UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
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☑ | Definitive Proxy Statement | |
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CSX Corporation
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
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2021 Proxy Statement
![]() | About CSX | |
Who We Are
CSX, a Class I railroad, is one of the nation’s leading transportation suppliers. The Company’s rail and intermodal businesses provide rail-based transportation services including traditional rail service and the transport of intermodal containers and trailers.
![]() | 193 Years in Operation | ![]() | 19,282 Employees | ![]() | 20,000 Route-Mile Network | ![]() | 3,500+ Locomotives | |||
![]() | 3.2 million Carloads | ![]() | 2.7 million Intermodal Units | ![]() | 1,642 Trains Per Day |
Our transportation network serves some of the largest population centers in the nation. Nearly two-thirds of Americans live within CSX’s service territory.
Our Strategy | CSX Network Map |
The Guiding Principles of Scheduled Railroading | |
Scheduled railroading is transforming CSX into a more efficient and reliable railroad. Based on five guiding principles — safety, service, cost control, asset utilization and people — scheduled railroading is both an operating model and a shared commitment to excellence. | |
![]() | Operate Safely |
![]() | Improve Customer Experience |
![]() | Control Costs |
![]() | Optimize Asset Utilization |
![]() | Value And Develop Employees |
Letter to Shareholders | ||
![]() | March Dear
Given the ongoing impacts of the COVID-19 pandemic, you will not be surprised to learn that again this year, the CSX Annual Meeting of Shareholders (“Annual Meeting”) will be conducted in a virtual format. Our collective familiarity with virtual meeting technology and its ability to support increased participation is one of the few positive aspects of this unusual time. Like CSX’s business itself, we all continue to demonstrate resilience in the face of challenges arising from disruption. Therefore, it is with confidence in the future and in anticipation of a well-attended event that I am pleased on behalf of the Board of Directors of CSX Corporation CSX2021. To participate, Prior to the meeting, I
In compliance with the Securities and Exchange Commission’s “notice and access” rules,
Because every vote is important, I encourage you
Along with the CSX Board of Directors and our leadership team, I look forward to your participation in the Annual Meeting. Sincerely, ![]() James M. Foote President and Chief Executive Officer | |
CSX believes that providing Internet access to our proxy materials increases the ability of our shareholders to review important information about the Company, while reducing the environmental impact of our Annual Meeting. | ||
2021 Proxy Statement | 1 |
Notice of 2021 Virtual Annual Meeting of Shareholders | |
To Our Shareholders:Shareholders
The Annual Meeting of Shareholders (the “Annual Meeting”) of CSX Corporation (together with its subsidiaries, “CSX” or the “Company”) will be held at 10:00 a.m. (EDT) on Friday, May 3, 2019.7, 2021. If you plan to participate in the Annual Meeting, please see the instructions on page 9in the Question and Answer section of the Proxy Statement. Shareholders will be able to listen, vote electronically and submit questions during the Annual Meeting online or via telephone.online. There will be no physical location for shareholders to attend. Shareholders may only participate online at www.virtualshareholdermeeting.com/CSX2019.CSX2021.
Items of Business:Business
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To elect the 11 director nominees named in the attached Proxy Statement to the Company’s Board of Directors | To ratify the appointment of Ernst & Young LLP as the Independent Registered Public Accounting Firm for 2021 | To vote on an advisory (non-binding) resolution to approve the compensation for the Company’s named executive officers |
The persons named as proxies will use their discretion to vote on other matters that may properly come before the Annual Meeting.
The above matters are described in the attached Proxy Statement. You are urged, after reading the attached Proxy Statement, to vote your shares by proxy using one of the following methods: (i) vote via the Internet or by telephone; or (ii) if you requested printed proxy materials, complete, sign, date and return your proxy card or voting instruction form if you hold your shares through a broker, bank or other nominee in the postage-paid envelope provided. This proxy is being solicited on behalf of the Company’s Board of Directors.
Only shareholders of record at the close of business on March 4, 2019,8, 2021, which is the record date for the Annual Meeting, are entitled to vote. The Notice of Internet Availability of Proxy Materials (the “Notice”), the Proxy Statement and the Annual Report on Form 10-K for the fiscal year ended December 31, 20182020 (the “2018“2020 Annual Report”) are being mailed or made available to those shareholders on or about March 20, 2019.24, 2021.
By Order of the Board of Directors,
Nathan D. Goldman
Executive Vice President-Chief Legal
Officer
and Corporate Secretary
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALSFOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 3, 2019
The Company’s Notice of Annual Meeting, Proxy Statement and Annual Report on Form 10-K for thefiscal year ended December 31, 2018, are available, free of charge, at www.proxyvote.com.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS The Company’s Notice of Annual Meeting, Proxy Statement |
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Table of Contents | ||
2021 Proxy | 3 |
Advancing ESG through Transformation | ||
The goal of CSX’s operating model is to improve transit times and enhance reliability, resulting in more consistent freight flows, a more sustainable use of resources across the CSX network, a superior service product for our customers, and a safe and rewarding work environment for CSX employees.
Our operational transformation enabled us to drive improvements across the business, including our ESG performance. Most significantly, we have been able to:
![]() | Improve safety performance across the network through enhanced safety training, processes, and technology | ||
![]() | Achieve faster transit times, greater schedule reliability, increased transparency of network performance, and more consistent freight flows, resulting in a superior service for customers | ||
![]() | Reduce fuel usage and emissions by converting more road miles to rail miles and realizing higher utilization of assets across the network – reducing CSX’s carbon footprint as well as our customers’ footprints | ||
(1) 2020 data to be released later this year. |
What’s Ahead
The next phase of CSX’s transformation focuses on capturing the full value of the improved service by generating profitable and sustainable growth. Increased fluidity and efficiencies across the network allow us to provide a level of service, transparency, efficiency, and reliability that was not previously possible. With continued investments in rail assets, accident prevention, environmental awareness, fuel efficiency, and more, we continue to look for opportunities to better serve our customers and employees and to make rail the sustainable transportation mode of choice.
Awards and Accomplishments
CSX is proud to have received several high-profile awards, rankings, and other honors over the last year, including the following:
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ADVANCING ESG THROUGH TRANSFORMATION
ESG Highlights
Our leadership in the freight rail industry and our aspiration to be the best-run railroad in North America rely on our ability to conduct business in a sustainable way. A strong commitment to environmental stewardship, social responsibility and a solid governance framework are critical to our mission. CSX actively works to innovate its approach and drive efficiencies, while setting challenging goals and pursuing opportunities for continued improvement as part of our commitment to sustainable business practices.
In early 2020, the Company engaged with internal and external stakeholders to evaluate its Environmental, Social and Governance (“ESG”) priorities. Our process included reviewing multiple ESG reporting frameworks and guidelines, such as the United Nations’ Sustainable Development Goals, Global Reporting Initiative, Sustainability Accounting Standards Board and the Task Force on Climate-related Financial Disclosures. We also benchmarked peer companies and conducted a media analysis to identify 26 potentially material topics. We then evaluated topics through surveys of 693 internal and external stakeholders, including employees, union members, customers, suppliers, investors, nonprofit organizations, and others. This exercise led to a prioritization of the issues most material to our business and stakeholders, which were published in the CSX 2019 ESG Report. |
Environmental
As the most fuel-efficient mode of freight transportation on land, railroads are uniquely positioned to contribute to a more-sustainable society. CSX’s success in moving more freight with less asset intensity and reducing fuel consumption has created a reliable service product that is allowing customers to move freight from the highway to rail and reduce their overall carbon footprint.
Since the implementation of the scheduled railroading model in 2017, CSX has reduced its locomotive fleet by over 35%, improved utilization of trip optimization technology, and increased the use of distributed power – which have helped the Company reach record fuel efficiency. Looking towards the future, the Company is aggressively setting new environmental goals to guide our strategy through 2030, building on our success in moving more freight with less asset intensity and reducing fuel consumption.
Additional details on our environmental management approach, including our Environmental Policy, can be found in our 2019 ESG Report.
Energy and Fuel Efficiency In 2019, we partnered with the Science Based Targets initiative (“SBTi”), an organization dedicated to supporting commitments that are consistent with the goal of the Paris Agreement to limit global warming to well-below 2°C above pre-industrial levels. Through this partnership, CSX has made an ambitious new commitment to reduce GHG emissions intensity by 37.3% by 2030, using 2014 as our baseline. CSX is the | ||||
16% Improvement in fuel efficiency since 2014 | 508 miles Distance CSX moves one ton of freight on a | |||
2021 Proxy Statement | 5 |
ADVANCING ESG THROUGH TRANSFORMATION
Social
Our business is fueled by the dedication of our employees and our shared commitment to be the best-run railroad in North America. We believe in service, not only to our customers, but service to each other and service to our communities.
People
Workforce Diversity and Racial Equity
While 2020 provided more than its share of challenges, it shined a bright light on the extensive work that remains with respect to diversity and social justice in the United States. That said, we are extremely proud of the strides that CSX has made toward building a diverse organization that celebrates different backgrounds and experiences. We maintain our focus on working collaboratively with our employees, communities and partners to create a diverse and inclusive workplace.
In addition to our broader diversity efforts, which includes a focus on disability, women in field positions, STEM and being a military friendly organization, the Company developed a racial equity and social justice action plan focused on awareness, education and communication of diverse employee perspectives; taking action to eliminate potential or perceived inequities; providing employee development opportunities; voter education and engaging in social justice partnerships and activities across our communities.
As we work to increase the diversity of our workforce, CSX has built partnerships with organizations such as the Congressional Black Caucus, City Year, CSX Pride in Service organizations, National African-American Women’s Leadership Institute, SOAR (a leadership development program for women and minorities), Disability: In, the Wounded Warrior Project, and Generation W. Through our partnerships, we create stronger inclusion, provide opportunities and resources for our workforce, and enhance our access to exceptional talent.
Talent Strategy
At CSX, we recognize the unique contributions that each person brings to the Company and know that our people are the foundation of our success. Key to that foundation is building and maintaining a strong talent strategy. We are committed to building a culture that empowers employees to deliver value and reach their full potential. To attain our vision to be the best-run railroad in North America, we want every employee to be engaged and inspired as a valued contributor to our collective success. Our talent strategy focuses on four pillars:
CSX TALENT STRATEGY |
![]() | Right Role, Right Number Every position adds value | ![]() | Diverse Experiences & Skills Every person adds value | ![]() | Motivated to Succeed Diversity, inclusion and engagement | ![]() | Well-compensated Competitive pay and benefits | ||||||
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ADVANCING ESG THROUGH TRANSFORMATION
Safety
Every employee at CSX is part of the Safety team. We foster a culture of learning and take a network approach to safety, with a goal of together identifying best practices to eliminate risk and sharing those practices across our network. We take a preventive approach, working to proactively reduce risk to our employees or anyone in the vicinity of our rail network. We uphold our safety culture through effective management systems, ongoing training, robust hazard management and emergency preparedness and response mechanisms, and continuous collaboration and communication with employees, customers, suppliers, communities, and industry peers.
To better serve the communities in which we operate, CSX has a multi-year partnership with Operation Lifesaver, an education and awareness organization committed to ending collisions, fatalities and injuries at highway-rail grade crossings and along railroads rights-of-way. In addition to our work with Operation Lifesaver, CSX actively participates in Rail Safety Week, during which CSX conducts awareness activities, including traffic and trespassing enforcement blitzes, school and community presentations, and truck driver outreach.
Communities
Governance
Good governance practices begin with strong leaders who understand the opportunities and challenges across the business and help make decisions that support the Company’s long-term growth and success. In consultation with the Board of Directors, CSX has developed systems, policies and procedures to ensure the Company maintains effective audit, compliance and risk management programs.
