responsible Companies: Newsweek magazine recognized CSX as America’s top railroad for corporate responsibility and first among all U.S. transport and logistics companies. World Finance Magazine –
2020 Most Sustainable Company
in the Logistics Industry: For the second consecutive year, CSX was selected by World Finance magazine as the winner in the logistics category for our commitment to ESG policies in all aspects of our operations. U.S. Veterans Magazine – Best of the Best Top Veteran-Friendly Companies: The U.S. Veterans Magazine included CSX on its Best of the Best Top Veteran-Friendly Companies list in 2020 for the second year in a row, recognizing our efforts in welcoming veterans to our workforce. Military Times – Best for Vets: Employers: Military Times released its annual Best for Vets: Employers ranking for 2020, with CSX appearing in 44th position. Disability:IN – Best Place to Work for Disability Inclusion: For the third consecutive year, CSX was recognized as a Best Place to Work for Disability Inclusion by Disability:IN and the American Association of People with Disabilities. U.S. Veterans Management Named to the list Best of the Best Top Veteran-Friendly Companies for 2021. |
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, 2016.3, 2022. Follow the instructions to obtain your records and to create an electronic voting instruction form. ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS
During The Meeting If you would like- Go to reducewww.virtualshareholdermeeting.com/CSX2022
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, 2016.3, 2022. 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: | | | | D71017-P69810 | E06413-P72320
| KEEP THIS PORTION FOR YOUR RECORDS | | | DETACH AND RETURN THIS PORTION ONLY
| THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. | DETACH AND RETURN THIS PORTION ONLY |
| CSX CORPORATION | | | | | | | | | The Board of Directors recommends you vote FOR
Proposals 1, 2 and 3. | | | | | | | |
| | Nominees: | | For
| | Against
| | Abstain
| | | | | | | | | | | | | 1a. | D. M. Alvarado | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | 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. | | YesNominees:
|
|
For |
Against |
Abstain | | | No | 1a. | | Donna M. Alvarado | | ☐ | ☐ | ☐ | | | | 1b. | | Thomas P. Bostick | | ☐ | ☐ | ☐ | | | | 1c. | | James M. Foote | | ☐ | ☐ | ☐ | | | | 1d. | | Steven T. Halverson | | ☐ | ☐ | ☐ | | | | 1e. | | Paul C. Hilal | | ☐ | ☐ | ☐ | | | | 1f. | | David M. Moffett | | ☐ | ☐ | ☐ | | | | 1g. | | Linda H. Riefler | | ☐ | ☐ | ☐ | | | | 1h. | | Suzanne M. Vautrinot | | ☐ | ☐ | ☐ | | | | 1i. | | James L. Wainscott | | ☐ | ☐ | ☐ | | | | 1j. | | J. Steven Whisler | | ☐ | ☐ | ☐ | | | | 1k. | | John J. Zillmer | | ☐ | ☐ | ☐ |
| | | | For | | Against | | Abstain | | | | | | | | | | | | | 1k. | M. J. Ward2. | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | 1l. | J. S. Whisler | | ☐ | | ☐ | | ☐ | | | | | | | | | | | 2. | | The ratification of the appointment of Ernst & Young LLP as the Independent Registered Public Accounting Firm for 2016;2022; and | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | 3. | | Advisory (non-binding) resolution to approve compensation for the company'sCompany's named executive officers. | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
 |  | 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
D71018-P69810 |
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, 20164, 2022 The undersigned hereby appoints MICHAEL J. WARD, ELLEN M. FITZSIMMONS and MARKNATHAN D. AUSTIN, and each of them,GOLDMAN, as proxies, eachproxy, 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/CSX2022 on May 11, 2016,4, 2022, 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 themhim 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 theirhis 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 nomineesProposals 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 proxiesproxy 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, May 10, 2016.3, 2022. 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
|
Continue working toward our science-based target to reduce GHG emissions intensity by 37.3%, using 2014 as our baseline.
Reduce the amount of hazardous waste generated from ongoing operations by 30%.
Expand efforts to engage our supply chain through evaluation of GHG quantification, ESG goals, and evaluation of risks and opportunities by engaging our suppliers through CDP Supply Chain.
Increase the company’s use of renewable energy to 50% of the Scope 2 footprint.
100%
66%
Significant percentage of executive compensation that is performance-based
Re-pricing of 