Business Ethics 2020 Ethics Data Highlights ![]() Management Employees Trained ![]() Union Employees Trained | Risk Management and Business Disruption Prevention $1.63B in capital expenditures to maintain and improve our existing infrastructure. Cyber and Information Security Management In 2019, Suzanne M. Vautrinot, a retired U.S. Airforce major general, joined our Board. Ms. Vautrinot, who led the USAF’s Cyber Command and is currently the | Human Rights In 2020, CSX adopted a formal Human Rights Policy. In January 2020, CSX joined a U.S. Department of Transportation initiative to fight human trafficking through increased education and public awareness. Responsible Sourcing 4,800 suppliers, both domestic and international, create a network of partners that contribute to CSX’s responsible value chain. | ||||
To learn more about our commitment to Environment, Social and Governance (ESG) or to view our 2019 ESG Report, visit our ESG site at https://investors.csx.com/esg.
2021 Proxy Statement | 7 |
This summary highlights information contained elsewhere in this Proxy Statement. This summary does not contain all of the information that you should consider, and you should read the entire Proxy Statement carefully before voting. For more complete information regarding the Company’s 2020 performance, please review the 2020 Annual Report.
BOARD NOMINEES |
Committee Memberships | ||||||||||||||
Name | Since | ![]() | ![]() | ![]() | ![]() | ![]() | Other Public Company Boards | |||||||
![]() | Donna M. Alvarado Independent | 2006 | ![]() | ![]() | CoreCivic, Inc. Park National Corporation | |||||||||
![]() | Thomas P. Bostick Independent | 2020 | ![]() | ![]() | Perma-Fix Environmental Services, Inc. | |||||||||
![]() | James M. Foote | 2017 | ![]() | |||||||||||
![]() | Steven T. Halverson Independent | 2006 | ![]() | ![]() | ![]() | |||||||||
![]() | Paul C. Hilal Independent | 2017 | ![]() | ![]() | ![]() | Aramark | ||||||||
![]() | David M. Moffett Independent | 2015 | ![]() | ![]() | ![]() | PayPal Holdings, Inc. Genworth Financial, Inc. | ||||||||
![]() | Linda H. Riefler Independent | 2017 | ![]() | ![]() | ![]() | MSCI, Inc. | ||||||||
![]() | Suzanne M. Vautrinot Independent | 2019 | ![]() | ![]() | Wells Fargo & Co. Ecolab, Inc. Parsons Corporation | |||||||||
![]() | James L. Wainscott Independent | 2020 | ![]() | ![]() | Parker-Hannifin Corp. | |||||||||
![]() | J. Steven Whisler Independent | 2011 | ![]() | ![]() | ![]() | Brunswick Corporation International Paper Co. | ||||||||
![]() | John J. Zillmer Independent (Chairman of the | 2017 | ![]() | ![]() | ![]() | Ecolab, Inc. Aramark Corporation |
![]() | Audit | ![]() | Compensation and Management | ![]() | ![]() | Finance | ![]() | Governance and Sustainability | ![]() | Chair | ![]() | Member |
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Proxy Voting Summary
Elements of the Company’s 2020 Executive Compensation Programs
As an organization focused on pay-for-performance, CSX provides competitive total compensation opportunities in line with similar Comparator Group companies. The Compensation and Talent Management Committee reviews the performance and accomplishments of each executive to ensure incentive compensation payouts are consistent with the Company’s overall executive compensation program objectives.
Form | Performance | Objective | ||||||
Salary | Based on assessment of scope of responsibilities, individual performance, experience and long-term shareholder value creation | Recruit, engage and retain talented, high-performing leaders | ||||||
Short-Term Incentives | Cash | The Company’s performance measures for the 2020 annual incentive awards were:
■ Operating Ratio ■ Safety Individual performance is also considered for determining the final payout for the executive | Motivate and | |||||
Long-Term Incentives |
■ Non-qualified Stock Options | |||||||
The performance measures for the performance units granted as part of ■ Operating Income ■ Free Cash Flow Formulaic linear Relative Total Shareholder Return modifier of +/- 25% with 250% maximum | ||||||||
2021 Proxy Statement | 9 |
Attend our Annual Meeting of Shareholders
Alignment with Leading Governance Practices
The Committee has established executive compensation programs that incorporate leading governance principles. Highlighted below are executive compensation practices that drive performance and support strong corporate governance.
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How to Cast Your Vote by Proxy
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Voting Matters and Board Recommendation
The Board of Directors unanimously recommends a vote:
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Proxy Summary
Board Nominees
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Proxy Summary
Corporate Governance Highlights
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Stock ownership guidelines for officers and directors
BUSINESS HIGHLIGHTS FOR 2018
CSX accelerated its transformational change in 2018. Aided by the precision scheduled railroad business model,
Business Highlights for 2020
In 2020, CSX delivered a Company-record operating ratio of 60.3% in 2018.58.8%. In addition, CSX returned approximately $5.4$1.7 billion to shareholders in the form of dividends and share repurchases. For more detail on CSX’s performance in 2018,2020, please see the 20182020 Annual Report.
STOCK PERFORMANCE GRAPH
Stock Performance Graph The cumulative five-year shareholder returns on $100 invested at December 31, | ||
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Proxy Summary
TARGET COMPENSATION MIX FOR THE NAMED EXECUTIVE OFFICERS
Information regarding the compensation mix for the Chief Executive Officer (“CEO”) and each of the other executive officers named in the Summary Compensation Table (“Named Executive Officers” or “NEOs”) is set forth in the tables below. The tables indicate that 89% of the CEO’s target compensation and an average of 82% of the other Named Executive Officers’ target compensation is at risk and subject to the achievement of one or more performance goals.
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EXECUTIVE COMPENSATION HIGHLIGHTS
The table below highlights the 2018 compensation for the Named Executive Officers as disclosed in theSummary Compensation Table.
Name and Title | Salary | Bonus | Stock Awards | Option Awards | Non-Equity Incentive Plan Compensation | Change in Pension Value and Nonqualified Deferred Compensation Earnings | All Other Compensation | Total | ||||||||
James M. Foote President and Chief Executive Officer | $ | 1,220,833 | — | $ | 5,310,204 | $ | 3,524,190 | $ | 3,052,081 | $ | 441,428 | $ | 221,863 | $ | 13,770,599 | |
Frank A. Lonegro Executive Vice President and Chief Financial Officer | $ | 500,000 | — | $ | 1,180,057 | $ | 783,158 | $ | 900,000 | $ | 439,030 | $ | 20,741 | $ | 3,822,986 | |
Edmond L. Harris Executive Vice President Operations CSX Transportation, Inc. | $ | 589,130 | $ | 250,000 | $ | 2,824,310 | $ | 1,455,954 | $ | 1,060,435 | $ | 181,385 | $ | 154,621 | $ | 6,515,835 |
Mark K. Wallace Executive Vice President – Sales and Marketing | $ | 550,000 | — | $ | 3,367,141 | $ | 783,158 | $ | 990,000 | $ | 139,665 | $ | 118,199 | $ | 5,948,163 | |
Nathan D. Goldman Executive Vice President – Chief Legal Officer & Corporate Secretary | $ | 500,000 | — | $ | 1,180,057 | $ | 783,158 | $ | 900,000 | $ | 182,544 | $ | 36,523 | $ | 3,582,282 |
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Proxy Statement for 2019 Annual Meeting of Shareholders
Proxy Statement for 2019 Annual Meeting of Shareholders
Proxy Statement for 2019 Annual Meeting of Shareholders
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Overview
Ten
Eleven directors are to be elected to hold office until the 20202022 Annual Meeting of Shareholders (the “2022 Annual Meeting”) and their successors are elected and qualified. Each of the nominees, other than Thomas P. Bostick and James L. Wainscott, was elected to the Board at the Company’s 20182020 Annual Meeting of Shareholders. Nominees for Board membership are expected to be prominent individuals who demonstrate leadership and possess outstanding integrity, values and judgment. Directors and nominees must be willing to devote the substantial time required to carry out the duties and responsibilities of directors. In addition, each Board member is expected to represent the broad interests of the Company and its shareholders as a group, and not any particular constituency.
Diversity
CSX strives to cultivate an environment that embraces teamwork and capitalizes on the value of diversity. Although the Board does not have a formal written diversity policy, the Governance and Sustainability Committee has a long-standing commitment to diversity and is guided by the Company’s diversity philosophy when considering director nominees. The Committee recognizes the importance of maintaining a Board with a broad scope of backgrounds and expertise that will expand the views and experiences available to the Board in its deliberations. Many factors are taken into account when evaluating director nominees, including their ability to assess and evaluate the Company’s strategies in the face of changing economic and regulatory environments that may impact customer and shareholder expectations. In addition, the Committee feels that candidates representing varied age, gender, and cultural and ethnic backgrounds add to the overall diversity and viewpoints of the Board. The Governance and Sustainability Committee and the full Board believe that the director nominees listed below embody the breadth of backgrounds and experience necessary for a balanced and effective Board.
Board Information and Diversity Highlights
The Governance and Sustainability Committee and the full Board believe that the director nominees listed below embody the breadth of backgrounds and experience necessary for a balanced and effective Board.
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Item 1: Election of Directors
In determining the qualifications of a director nominee, the Board and the Governance Committee consider the following to be key skills and areas of experience:
The chart below highlights some of the Board’s skills and experience as a group. The biography of each director also includes certain of their specific areas of expertise that resulted in the Board’s determination that each nominee is uniquely qualified to serve on the Board.
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Item 1: Election of Directors
Board Nominees
The Governance Committee has recommended to the Board, and the Board has approved, the persons named below as director nominees. The Board believes that each of the director nominees adds to the overall diversity of the Board. The director nominees bring a wide range of experience and expertise in management, railroad operations and financial markets. As of the date of this Proxy Statement, the Board has no reason to believe that any of the nominees named will be unable or unwilling to serve. There are no family relationships among any of these nominees or among any of the nominees and any executive officer of the Company. Although certain directors (Messrs. Hilal and Zillmer and Ms. Riefler) were nominated to the Board in 2017 in accordance with an agreement (the “MR Agreement”) between the Company and MR Argent Advisor LLC and its affiliated funds (“Mantle Ridge”), the MR Agreement terminated following the 2018 Annual Meeting. Therefore, these director nominees are not being nominated pursuant to the MR Agreement this year.
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Information regarding each director nominee follows. Each nominee has consented to being named in this Proxy Statement and to serve if elected.
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Item
ITEM 1: ElectionELECTION OF DIRECTORS
Key Skills and Experience
In determining the qualifications of Directorsa director nominee, the Board and the Governance and Sustainability Committee consider the following to be key skills and areas of experience:
Board’s Skills and Experience as a Group | |||||
![]() ![]() | Business operations experience gives directors a practical understanding of developing, implementing and assessing the Company’s operating plan and business strategy. | ![]() | |||
![]() | Corporate Governance | Corporate governance experience supports Board and management accountability, transparency and protection of shareholder interests. | ![]() | ||
![]() | Finance/Capital Allocation | Financial and capital allocation experience is important in evaluating the Company’s capital structure. | ![]() | ||
![]() | Financial Expertise/Literacy | Financial expertise and literacy is important because it assists directors with their oversight of financial reporting and internal controls. | ![]() | ||
![]() | Government/Public Policy | Government and public policy experience is important in understanding the regulatory environment in which the Company operates. | ![]() | ||
![]() | Risk Management | Risk management experience is critical to the Board’s risk oversight role. | ![]() | ||
![]() | Marketing/Sales | Marketing and sales experience is important to understanding the Company’s business strategies in developing new markets. | ![]() | ||
![]() | Talent Management | Talent management experience is valuable in helping the Company attract, motivate and retain high performing employees, including succession planning efforts. | ![]() | ||
![]() | Transportation Industry | Transportation industry experience is important to understanding the dynamics within the freight transportation sector. | ![]() |
The chart above highlights the Board’s skills and experience as a group. The biography of each director also includes certain of their specific areas of expertise that resulted in the Board’s determination that each nominee is uniquely qualified to serve on the Board. |
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ITEM 1: ELECTION OF DIRECTORS
Board Nominees
The Governance and Sustainability Committee has recommended to the Board, and the Board has approved, the persons named below as director nominees. The Board believes that each of the director nominees adds to the overall diversity of the Board. The director nominees bring a wide range of experience and expertise in management, railroad operations, financial markets, human capital and risk management. As of the date of this Proxy Statement, the Board has no reason to believe that any of the nominees named will be unable or unwilling to serve. If any of the nominees named is not available to serve as a director at the time of the Annual Meeting (an event which the Board does not now anticipate), the proxies will be voted for the election of such other person or persons as the Board may designate, unless the Board, in its discretion, reduces the size of the Board.
There are no family relationships among any of these nominees or among any of the nominees and any executive officer of the Company.
Information regarding each director nominee follows. Each nominee has consented to being named in this Proxy Statement and to serve if elected.
![]() | The Board unanimously recommends a vote FORthe election of the following nominees. |
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| 2006 CSX Committees | Audit/Compensation and Talent Management Other Public Directorships
Park National Corporation |
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Biographical Information
Donna M. Alvarado is the founder and current President of
Ms. | Skills and Qualifications
As a result of her experience in the public and |
2021 Proxy Statement | 13 |
ITEM 1: ELECTION OF DIRECTORS
![]() Age 64 Director since2020 CSX Committees Other Public Directorships • Perma-Fix Environmental Services, Inc. | Thomas P. Bostick INDEPENDENT DIRECTOR NOMINEE | |
![]() | Biographical Information Mr. Thomas P. Bostick is a retired U.S. Army Lieutenant General and former Chief Operating Officer at Intrexon, a biological engineering company. As Chief of Engineers and Commanding General of the U.S. Army Corps of Engineers, he was responsible for most of the nation’s civil works infrastructure and military construction, leading the world’s largest public engineering organization. Among his previous commands, Mr. Bostick was the Army’s Director of Human Resources and led the U.S. Army Recruiting Command. He was deployed during Operation Iraqi Freedom as second in command of the 1st Cavalry Division and later commanded the Army Corps of Engineers Gulf Region Division. Mr. Bostick joined Intrexon after retiring from the Army in 2016. He led a restructuring of the company in 2019 that resulted in Intrexon being renamed Precigen at the start of 2020. Skills and Qualifications Mr. Bostick has extensive leadership experience, engineering expertise and knowledge in the fields of sustainability and human resources. |
![]() Age 67 Director since2017 CSX Committees Other Public Directorships • None | James M. Foote
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Biographical Information James M. Foote, a senior executive with over 40 years of railroad industry experience in finance, operations and sales and marketing, was named President and Chief Executive Officer and a director of CSX in December 2017. Mr. Foote joined CSX as Executive Vice President and Chief Operating Officer in October 2017. Prior to joining CSX, Mr. Foote was President and Chief Executive Officer of Bright Rail Energy, a technology company formed in 2012 to design, develop and sell products that allow railroads to switch locomotives to natural gas power. Before heading Bright Rail, Mr. Foote was Executive Vice President, Sales and Marketing with Canadian National Railway | Skills and Qualifications Mr. Foote has expertise in railroad operations, including the scheduled railroading operating model, and sales and marketing. He also provides the Board with significant knowledge and understanding of the Company and its business. |
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ItemITEM 1: Election of DirectorsELECTION OF DIRECTORS
![]() Age 66 Director since2006 CSX Committees Other Public Directorships • None | |||
![]() | Steven T. Halverson
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Biographical Information Steven T. Halverson is the former Chairman and former Chief Executive Officer of The Haskell Company, one of the largest design and construction firms in the United States. Prior to joining The Haskell Company in 1999, Mr. Halverson served as a Senior Vice President of M.A. Mortenson, a national construction firm. Mr. Halverson also serves as a director for GuideWell Mutual Insurance Holdings, Blue Cross Blue Shield of Florida, and is past chair of the Florida Council of 100, the Florida Chamber of Commerce, the Construction Industry Roundtable and the Jacksonville Civic Council. From 2008 until its sale to McKesson Corporation in 2013, Mr. Halverson served on the board of directors of PSS World Medical. | Skills and Qualifications Mr. Halverson’s expertise in the construction industry allows him to provide unique insight and perspective on the U.S. economy and certain CSX markets. In addition, through his roles with key organizations in Florida, Mr. Halverson provides broad leadership capabilities to the Board. |
![]() Age 54 Director since2017 CSX Committees Other Public Directorships • Aramark | ||||
![]() | Paul C. Hilal
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Biographical Information Paul C. Hilal founded and controls Prior to founding Mantle Ridge, Mr. Hilal was a partner and senior investment professional at Pershing Square Capital Management where he worked from 2006 to 2016. From 2012 to 2016, Mr. Hilal served as a director of Canadian Pacific Railway Limited | Skills and Qualifications Mr. Hilal draws on his experience as a value investor, as a capital allocator, and as an engaged director driving shareholder value. Additionally, through his railroad industry experience and perspective, Mr. Hilal provides the Board valuable insight regarding the financial aspects of CSX’s business. |
15 |
ItemITEM 1: Election of DirectorsELECTION OF DIRECTORS
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![]() Age69
Director since | 2015 CSX Committees Audit (Chair)/Executive/Finance | Other Public Directorships
| David M. Moffett INDEPENDENT DIRECTOR NOMINEE | |
Biographical Information
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David M. Moffett served as the Chief Executive Officer and a director of the Federal Home Loan Mortgage Corporation from September 2008 until his retirement in March 2009. He previously served as a Senior Advisor with the Carlyle Group LLC from May 2007 to September 2008, and as the Vice Chairman and Chief Financial Officer of U.S. Bancorp from 2001 to 2007, after its merger with Firstar Corporation where he served as Vice Chairman and Chief Financial Officer from 1998 to 2001. Mr. Moffett also served as Chief Financial Officer of StarBanc Corporation, a predecessor to Firstar Corporation, from 1993 to 1998. Mr. Moffett serves as a trustee on the boards of Columbia Fund Series Trust I and Columbia Funds Variable Insurance Trust, overseeing approximately 52 funds within the Columbia Funds mutual fund complex. In addition, he serves as a trustee for the University of Oklahoma Foundation. Mr. Moffett also has served as a consultant to Bridgewater and Associates. From 2007 to 2015, Mr. Moffett served on the board of directors of eBay, Inc. From 2010 to 2016, Mr. Moffett served on the board of directors of CIT Group Inc. | Skills and Qualifications With his many years of experience as a chief executive officer or chief financial officer of public financial services companies, Mr. Moffett is able to provide valuable insight to the Board concerning financial matters. He is also able to leverage his significant public policy experience. |
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Item 1: Election of Directors60
Director since2017
CSX Committees
Compensation and Talent Management/Executive/
Governance and Sustainability (Chair)
Other Public Directorships
![]() | Linda H. Riefler
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Biographical Information Linda H. Riefler served as the Chairman of Global Research at Morgan Stanley from 2011 to 2013 and prior to that as Global Head of Research since 2008. From 2006 to 2008 she served as the Chief Talent Officer of Morgan Stanley, in which role she served on both the Management Committee | In addition to serving on the CSX board of directors, Ms. Rielfer currently serves on the board of MSCI, Inc., a global provider of indices and decision report tools, services to global portfolio managers and asset owners across the equity, fixed income, and alternative asset universes. MSCI is also a leader in ESG research. She also serves on the board of North American Partners in Anesthesia, a private equity-owned national health care company. Ms. Riefler also serves as the chair of an educational nonprofit called Pencils of Promise that is committed to literacy in global rural underserved communities. Previously, Ms. Riefler has served on the boards of Stanford Graduate School of Business and Choate Rosemary Hall. Skills and Qualifications Ms. Riefler draws on her experience at Morgan Stanley to provide the Board perspective on growth strategies, risk management, debt and equity financings, and capital market allocations. |
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ITEM 1: ELECTION OF DIRECTORS
![]() Age 61 Director since2019 CSX Committees Other Public Directorships • Ecolab, Inc. • Parsons Corporation • Wells Fargo & Co. | Suzanne M. Vautrinot INDEPENDENT DIRECTOR NOMINEE | |
![]() | Biographical Information Suzanne M. Vautrinot is the Founder and President of Kilovolt Consulting, Inc., a cyber security strategy and technology consulting firm. In 2013, Ms. Vautrinot retired from the United States Air Force (“USAF”) as a Major General following a distinguished 31-year career where she influenced the development and application of critical cyber security and space technology. From 2011 to 2013, Ms. Vautrinot served as Commander of the USAF’s Cyber Command where she oversaw a multibillion-dollar cyber enterprise and led a workforce of 14,000 personnel conducting offensive and defensive cyber operations worldwide. She served as the Deputy Commander for Joint Forces Component Command Network Warfare and was instrumental in creating, operating and protecting U.S. Cyber Command and the global network architecture. During her career in the USAF, Ms. Vautrinot also served as Director of Plans and Policy, U.S. Cyber Command and Deputy Commander, Network Warfare, U.S. Strategic Command, as well as Commander - Air Force Recruiting Service. Ms. Vautrinot was formerly a director of Norton Life Lock Inc. (formerly Symantec Corporation) from 2013 to 2019. Skills and Qualifications Ms. Vautrinot provides the Board with expertise in cyber security, risk management, corporate governance and talent management. |
![]() Age 63 Director since2020 CSX Committees Other Public Directorships • Parker-Hannifin Corp. | James L. Wainscott INDEPENDENT DIRECTOR NOMINEE | |
Biographical Information James L. Wainscott is the former Chairman, President and Chief Executive Officer of AK Steel Holding Corporation, a leading steel production and manufacturing company. He joined AK Steel in 1995 as Vice President and Treasurer and was appointed Chief Financial Officer two years later. In 2003, he was named President, CEO and a member of the board of directors and then Chairman of the Board in 2006. Mr. Wainscott retired as President and CEO of AK Steel in 2015, and as Chairman in 2016. Prior to his time at AK Steel, Mr. Wainscott held a number of leadership positions with National Steel Corporation. Mr. Wainscott also serves as vice chair of the Council of Chief Executives, a group primarily consisting of retired Fortune 500 Company CEOs. Skills and Qualifications Mr. Wainscott brings a deep knowledge of key industrial markets and proven leadership to the Company’s board of directors. |
2021 Proxy Statement | 17 |
ITEM 1: ELECTION OF DIRECTORS
![]() Age 66 Director since2011 CSX Committees Other Public Directorships • Brunswick Corporation • International Paper Co. | J. Steven Whisler
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Biographical Information J. Steven Whisler is the retired Chairman and Chief Executive Officer of Phelps Dodge Corporation, a mining and manufacturing company, where he served in many roles from 1981 until his retirement in 2007. During his tenure at Phelps Dodge Corporation, Mr. Whisler was instrumental in the implementation of its “Zero and Beyond” safety program designed to eliminate workplace injuries and its “Quest for Zero” process-improvement program designed to, among other things, eliminate environmental waste while enhancing product quality. Mr. Whisler also served as director of US Airways Group, Inc. from 2005 until 2011, and Burlington Northern Santa Fe from 1995 until its acquisition by Berkshire Hathaway in 2010. | Skills and Qualifications Through his prior tenure on the Burlington Northern Santa Fe board of directors and as a former executive in the mining industry, Mr. Whisler brings to the Board invaluable safety program experience, railroad knowledge and familiarity with certain key markets. |
Item 1: Election of Directors
![]() Age 65 Director since2017 CSX Committees Other Public Directorships • Ecolab, Inc. • Aramark | |||
![]() | John J. Zillmer
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Biographical Information John J. Zillmer is the | Skills and Qualifications Mr. Zillmer provides the Board valuable insight on business optimization and improvement, in addition to labor relations, environmental safety, logistics, corporate governance and talent management. |
18 | ![]() |
Table of ContentsWhat if a nominee is unable to serve as director?
If any of the nominees named above is not available to serve as a director at the time of the Annual Meeting (an event which the Board does not now anticipate), the proxies will be voted for the election of such other person or persons as the Board may designate, unless the Board, in its discretion, reduces the size of the Board.ITEM 1: ELECTION OF DIRECTORS
DIRECTOR INDEPENDENCEDirector Independence
The Board annually evaluates the independence of each of its directors and, acting through its Governance and Sustainability Committee, the performance of each of its directors. In evaluating the independence of each of its directors, the Board considers the NasdaqNASDAQ Global Select Market (“Nasdaq”NASDAQ”) listing standards and reviews transactions or relationships, if any, between each director, director nominee or his or her immediate family and the Company or its subsidiaries. The purpose of this review is to determine whether any such relationships or transactions would interfere with the exercise of independent judgment by the director or director nominee in carrying out his or her responsibilities as a director, and thus, be inconsistent with a determination that the director or director nominee is independent. The Board also considers the independence of its committee members under applicable tax and securities laws.
In February 2019,2021, after considering NasdaqNASDAQ listing standards, the Board, upon recommendation from the Governance and Sustainability Committee, determined that the following director nominees are independent under the NasdaqNASDAQ listing standards: Donna M. Alvarado, Pamela L. Carter,Thomas P. Bostick, Steven T. Halverson, John D. McPherson,Paul C. Hilal, David M. Moffett, Linda H. Riefler, Suzanne M. Vautrinot, James L. Wainscott, J. Steven Whisler and John J. Zillmer.
PRINCIPLES OF CORPORATE GOVERNANCEPrinciples of Corporate Governance
The Board is committed to corporate governance principles and practices that facilitate the fulfillment of its fiduciary duties to the Company and its shareholders. The Board has adopted Corporate Governance Guidelines that reflect the high standards that employees, investors, customers, suppliers and others should expect. Key corporate governance principles observed by the Board and the Company include:
■ | separation of the roles of Chairman and Chief Executive Officer; | ||
■ | nomination of a slate of directors for election to the Board, a substantial majority of which are independent, as that term is defined in the | ||
■ | establishment of qualification guidelines for director candidates and review of each director’s performance and continuing qualifications for Board membership; | ||
■ | the requirement that the Audit Committee, Compensation and Talent Management Committee and Governance and Sustainability Committee be comprised solely of independent |
Item 1: Election of Directors
authority for the | |||
■ | adoption of a Code of Ethics, which meets applicable rules and regulations and covers all directors, officers and employees of CSX; | ||
■ | adoption of a Policy Regarding Shareholder Rights Plans, establishing parameters around the adoption of any future shareholder rights plan, including the expiration of any such plan within one year of adoption if the plan does not receive shareholder approval or ratification; | ||
■ | adoption of a Policy Regarding Shareholder Approval of Severance Agreements, requiring shareholder approval of certain future severance agreements with senior executives that provide benefits in an amount exceeding a threshold set forth in the policy; | ||
■ | a majority voting standard with a director resignation policy in an uncontested election; and | ||
■ | adoption of a proxy access | ||
CSX’s Corporate Governance Guidelines and Code of Ethics are available on the Company’s website at http://investors.csx.com under the heading “Corporate“Environmental, Social and Governance.” Shareholders may also request a free copy of any of these documents by writing to CSX Corporation, Office of the Corporate Secretary, 500 Water Street, C160, Jacksonville, Florida 32202. Any waivers of or changes to the Code of Ethics that apply to our directors or executive officers will be disclosed on CSX’s website athttp://www.csx.com.www.csx.com. There were no waivers to the Code of Ethics in 2018.2020.
2021 Proxy Statement | 19 |
ITEM 1: ELECTION OF DIRECTORS
SHAREHOLDER OUTREACH AND ENGAGEMENTShareholder Outreach and Engagement
We believe that on-going shareholder engagement is a key component of effective corporate governance that allows the Company to better understand evolving trends and enable strategic decision-making to deliver shareholder value. We conduct shareholder outreach throughout the year to ensure that management and the Board understand and consider our shareholders’ views on important issues.
Senior leaders and subject matter experts from the Company meet routinely with representatives from many of our institutional shareholders and periodically with proxy advisory firms to discuss CSX’s business strategy, corporate governance practices, executive compensation, and environmental, social and governanceESG matters. Members of the Board participate in these meetings from time to time.
In addition to this shareholder outreach, CSX also engages with shareholders and other interested parties through its participation in industry and investment community conferences, investor road shows, and analyst meetings. In 2020, CSX maintained an active shareholder outreach program, including investor conferences, small group meetings, and non-deal roadshows. The Company leveraged the increased use of virtual meetings to expand international outreach, meeting with investors in Europe, Asia and Australia. In 2020, CSX hosted meetings with almost 400 firms, including 167 unique firms, representing $10.4 trillion of equity assets under management.
In addition, we continue to successfully engage with individual shareholders to advance issues that are in the best interests of our broad and diverse shareholder base. As part of our ESG reporting process, we conduct a materiality assessment to rank those items deemed the most important to various stakeholders, including shareholders, employees, customers, regulators, and other interested parties.
Shareholders
Interested parties who wish to communicate with the Board, or with a particular director, may forward appropriate correspondence to CSX Corporation, Office of the Corporate Secretary, 500 Water Street, C160, Jacksonville, Florida 32202. Pursuant to procedures established by the non-management directors of the Board, the Office of the Corporate Secretary will forward appropriate correspondence to the Board or a particular director. Appropriate correspondence generally includes any legitimate, non-harassing inquiries or statements. Interested parties who wish to communicate with the Chairman of the Board or non-employee directors may forward correspondence to CSX Corporation, the Chairman of the Board, CSX
Board of Directors, 500 Water Street, C160, Jacksonville, Florida 32202.Directors’ Role in Risk Oversight
BOARD OF DIRECTORS’ ROLE IN RISK OVERSIGHT
Pursuant to its charter, the Audit Committee of the Board has primary responsibility for risk oversight. In addition to regular risk presentations to the Audit Committee, management periodically reports to the Board and its other committees on current risks and the Company’s approach to avoiding and mitigating risk exposure.
The Company’s BusinessEnterprise Risk Management (“BRM”ERM”) program includes activities related to the identification, assessment, mitigation and monitoring of risks. The CSX risk universe is divided into the following broad risk categories:
Compliance— Risks directly impacting CSX’s ability to meet or comply with state, federal or local rules and regulations (e.g., environmental laws and regulations);
Strategic— Risks (and opportunities) directly impacting CSX’s ability to achieve or exceed its stated longer term strategic objectives (e.g., market demand shifts); and
ITEM 1: ELECTION OF DIRECTORS The objective of the External— Risks arising from events outside CSX and beyond the Company’s direct influence or control (e.g.■ Compliance Risks directly impacting CSX’s ability to meet or comply with state, federal or local rules and regulations (e.g., environmental laws and regulations); ■ Strategic Risks (and opportunities) directly impacting CSX’s ability to achieve or exceed its stated longer term strategic objectives (e.g., market demand shifts); and ■ External Risks arising from events outside CSX and beyond the Company’s direct influence or control (e.g., economic downturn, cyber and other security risks). 20 BRMERM program is to facilitate timely identification and review of new and existing risks along with overseeing the development and execution of mitigation plans. A well-established risk management structure is leveraged to govern the program. Risks are prioritized based on their potential impacts on the Company. On an ongoing basis, risks are evaluated to track the status of key mitigation activities along with the trends of key indicators. Ultimately, the BRMERM program provides an opportunity for business and functional leadership to collaborate on the key Company risks and identify needed mitigation steps to help advance the Company’s objectives.20 CSX Corporation 2019 Proxy Statement
TableBoard of ContentsDirectors’ Role in Succession Planning
Item 1: Election of Directors
BOARD OF DIRECTORS’ ROLE IN SUCCESSION PLANNING
The Board is responsible for succession planning for the Board, as well as senior management, including the CEO. In addition to succession planning efforts by the Board and the Governance and Sustainability Committee throughout the year, the full Board engages in a comprehensive management succession planning exercise on an annual basis where it analyzes potential succession candidates across all senior management positions. Although the Board focuses on the senior executive team and CEO succession, directors also discuss the pipeline for other key roles in the Company. As part of this exercise, the Board reviews skills, competencies and readiness levels of succession candidates and recommends development plans to ensure that management succession candidates are adequately prepared for planned and unexpected transitions.
TRANSACTIONS WITH RELATED PERSONS AND OTHER MATTERSBoard of Director’s Role in Oversight of ESG
The Governance and Sustainability Committee oversees the development and execution of CSX’s ESG strategy and reporting. Additionally, the Audit Committee of the Board has responsibility for risk oversight and evaluation of climate-related issues, including risks associated with energy and environmental policy. On a day-to-day basis, ESG is collaboratively managed by the respective operational departments. Operational leaders are responsible for measuring and monitoring progress against key performance indicators and for reviewing and applying stakeholder feedback and insights.
Transactions with Related Persons and Other Matters
CSX operates under a Code of Ethics that requires all employees, officers and directors, without exception, to avoid engaging in activities or relationships that conflict, or would be perceived to conflict, with the Company’s interests or adversely affect its reputation. It is understood, however, that certain relationships or transactions may arise that would be deemed acceptable and appropriate upon full disclosure of the transaction, following review to ensure there is a legitimate business reason for the transaction and that the terms of the transaction are no less favorable to CSX than could be obtained from an unrelated person. The Audit Committee is responsible for oversight, review and oversightapproval or ratification of all transactions with related persons. CSX has not adopted written procedures for reviewing, approving or ratifying Related Person Transactions, but generally follows the procedures described below in accordance with Item 404 of Regulation S-K.
A “Related Person Transaction” is a transaction, arrangement or relationship (or any series of similar transactions, arrangements or relationships) in which: (i) CSX (including any of its subsidiaries) was, is or will be a participant; (ii) the amount involved exceeds $120,000 in any fiscal year; and (iii) any Related Person had, has or will have a direct or indirect material interest (other than solely as a result of being a director or a less than 10% beneficial owner of another entity).
2021 Proxy Statement | 21 |
ITEM 1: ELECTION OF DIRECTORS
A “Related Person” includes: (i) any person who is, or at any time since the beginning of the last fiscal year was, a director or executive officer or a nominee to become a director; (ii) any person who is known to be the beneficial owner of more than 5% of any class of CSX’s voting securities; (iii) any immediate family member of any of the foregoing persons, which means any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law of the director, executive officer, nominee or more than 5% beneficial owner, and any person (other than a tenant or employee) sharing the household of such director, executive officer, nominee or more than 5% beneficial owner; and (iv) any firm, corporation or other entity in which any of the foregoing persons is employed or is a partner or principal or in a similar position or in which such person has a 5%direct or greater beneficial ownershipindirect material interest.
On an annual basis, in response to the Directors and Officers Questionnaire (“Questionnaire”) and a Related Person Transaction survey (“Survey”), each director, director nominee and executive officer submits to the Corporate Secretary a description of any current or proposed Related Person Transactions. Directors and executive officers are expected to notify the Corporate Secretary of any updates to the list of Related Person Transactions during the year. If Related Person Transactions are identified, those transactions are reviewed by the Audit Committee.
The Audit Committee will evaluate Related Person Transactions based on:
■ | information provided to the Board during the required annual affirmation of independence; |
■ | applicable responses to the Questionnaires and Surveys submitted to the Company; and |
■ | any other applicable information provided by any director or executive officer of the Company, or obtained through internal database queries. |
In connection with the review, approval or ratification of any Related Person Transaction, the Audit Committee will consider whether the transaction will be a conflict of interest or give the appearance of a conflict of interest. In the case of any Related Person Transaction involving an outside director or nominee for director, the Audit Committee will also consider whether the transaction will compromise the director’s status as an independent director as prescribed in the NasdaqNASDAQ listing standards. The Audit
Compensation Committee did not identify any Related Person Transactions during 2018 that are required to be reported pursuant to Item 404(a) of Regulation S-K.
Table of ContentsInterlocks and Insider Participation
Item 1: Election of Directors
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Compensation and Talent Management Committee is, or in 20182020 was, an executive officer or former executive officer or employee of the Company. In addition, no executive officer of the Company served on the board of directors of any entity whose executive officers included a director of the Company.
BOARD LEADERSHIP AND COMMITTEE STRUCTUREBoard Leadership and Committee Structure
The Board believes that at this time, and based on the Company’s current circumstances, the positions of Chairman and CEO should be separate, with the Chairman of the Board role being filled by an independent director. The duties of the Chairman include: (i) calling special meetings of the Board; (ii) presiding at all meetings of the Board and shareholders; (iii) in consultation with the Vice Chairman of the Board, determining the agenda, schedule and meeting materials for meetings of the Board in consultation with the Vice Chairman of the Board; (iv) guiding Board discussions and facilitating discussions between the Board and the Company’s management; (v) interacting with the Company’s analysts, investors, employees and other key constituencies; and (vi) keeping the Vice Chairman informed, and consulting with the Vice Chairman, as to material internal and external discussions the Chairman has, and material developments the Chairman learns, about the Company and the Board.
The Chairman is assisted by a Vice Chairman. The duties of the Vice Chairman include: (i) providing input on the agenda, schedules and meeting materials for meetings of the Board; (ii) assisting in guiding Board discussions and facilitating communication between the Board and the Company’s management; (iii) interacting with the Company’s analysts, investors, employees and other key constituencies; (iv) performing the duties of Chairman in the absence or at the request of the Chairman; and (v) keeping the Chairman informed, and consulting with the Chairman, as to material internal and external discussions the Vice Chairman has, and material developments the Vice Chairman learns, about the Company and the Board.
The Board has sixfive standing committees: the Audit Committee, the Compensation and Talent Management Committee, the Executive Committee, the Finance Committee, and the Governance Committee and the Public AffairsSustainability Committee. Each of these committees has a written charter approved by the Board, a copy of which can be found on the Company’s website athttp://investors.csx.comunder the heading “Corporate“Environmental, Social and Governance.” As of the Record Date, the composition of the committees of the Board was as follows:
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ItemITEM 1: Election of DirectorsELECTION OF DIRECTORS
Executive Committee | 0Meetings in | ||||
Committee Members | Independent Members | ||||
![]() | James M. Foote (Chair) Steven T. Halverson Paul C. Hilal David M. Moffett | Linda H. Riefler | 6/7
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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, Chairman of the Board, Vice Chairman and the chairs of each of the | ![]()
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Audit Committee | |||||||
Committee Members | Independent Members | ||||||
![]() | David M. Moffett (Chair) Donna M. Alvarado Steven T. Halverson | Suzanne M. Vautrinot | 5/5 ![]() | ||||
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 Registered Public Accounting Firm’s qualifications and independence; (iv) the Company’s risk management processes; (v) the performance of the Independent Registered Public Accounting Firm; and (vi) the Company’s internal audit function. The Audit Committee recommends the appointment of the Independent Registered Public Accounting Firm 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 Registered Public Accounting Firm, reviews the scope and methodology of the Independent Registered Public Accounting Firm’s 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 Registered Public Accounting Firm and management. The Audit Committee is responsible for the approval of all services performed by the Independent Registered Public Accounting Firm. Finally, the Audit Committee maintains procedures for the receipt and treatment of complaints regarding the Company’s accounting, internal accounting controls or auditing matters. As part of its risk management responsibilities, the Audit Committee oversees cybersecurity risks. The Audit Committee has five members, each of whom the Board, upon recommendation of the Governance and Sustainability Committee, has determined to be independent pursuant to the independence standards promulgated by The Board has determined that all members of the Audit Committee are financially literate and Messrs. Moffett and Whisler | ![]()
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2021 Proxy Statement | 23 |
ItemITEM 1: Election of DirectorsELECTION OF DIRECTORS
Compensation and Talent Management Committee | |||||
Committee Members | Independent Members | ||||
![]() | Steven T. Halverson (Chair) Donna M. Alvarado Linda H. Riefler John D. McPherson | James L. Wainscott | 6/6 ![]() | ||
The primary functions of the Compensation and Talent Management Committee are to: (i) establish the Company’s philosophy with respect to executive compensation and benefits; (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, 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 Compensation and Talent Management Committee from time to time; and (vi) review the Compensation Discussion and Analysis (“CD&A”) section of this Proxy Statement and, as appropriate, recommend to the Board for approval the inclusion of the CD&A section in the Company’s Annual Report on Form 10-K and Proxy Statement. In addition, the Compensation and Talent Management Committee The Compensation and Talent Management Committee may, under its charter, delegate all or a portion of its duties and responsibilities to a subcommittee thereof as appropriate and consistent with applicable regulations, laws and exchange listing standards. The Compensation and Talent Management Committee has also retained the services of an independent compensation consultant to advise on executive compensation matters. The role of the compensation consultant in determining or recommending the amount or form of executive compensation is described in the The Compensation and Talent Management Committee has
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Finance Committee | |||||
Committee Members | Independent Members | ||||
![]() | J. Steven Whisler (Chair) Thomas P. Bostick Paul C. Hilal | David M. Moffett | 5/5 ![]() | ||
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 Finance Committee reviews and recommends policies and practices related to dividends and share repurchase programs. | ![]()
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24 | ![]() |
ItemITEM 1: Election of DirectorsELECTION OF DIRECTORS
Governance and Sustainability Committee | |||||
Committee Members | Independent Members | ||||
![]() | Linda H. Riefler (Chair) Thomas P. Bostick Paul C. Hilal John D. McPherson | Suzanne M. Vautrinot John J. Zillmer | 6/6
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The Governance and Sustainability Committee identifies individuals qualified to become Board members and recommends candidates for election to the Board. In identifying and recommending director nominees, the Governance and Sustainability Committee uses criteria established by the Board with respect to qualifications for nominations to the Board and for continued membership on the Board. Additionally, the Governance and Sustainability Committee reviews and makes recommendations to the Board regarding director independence. In considering potential director candidates, the Governance and Sustainability Committee considers whether the individual has demonstrated leadership ability, integrity, values and judgment. The Governance and Sustainability Committee seeks to maintain a Board with a broad diversity of experience in business matters and the ability to assess and evaluate the role and policies of the Company in the face of changing economic conditions, regulatory environment and customer expectations. The Governance and Sustainability Committee generally identifies nominees for directors through its director succession planning process. The Governance and Sustainability Committee will also consider persons recommended by shareholders of the Company in selecting director nominees. Potential nominees suggested by shareholders will be evaluated by the Committee on the same basis as individuals identified directly by the Committee or from other sources. For more information on the director nominees, see Item 1: Election of Directors. The Governance and Sustainability Committee has The Governance and Sustainability Committee develops, recommends and monitors corporate governance principles and conducts regular evaluations of director performance and of the effectiveness of the Board as a working group. In addition, the Governance and Sustainability Committee reviews and recommends changes to the Board regarding committee structure and director compensation. | ![]()
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TableAnnual Evaluation of ContentsBoard Performance
Item 1: Election of Directors
ANNUAL EVALUATION OF BOARD PERFORMANCE
The Board believes annual performance reviews are essential for ensuring overall effectiveness, including fulfilment of its oversight responsibilities, strategic planning and communications. For 2018,2020, the Board evaluation process was initiated through detailed questionnaires. Individual director performance iswas then discussed with committee chairs or the Chairman of the Board, as appropriate. Summaries of the committee-specific feedback arewas provided to the relevant committee chairs, which arewere then reviewed with the Chairman of the Board. The Governance and Sustainability Committee reviewsreviewed the evaluations and recommendations. Each standing committee also conducted an evaluation of its own performance.
MEETINGS OF THE BOARD AND EXECUTIVE SESSIONSMeetings of the Board and Executive Sessions
During 2018,2020, there were 7nine meetings of the Board. Each of the directors then serving attended at least 75% of the meetings of the Board and the committees on which he or she served. The non-employee directors met alone in executive session at each regular Board meeting. These executive sessions were chaired by the Chairman of the Board. In accordance with the CSX Corporate Governance Guidelines, the independent directors (when different than non-management directors) meet in executive session at least once a year. While the Company does not have a formal policy regarding director attendance at annual shareholder meetings, the Company strongly encourages directors to attend absent an emergency. All but one directorof the then-serving incumbent directors attended the 20182020 Annual Meeting.
2021 Proxy Statement | 25 |
Table of ContentsDIRECTOR COMPENSATION
ITEM 1: ELECTION OF DIRECTORS
The Board periodically but at least once every three years, reviews and sets the compensation for the 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, independent directors.
Elements of Director Compensation
The following charts show director cash and equity compensation for fiscal year 2018.2020.
Annual Retainer | Cash | Equity(1) | ||||
Base Retainer | $ | 100,000 | $ | 150,000 |
Annual Retainer | Cash | Equity(1) | |||
Base Retainer | $112,500 | $162,500 |
(1) | Annual grant of CSX common stock in the amount of |
Incremental Amount Above Annual Retainer | ||
Chairman of the Board | $ | 250,000 |
Audit Committee Chair(2) | $ | 20,000 |
Audit Committee Member | $ | 5,000 |
Compensation Committee Chair | $ | 20,000 |
Finance Committee Chair | $ | 10,000 |
Public Affairs Committee Chair | $ | 10,000 |
Governance Committee Chair | $ | 15,000 |
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Each non-employee director was eligible to defer all or a portion of his or her director’s fees in 2018,2020, including cash and stockequity compensation, under the CSX Directors’ Deferred Compensation Plan (the “Directors’ Plan”). Cash deferrals are credited to an unfunded account and invested in various investment choices or deferred as shares of CSX common stock. The investment choices parallel the investment options offered to employees under CSX’s 401(k) plan. StockEquity deferrals are automatically held as outstanding shares in a trust, with dividends credited in the form of additional shares.
Item 1: Election of Directors
Matching Gift Program and Other Benefits
Non-management directors may participate in the CSX Directors’ Matching Gift Program, which is considered an important part of CSX’s philanthropy and community involvement. CSX will match director contributions to organizations that qualify for support under Company guidelines, up to a maximum annual CSX contribution of $50,000 per non-employee director per year. During 2018, six2020, seven philanthropic organizations in areas served by the Company collectively received $230,000$175,000 under the Directors’ Matching Gift Program.
Non-employee directors also are eligible to receive other compensation and benefits as discussed below. The CEO does not receive compensation for his services as a director.
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Table of Contents2018 DIRECTORS’ COMPENSATION TABLE
ITEM 1: ELECTION OF DIRECTORS
2020 Directors’ Compensation Table
The following table summarizes the compensation of each of the non-employee directors in 2018.2020.
Name | Fees Earned or Paid in Cash(1) ($) | Stock Awards(2),(3),(4) ($) | All Other Compensation(6) ($) | Total ($) | ||||
Donna M. Alvarado | $ | 105,000 | $ | 145,191 | $ | 1,391 | $ | 251,582 |
John B. Breaux | $ | 110,000 | $ | 145,191 | $ | 31,391 | $ | 286,582 |
Pamela L. Carter | $ | 110,000 | $ | 145,191 | $ | 1,391 | $ | 256,582 |
Steven T. Halverson | $ | 105,000 | $ | 145,191 | $ | 51,391 | $ | 301,582 |
Paul C. Hilal | $ | 100,000 | $ | 145,191 | $ | 1,391 | $ | 246,582 |
Edward J. Kelly, III | $ | 100,000 | $ | 387,158 | $ | 51,391 | $ | 538,549 |
John D. McPherson | $ | 100,000 | $ | 145,191 | $ | 1,391 | $ | 246,582 |
David M. Moffett | $ | 120,000 | $ | 145,191 | $ | 51,391 | $ | 316,582 |
Dennis H. Reilley | $ | 120,000 | $ | 145,191 | $ | 1,391 | $ | 266,582 |
Linda H. Riefler | $ | 105,000 | $ | 145,191 | $ | 1,391 | $ | 251,582 |
J. Steven Whisler | $ | 105,000 | $ | 145,191 | $ | 51,391 | $ | 301,582 |
John J. Zillmer | $ | 120,000 | $ | 145,191 | $ | 1,391 | $ | 266,582 |
Name | Fees Earned or Paid in Cash(1) ($) | Stock Awards(2) ($) | All Other Compensation(3) ($) | Total ($) | ||||||||||||||||
Donna M. Alvarado | $ | 117,500 | $ | 176,945 | — | $ | 294,445 | |||||||||||||
Thomas P. Bostick(4) | $ | 21,635 | — | — | $ | 21,635 | ||||||||||||||
Pamela L. Carter(5) | $ | 53,594 | $ | 176,945 | $ | 4,843 | $ | 235,382 | ||||||||||||
Steven T. Halverson | $ | 137,500 | $ | 176,945 | $ | 50,000 | $ | 364,445 | ||||||||||||
Paul C. Hilal | $ | 112,500 | $ | 176,945 | — | $ | 289,445 | |||||||||||||
John D. McPherson | $ | 112,500 | $ | 176,945 | — | $ | 289,445 | |||||||||||||
David M. Moffett | $ | 137,500 | $ | 176,945 | $ | 50,000 | $ | 364,445 | ||||||||||||
Linda H. Riefler | $ | 120,000 | $ | 176,945 | $ | 5,000 | $ | 301,945 | ||||||||||||
Suzanne M. Vautrinot | $ | 117,500 | $ | 176,945 | $ | 20,000 | $ | 314,445 | ||||||||||||
James L. Wainscott(4) | $ | 51,563 | — | — | $ | 51,563 | ||||||||||||||
J. Steven Whisler | $ | 122,500 | $ | 176,945 | $ | 50,000 | $ | 349,445 | ||||||||||||
John J. Zillmer | $ | 120,000 | $ | 449,198 | — | $ | 569,198 |
(1) | Fees Earned or Paid in Cash – Includes a cash retainer of |
(2) | Stock Awards – Amounts disclosed in this column are based on the February |
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All Other Compensation – | |
(4) | Lt. Gen. (ret.) Bostick and Mr. Wainscott joined the CSX Board of Directors on October 8, 2020 and July 8, 2020, respectively. |
(5) | Ms. Carter retired from the CSX Board of Directors on May 22, 2020. |
Stock Ownership Guidelines
The Board has adopted Stock Ownership Guidelines to better align the interests of non-employee directors with the interests of shareholders. Within five 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 five times the amount of such non-employee director’s annual cash retainer. If the annual cash retainer increases, the non-employee directors will have five 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 athttp://investors.csx.comunder the heading “Corporate“Environmental, Social and Governance.”
2021 Proxy Statement | 27 |
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 Registered Public Accounting Firm retained to audit the Company’s financial statements. Pursuant to this responsibility, the Audit Committee engages in a comprehensive annual evaluation of the Independent 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 rotation of the Independent Registered Public Accounting Firm. Furthermore, in conjunction with the mandated rotation of the Independent Registered Public Accounting Firm’s lead engagement partner, the Audit Committee and its chair were directly involved in the selection of the Independent Registered Public Accounting Firm’s lead engagement partner.
The Audit Committee has selected and appointed Ernst & Young LLP (“EY”) as the Company’s Independent Registered Public Accounting Firm to audit and report on CSX’s financial statements for the fiscal year ending December 31, 2019.2021. EY or its predecessors have continuously served as the Company’s Independent Registered Public Accounting Firm since 1981. The Audit Committee and the Board believe that the continued retention of EY as the Company’s Independent Registered 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 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.
EY has no direct or indirect financial 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, officer or employee. Representatives of EY will be present atparticipate in the Company’s Annual Meeting and will be afforded an opportunity to make a statement if they desire to do so. It also is expected they will be available to respond to appropriate questions.
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The Board unanimously recommends that the shareholders vote FOR this proposal. |
Item 2: Ratification ofFees Paid to Independent Registered Public Accounting Firm
FEES PAID TO INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
EY served as the Independent Registered Public Accounting Firm for the Company in 2018.2020. The Audit Committee was responsible for the audit fee negotiations associated with the retention of EY. Fees paid to EY were as follows:
2017 | 2018 | |||
Audit Fees: 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. | $ | 3,063,000 | $ | 3,030,000 |
Audit Related Fees: Includes audits of employee benefit plans and subsidiary audits. | $ | 159,000 | $ | 162,000 |
Tax Fees: | $ | 136,000 | $ | — |
All Other Fees: 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. | $ | 76,000 | $ | 2,000 |
2019 | 2020 | |||||||
Audit Fees: | $ | 2,816,000 | $ | 2,918,000 | ||||
Includes fees associated with the integrated audit, testing internal controls over financial reporting (SOX 404), the reviews of the Company’s quarterly reports on Form 10-Q, statutory audits and other attestation services related to regulatory filings. | ||||||||
Audit Related Fees: | $ | 221,000 | $ | 225,000 | ||||
Includes audits of employee benefit plans and subsidiary audits. | ||||||||
Tax Fees: | $ | — | $ | — | ||||
Includes fees for tax compliance and tax advice and planning. | ||||||||
All Other Fees: | $ | 1,000 | $ | 380,000 | ||||
Includes fees for advisory services for non-audit projects. The Audit Committee has concluded that the services covered under the caption “All Other Fees” are compatible with maintaining EY’s independent status. |
PRE-APPROVAL POLICIES AND PROCEDURESPre-Approval Policies and Procedures
The Audit Committee is responsible for the approval of all services performed by EY. The Chairman of the Audit Committee has the authority to approve all engagements that will cost less than $250,000 and, in such cases, will report any pre-approvals to the full Audit Committee for ratification at its 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 20172019 and 2018,2020, all services performed by EY were pre-approved.
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Report of the Audit Committee | ||
The Audit Committee oversees the Company’s financial reporting process on behalf of the Board. Management has the primary responsibility for the financial statements, for establishing and maintaining effective internal control over financial reporting and for assessing the effectiveness of internal control over financial reporting. In fulfilling its oversight responsibilities, the Audit Committee reviewed and discussed with management the audited financial statements, including a discussion of the quality of the accounting principles, the reasonableness of significant judgments and the clarity of disclosures in the financial statements.
During 2018,2020, the Audit Committee was comprised solely of independent directors as defined by NasdaqNASDAQ listing standards and Rule 10A-3 of the Securities Exchange Act of 1934. The members of the Audit Committee in 2018,2020, together with appointment dates and meeting attendance, isare set forth below:
Members | Committee Member Since | Attendance at Full Meetings During | ||
David M. Moffett, | May 2015 | 9/9 | ||
Donna M. Alvarado | August 2006 | 9/9 | ||
Steven T. Halverson | 9/9 | |||
9/9 | ||||
J. Steven Whisler | May 2011 | 9/9 |
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 registered public accounting firm.Independent Registered Public Accounting Firm. The Audit Committee discussed with the Company’s internal auditors and independent registered public accounting firmIndependent Registered Public Accounting Firm the overall scope and plans for their respective audits. The Audit Committee meets with the internal auditors and the independent registered public accounting firm,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 financial reporting and the overall quality of the Company’s financial reporting.
Each year, the Audit Committee evaluates the qualifications, performance and independence of the Company’s independent registered public accounting firm,Independent Registered Public Accounting Firm, and determines whether to re-engage the current independent registered public accounting firm.Independent Registered Public Accounting Firm. In doing so, the Audit Committee considers the quality and efficiency of the services provided by the independent registered public accounting firm,Independent Registered Public Accounting Firm, the capabilities of the independent registered public accounting firm,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 EY as the Company’s independent registered public accounting firmIndependent Registered Public Accounting Firm for 2019.2021. Although the Audit Committee has the authority to appoint the independent registered public accounting firm,Independent Registered Public Accounting Firm, the Audit Committee intends to continue to recommend that the Board ask shareholders to ratify the appointment of the independent registered public accounting firmIndependent Registered Public Accounting Firm at the Annual Meeting.
EY, the Company’s independent registered public accounting firmIndependent Registered Public Accounting Firm for 2018,2020, is responsible for expressing an opinion that: (i) the Company’s consolidated financial statements present fairly, in all material respects, the financial position, results of operations and cash flows in conformity with generally accepted accounting principles in the United States; and (ii) the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2018.2020.
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Report of the Audit CommitteeREPORT OF THE AUDIT COMMITTEE
In this context, the Audit Committee has:
(i) | reviewed and discussed with management, the audited financial statements for the year ended December 31, | |
(ii) | discussed with EY, the matters required to be discussed by | |
(iii) | received from EY, the written disclosures and the letter regarding auditors’ independence required by the applicable provisions of the PCAOB | |
(iv) | reviewed and discussed with management and EY, the results of management’s assessment of the effectiveness of the Company’s internal control over financial reporting and EY’s audit of the Company’s internal control over financial 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 financial statements be included in the 20182020 Annual Report.Report on Form 10-K for filing with the SEC.
Members of the Audit CommitteeCommittee:
David M. Moffett,Chair
Donna M. Alvarado
Steven T. HalversonLinda H. RieflerSuzanne M. Vautrinot
J. Steven Whisler
Jacksonville, Florida
February 6, 2019
Table of Contents9, 2021
ENVIRONMENTAL RESPONSIBILITY
Rail is the most environmentally friendly way to move goods over land, and CSX is working to lessen the environmental impact of its operations.
CSX continues to advance fuel efficiency by investing in a variety of technologies and operational strategies including Trip Optimizer, idle reduction technologies, distributed power, and trailing unit shutdown. Additionally, CSX has an active engine retrofit program in which it rebuilds or remanufactures older locomotives to current emissions standards to improve the overall efficiency and elevate the average tier level of the fleet. In 2017, CSX’s fuel efficiency improved to an all-time record – the company moves a ton of freight, on average, 488 miles on a single gallon of fuel.
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COMMUNITY INVESTMENT
CSX’s giving and volunteer programs extend the Company’s service culture deeper into the communities across its 23-state network.
CSX also supports communities through monetary and in-kind donations to nonprofit organizations, and by working with select service partners to help us extend our impact. CSX employees can also take advantage of volunteer service opportunities to support their choice of nonprofit organizations.
This Compensation Discussion and Analysis (“CD&A”) describes the principles of the Company’s executive compensation programs, how those principles are applied and how the Company’s compensation programs are designed to drive executive performance and create sustainable long-term shareholder value. This CD&A focuses on the compensation of the Named Executive Officers (“NEOs”) as of December 31, 2018, who are listed below.
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2018 Business Highlights
Building on the introduction of the scheduled railroading operating model in 2017, CSX delivered transformative performance improvement and operating efficiency in 2018. Under the first full year of leadership of President and CEO James M. Foote, the Company continued to drive efficiencies under the new operating model to achieve record operating performance and financial results. In 2018, the Company implemented an organizational realignment of the operating departments, which focused on network simplification while intensifying safety efforts. In addition, the leadership team met with customers and investors to: (i) provide further details on the new operating model, including the Company’s commitment to providing an industry-leading service product; (ii) communicate changes taking place; and (iii) build confidence in the model’s potential for long-term success.
CSX continues to deliver value to shareholders through a balanced approach to deploying cash that includes investments in the business and distributions to shareholders. In 2018, CSX returned approximately $5.4 billion to its shareholders in the form of dividends and share repurchases. In 2018, the Company also invested approximately $1.75 billion to further enhance safety, service, capacity and flexibility of its network. In January 2019, the Company announced a new $5 billion share repurchase program.
As a result of the scheduled railroading operating model and the renewed focus on driving a safe, efficient and customer-focused railroad, the Company was able to generate record productivity and profits. Key 2018 business highlights included:
Operating Income | Operating Ratio | Productivity Gains | Fully-Diluted EPS | Total Shareholder Return | Capital Returned to Shareholders | |||||
$4.87B | 60.3% | $365M | $3.84 | 14.5% | $5.4B |
Compensation Discussion and Analysis
The Scheduled Railroading Operating Model
Based on five foundational principles — operating safely, optimizing asset utilization, controlling costs, improving customer service, and valuing and developing employees — scheduled railroading drives efficiency by streamlining the rail network and simplifying the operating plan. The fundamental difference between traditional railroading and scheduled railroading is that the former focuses on meeting train schedules, whereas scheduled railroading requires CSX to develop a trip plan for each rail car and focuses on moving customers’ freight as efficiently as possible by eliminating unnecessary handlings. As a result, the operations team has significantly reduced the number of car handlings that previously slowed the movement of cars across the network and impaired timely service to customers. Much of this was accomplished through a reduction in the number of hump classification yards that process cars from inbound trains and build outbound trains. At the beginning of the scheduled railroading transformation, CSX had twelve hump yards on the network; today it has five.
Scheduled railroading drives efficiency through improved use of assets, with a focus on reducing the time that locomotives and rail cars are not moving freight. As such, the Company has removed more than 1,000 locomotives (approximately 25%) from active service and reduced its number of locomotive shops from ten to five. In addition, the Company has taken more than 22,000 rail cars (approximately 16%) out of the system, which enhances efficiencies and reduces maintenance costs.
Organizational efficiency is a hallmark of scheduled railroading. For example, over the past year, the network’s previous nine dispatching offices have been consolidated into one dispatching center in Jacksonville, Florida. While scheduled railroading recognizes that some functions are handled more effectively in a centralized location, another primary tenant of the model is that decision-making is more efficient when it takes place as close as possible to where the work is performed. A major organizational realignment in 2018 created East and West operating territories, each with two operating regions that oversee all three primary operating functions — transportation, mechanical and engineering. In addition, administrative support employees were assigned and relocated to the regions, where they work closely with teams in the field and quickly address local priorities. Another example involved the consolidation of customer service functions, including shipment tracking, problem resolution and transactional systems, into the sales and marketing organization to eliminate redundancies and create a more positive customer experience. These changes have improved customer service and resulted in a more efficient, engaged and productive workforce.
Delivering Results
The efficiencies achieved through the scheduled railroading operating model and improved business practices across the organization have resulted in significantly stronger performance and financial results. Throughout the year, the Company demonstrated that enhanced asset utilization improves service and lowers costs. The simplified network and operating plan contributed to historic lows in average rail car dwell time (the amount of time cars spend in terminals versus moving toward their destinations) and record highs in average train velocity. For 2018, the average dwell time improved 15% to 9.6 hours and velocity improved 19% to 17.9 m.p.h. The correlation between improved efficiency and better service was also reflected in a 26% reduction in locomotive failures despite the closure of half of the railroad’s locomotive shops.
As a result of the scheduled railroading operating model, the Company offers a service product that provides capacity to accommodate customers’ growth, while offering better supply chain solutions and a more reliable, higher value-added solution for customers’ transportation requirements. We are initiating more frequent, transparent communication with customers about service solutions and enhancements. For example, the CSX Customer Engagement Forum is a meeting hosted with select customers and CSX executives to understand customer perspectives on our service and how CSX can leverage the performance improvements of scheduled railroading to add value to their businesses.
Letter from the Compensation and Talent Management Committee | |
The members of the Compensation and Talent Management Committee (the “Committee”) believe it is important to provide shareholders with a clear understanding of the Committee’s processes for executive compensation and talent management decisions. This letter provides insight into our deliberations, thought processes and considerations, as we implement executive compensation and talent management programs that drive sustainable Company performance and create long-term shareholder value.
Beginning in 2017, CSX undertook a significant transformation of its business – one designed to create long-term value for all stakeholders. In 2020, along with other businesses, CSX endured unprecedented disruption from the far-reaching impacts of COVID-19 on the global economy, supply chains, and employees and their families. The Committee gave deep consideration on how to maintain and advance its long-term strategic vision in light of the profound COVID-19 disruptions and determined that in-flight long-term plans would not be altered, given the long-term focus of these plans on aligning compensation with shareholder value creation.
The Committee considered resetting the 2020 short-term incentive plan financial goals in the spring of 2020, when it was apparent that the pandemic had made these goals irrelevant. However, given the continuing high levels of economic uncertainty that could make revised goals just as irrelevant, the Committee instead advised management that it would consider exercising discretion in assessing performance under the 2020 short-term incentive plan. The Committee determined that, in exercising its discretion, it would consider CSX’s achievements using the following key performance criteria:
n | Actions taken to keep employees, customers and the communities in which CSX operates safe; | |
n | The direct impact of COVID-19 on performance and what performance would likely have been excluding the impact of COVID-19; | |
n | CSX performance on critical operational and financial metrics, relative to the other Class I railroads; | |
n | Actions by management to manage the impacts of COVID-19, while also maximizing Company performance despite the pandemic and positioning the Company for growth; and | |
n | Shareholder experience over 2020. |
Based on CSX’s achievements against these criteria, the Committee assessed the 2020 short-term incentive plan payout at 75% of target for the Named Executive Officers. (See the section titled “2020 MICP Targets and Payout Percentages” for a detailed assessment of performance against each of these criteria).
Pandemic Response Efforts
As members of the CSX Board of Directors, we wish to express our gratitude for the efforts and commitment of CSX employees during this extremely challenging time. The health and safety of Company employees is, and will always be, paramount. The Company’s quick response and system-wide COVID protocols implemented in March and April of last year helped provide a healthy, safe work environment under difficult and challenging circumstances. The safety protocols and extraordinary efforts of the Company’s employees allowed CSX to continue to provide transportation for critical goods and supplies while the global economy experienced historic disruptions from the pandemic. Further, the Company made significant progress toward its long-term strategic goals, preserving the ability to capitalize on the objectives made possible by the operational transformation to a scheduled railroad model. The swift adaptation to the pandemic disruptions helped the Company maintain operational efficiency, strong customer service, and safety performance. Importantly, the business model proved to be resilient in the face of unprecedented macroeconomic disruption.
Human Capital Management
In addition to executive compensation duties discussed below, the Committee has oversight responsibility with respect to human capital management. These responsibilities include reviewing the Company’s leadership development, performance management and talent acquisition programs. As a foundation for these programs, we are committed to providing the support management needs to hire, develop and retain top talent and ensure alignment of our executive compensation program with the Company’s long-term strategy.
The Committee also oversees the Company’s plans and processes for promoting diversity, inclusion and pay equity. We recognize that people are the foundation of the Company’s success and are committed to enhancing our culture and environment that inspire employee engagement and excellence. We are proud of the strides the Company has made in creating a world-class, diverse organization that is delivering transformational change in the rail industry. We remain committed to building an even more diverse, engaged and motivated workforce that will continue to deliver sustainable returns for shareholders.
2021 Proxy Statement | 31 |
LETTER FROM THE COMPENSATION AND TALENT MANAGEMENT COMMITTEE
Competition for Scheduled Railroading Expertise
Despite the significant challenges imposed by the pandemic in 2020, CSX continues to transform its business and advance critical strategic objectives. Given the Company’s success in advancing the business transformation and related strategic objectives, the Committee recognizes the critical importance of ensuring that it has a competitive, performance-based compensation structure in place to retain what we believe is a best-in-class management and operating team, particularly given the significant competition for the very small number of successful railroaders with scheduled railroading expertise.
Executive Compensation Program Design Process
The Company’s compensation programs are designed to attract and retain exceptional leadership talent, foster employee engagement and compensate employees appropriately in a competitive marketplace. In developing performance targets for the short- and long-term incentive plans that support the Company’s operating and strategic initiatives, the Committee reviews the Company’s annual and three-year business plans and global economic forecasts. The Committee’s ability to set appropriate and challenging performance goals is impacted by market and economic volatility, global trade dynamics, the geopolitical environment and overall visibility for short and long-term forecasts. Each year, the Committee reviews short and long-term incentive plan design to ensure alignment with the Company’s business strategy, key financial objectives, shareholder interests and environmental stewardship. To further this alignment, the Committee:
n | is committed to developing a pay-for-performance culture using incentive compensation performance measures that have a strong correlation to long-term shareholder value creation (see pages 44 – 50 of the CD&A); | |
n | ensures that a majority of the CEO’s and other named executive officer’s total compensation is at risk; | |
n | strikes the right balance between short and long-term incentives with significant weighting toward the long-term awards; and | |
n | uses multiple financial performance metrics in both short and long-term incentive plans. |
Consistent with the Company’s goal of being the best run railroad in North America, the Company also continues to evolve its strategy and leadership position around sustainable business operations. We are extremely proud of the leadership the Company has and continues to show in this area. For the 10th straight year, CSX has been included in the Dow Jones Sustainability Index, as the sole U.S. railroad to receive this recognition. Going forward, we expect sustainability to be even more important to the Company’s long-term business strategy, as railroads offer a unique opportunity within the freight transportation sector to reduce carbon emissions. Reflective of this, we have included sustainability goals in the Company’s 2021 annual incentive program, which applies to all management employees.
2020 Executive Compensation Decisions
Like many other companies, the Committee approved annual and long-term incentive compensation plans early in the year, just before the impacts of COVID-19 began to emerge. In fact, the Company performed well above target performance levels during the first quarter of 2020, which the Company believed to be a signal of strong performance to come over the rest of the year. With the onset of the pandemic, however, the Company experienced historic volume declines in the second quarter rendering the established financial performance goals for the annual incentive plan unattainable for the year. The Committee decided not to reset goals under the annual incentive plan due to the continuing economic uncertainty and decided not to reset goals for any of the outstanding long-term incentive cycles, given the long term focus of these plans on aligning compensation with shareholder value creation. However, the Committee indicated that it would assess performance under the 2020 short-term incentive plan using a principled approach to assess performance against key criteria, in light of the unprecedented economic upheaval.
In making this decision, the Committee noted that, in order to accelerate our scheduled railroading transformation, we set the 2020 short-term incentive targets with significant stretch and with much narrower performance shoulders than had been our practice. Threshold operating income was set just 2% below the target performance level and threshold operating ratio was set just 50 basis points above target performance level. The impact of the pandemic on freight volumes industry-wide quickly rendered the financial performance goals unattainable.
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LETTER FROM THE COMPENSATION AND TALENT MANAGEMENT COMMITTEE
Although the financial performance thresholds for the short-term incentive plan pre-pandemic were not achieved, the Committee exercised discretion to provide a payout to the NEOs that was significantly below the payout level to which performance was tracking prior to the onset of COVID-19. The Committee’s rationale for exercising discretion is set out in detail in the section headed “2020 MICP Targets and Payout Percentages.” In exercising its discretion, the Committee reviewed detailed analyses in five key areas and took into account:
n | Revenue growth initiatives achieved through the strength of the Company’s service product, supporting our long-term strategy of growing our intermodal business; | |
n | Strong financial performance relative to the other U.S. Class I railroads, leading the industry in volume performance while continuing to deliver significant cost savings; | |
n | Management of our network through periods of extreme volatility to drive structural efficiencies and create operating leverage in both rapidly declining and rapidly rebounding volume environments; | |
n | Achievement of an operating ratio of 58.8%; | |
n | The Company’s common carrier obligations to move freight that is critical to the U.S. economy; | |
n | The Company’s $10 million investment in employee health and safety, creating new processes and guidelines during the pandemic and achieving industry-leading personal injury safety performance; | |
n | Shareholder return of 27.1% for 2020, which was second against the U.S. Class I railroad peers; | |
n | First quarter (pre-pandemic) financial performance, which was tracking significantly above target; | |
n | The retention of key scheduled railroading operational talent; and | |
n | Continuing industry leadership in ESG and sustainable operations, earning multiple accolades in 2020 across a wide range of categories, including sustainability, diversity and inclusion, community service and emissions reductions. |
For 2020, the Committee determined to exercise discretion and award NEOs with a short-term incentive compensation payout at 75% of target, while eligible management employees who achieved performance expectations (approximately 2,500 employees) received a payout of 100% of target. The Committee has historically used discretion sparingly and such a decision is not ordinary course. As described more fully below, the Committee’s determination rested upon management’s quick pandemic response to maintain its position as an industry leader in operating efficiency, customer service and safety. As a result of this performance, CSX is positioned to execute on the strategy it developed pre-COVID to pursue profitable growth. As we look to the future, the Committee remains focused on structuring compensation programs to drive the next stage of the Company’s strategic growth plan. We believe that the Company is poised to capitalize on its superior customer service to deliver compelling value for new and existing customers. To drive this next phase of the Company’s continuing transformation, we have implemented compensation programs that drive sustainable growth, operating efficiency, reduced fuel consumption and emissions, and employee and train safety.
We realize shareholders may express their opinions through our annual say-on-pay vote, and we encourage additional shareholder feedback on the Company’s executive compensation programs. You may provide feedback to the Committee by sending correspondence to CSX Corporation, Office of the Corporate Secretary, 500 Water Street, C160, Jacksonville, Florida 32202. We consider this input as we refine our compensation philosophy and talent management processes.
2021 Proxy Statement | 33 |
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.
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Steven T. Halverson | Donna M. Alvarado | John D. McPherson | Linda H. Riefler | James L Wainscot | John J. Zillmer |
Chair
March 23, 2021
34 | ![]() |
Compensation Discussion and Analysis | |
Key Business Highlights for 2020
![]() | $4.36B Operating Income | ![]() | 58.8% Operating Ratio | ![]() | $3.60 Fully-Diluted EPS |
![]() | 27.1% Total Shareholder Return | ![]() | $1.7B Capital Returned to Shareholders |
Service Performance Volatile demand and supply chain disruptions, along with unpredictable personnel availability due to COVID-19 cases, contributed to service challenges throughout 2020. Nevertheless, CSX continued to perform at high levels and remained poised for a return to record-setting service reliability as conditions improved. | ![]() |
Safety Performance The Company’s commitment to being America’s safest railroad resulted in industry-leading safety performance in 2020, with the lowest personal injury rate of all U.S. Class I railroads. For the year, the Company improved its personal injury rate by 10%. These results were achieved by an intense focus on key operating principles, leadership and consistent communication. | ![]() |
2021 Proxy Statement | 35 |
COMPENSATION DISCUSSION AND ANALYSIS
2020 Impacts of COVID-19 Pandemic
In 2020, the COVID-19 pandemic had a dramatic, if not unprecedented, impact on global economies and supply chains. While CSX leadership team devoted significant attentionwas not immune to these challenges, the Company and resourcesits employees rose to improvingthe challenge to keep the domestic supply chain moving and deliver supplies needed across the country. Our employees remain steadfast in their commitment to running the best railroad in North America and delivering industry-leading service to our customers. Transparent and timely customer communication is a centerpiece of the Company’s pandemic response and will continue to reinforce our preparedness for providing safe, reliable rail service in support of economic recovery.
In the face of a pandemic that dramatically impacted global economies and stressed resources around the world, CSX was able to deliver industry-leading safety performance for personal injuries and continue its efforts to provide superior customer service. Despite disrupted supply chains worldwide, the Company maintained its operating discipline and began to leverage its improved service product to drive volume and revenue growth, and accelerate the conversion of freight volumes from highway to rail.
During the second quarter of 2020, CSX experienced the largest quarterly volume declines in 2018. A new chief safety officer was addedCompany history, as COVID-19 cases spread quickly throughout the country. This severe downturn required the Company to adjust assets and make difficult personnel decisions, including the leadership team,furlough of approximately 2,000 employees. Approximately 1,700 of these employees were brought back in the second and a comprehensive safety assessment was performed by an external safety consultant.the third quarters of 2020, as volume returned. The Company adoptedalso implemented furlough mitigation programs that offered voluntary leaves of absence and temporary part-time assignments to our conductors and engineers. These programs helped reduce the impact of the pandemic on our workforce by allowing employees who might otherwise be furloughed to continue health and welfare benefits and remain available for prompt recall to full-time work.
Operating Performance
Despite the extreme volatility in freight volumes in 2020, the Company continued to drive efficiencies while providing a programhigh level of safety enhancements that included a renewed focus on operating rules compliancecustomer service. Improved network planning and a revised discipline policy that placesoperational execution contributed to increased fuel efficiency, greater emphasis on educationnetwork fluidity and training.
With a continued focus on operatingfewer crew starts. These efficiencies enabled the Company to generate $2.65 billion of free cash flow to support dividend payments to shareholders, stock repurchases and safety performance,investment in the CSX delivered record financial results in 2018.rail infrastructure. The Company reduced its operating ratio — the percentageCompany’s capital expenditures of every revenue dollar that is used to cover operating expenses — to nearly 60%, eclipsing its 2018 goal. At the same time, revenue increased 7%approximately $1.63 billion for the year demonstrated a commitment to maintaining a safe, world-class rail network that is positioned for growth. This investment in infrastructure along with increased operating efficiencies and operating income increased by 31% year-over-year. The revenue increase was driven in part byimproved asset utilization have provided the Company with a substantial capacity reserve to accommodate higher volumes as economic factors but also reflected improved service. The salesconditions improve and marketing team pursued profitable new business opportunities based onhighway-to-rail conversions increase.
Note: Results prior to 2018 restated for pension accounting change. 2017 reflects non-GAAP reported results, which excluded the added valueimpact of a fastertax reform and more reliable service product.restructuring charges.
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Aligned for SuccessTable of Contents
The Company’s incentive pay programs were adjusted in 2018 to more closely align with the principlesCOMPENSATION DISCUSSION AND ANALYSIS
Objectives of the scheduled railroading for the purpose of driving improved performance and delivering value for shareholders. In addition, the changes were designed to motivate and engage employees through emphasis on factors over which they exercise more direct control thereby creating a stronger pay for performance environment.CSX’s Executive Compensation Program
Led by a strong management focus and clearly defined operating model, CSX employees advanced the Company’s scheduled railroading vision throughout 2018, demonstrating to customers and shareholders the effectiveness of the model for achieving industry-leading levels of performance.
EXECUTIVE COMPENSATION PRACTICES
What are theThe primary objectives of the Company’s executive compensation programs?
The primary objectives of the executive compensation programs are to:
Engage and | ||
Implement short and |
The Compensation Committee (for the purposes of the CD&A, the “Committee”) believes that a strong and engaged executive leadership team is critical to driving Company and employee performance and delivering shareholder value. Accordingly, the Committee has designed executive compensation programs to motivate management to drive stronger performance and align compensation with the short-term and long-term success of the Company. When designing the Company’s executive compensation programs, the Committee considers shareholder input through the annual say-on-pay vote.
Compensation Discussion and Analysis
How do the Company’s Executive Compensation Programs AlignAlignment with Leading Governance Practices?Practices
The Committee has established executive compensation programs that incorporate leading governance principles.practices. Highlighted below are executive compensation practices that drive performance and support strong corporate governance.
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CSX Executive Compensation Practices Include: | CSX Executive Compensation Practices Do NOT Include / Allow: | |
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What is the role of the
Factors Considered in Determining Executive Compensation Committee?
The Committee oversees the development and approval of the Company’s executive compensation philosophy, strategy and design. The Committee strives to reward performance through compensation plans that appropriately motivate and engage employees and support shareholder value creation while taking into account independent market data and market-competitive practices. In developing performance targets for the short and long-term incentive plans, the Committee reviews, among other factors, the annual and three-year business plans and economic environment. In assessing performance of the NEOs to determine incentive compensation payouts, the Committee conducts a detailed review of business goals and associated results. In accordance with its charter, the Committee may delegate to (i) the CEO or other members of executive management, the authority to adopt, amend or terminate any of the Company’s plans, policies or programs, subject to the limitations set forth in the applicable plan, policy or program, (ii) the CEO or the senior human resource officer, acting in consultation with the CEO, the authority to review and approve grants of stock options, stock appreciation rights, restricted stock, performance shares and other stock-related incentives to employees of the Company other than the CEO and other Section 16 officers and (iii) a subcommittee of the Committee, all or a portion of the Committee’s duties and responsibilities, consistent with applicable regulations, laws and listing standards.
What data does the Committee consider when determining executive compensation?
The Committee annually evaluates competitive compensationmarket data for the NEOs, including base salary and short and long-term incentives with that of similar positions at peer railroads and general industry companies that are part of the comparator group. Forgroup for executive compensation purposes of evaluating targeted compensation amounts for the NEOs, the Committee reviews market data at the 25th, 50th and 75th percentiles of the comparator group.(the “Comparator Group”). The Committee considers the following factors, among others, in evaluating target compensation levels:
n | Contribution to the Company’s financial results; | |
n | Effectiveness in | |
Sustained strong performance, criticality of the | ||
n | Contribution | |
n | The nature, scope and level of the executive’s responsibilities internally relative to other executives and externally based on the |
2021 Proxy Statement | 37 |
COMPENSATION DISCUSSION AND ANALYSIS
In keeping with past practices, and in consultation with its independent compensation consultant, the Committee developed a customized comparator groupthe Comparator Group for 20182020, which was comprised of 1514 primarily U.S.-based companies and North American railroads (the “Comparator Group”) to help guide totalexecutive compensation decisions at CSX. The Committee annually assesses and approves the Comparator Group to ensure that it reflects market characteristics comparable to those of the Company, including revenue, assets, net income, market capitalization, number of employees, industry type and business complexity. In addition, the Committee reviews the degree of overlap with proxy advisory peer companies. As a result of its review, for 2018, the Committee approved the following Comparator Group with changes from the prior year. The Company believes the use of the Comparator Group allows for a nuanced analysis of various total compensation components.2020, organized by market capitalization and revenue.
2020 COMPARATOR GROUP
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2018 COMPARATOR GROUP
| Market Capitalization as of December 31, | Revenue as of Fiscal Year-end 2020 | ||
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What is the role
All Values as of December 31, 2020
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 fulfilling its duties. The Committee has retained an independent compensation consultant, Meridian Compensation Partners, LLC (the “Consultant”), to provide objective analysis and to assist in the development and evaluation of the Company’s executive compensation programs. The Consultant reports directly to the Committee chair,Chair, and generally attends all meetings where the Committee evaluates the overall effectiveness of the executive compensation programs or where the Committee analyzes or approves executive compensation. The Consultant is paid on an hourly fee basis, with such hourly rates approved by the Committee annually.
Consultant’s Role and Responsibilities | ||
■ Analyzing competitive practices, financial information, stock price and other performance data in relation to the Company’s executive compensation philosophy ■ Reviewing compensation governance practices, including an annual risk assessment related to the Company’s compensation plans ■ Reviewing performance targets and assessing performance against targets for the Company’s short and long-term incentive plans | ■ Assessing compensation plan design in the context of the Company’s business goals, shareholder value creation and employee engagement ■ Providing regular updates to the Committee with respect to current trends and developments in legislative and regulatory activity, compensation program design and governance ■ Assisting in the development of the Comparator Group each year ■ Consulting with the Committee chair to plan and prioritize Committee agenda items |
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COMPENSATION DISCUSSION AND ANALYSIS
The Committee reviews the performance and independence of the Consultant on an annual basis, at which time it decides whether to renew the Consultant’s annual engagement. Each year, the Committee considers all appropriate information relating to the independence of the Consultant and its professionals involved in the work performed for, and advice provided to, the Committee. In 2018,2020, the Committee determined that: (i) the relationships and work of the Consultant and its professionals did not present any conflict of interest; and (ii) the Consultant and its professionals are independent for the purpose of providing advice to the Committee with respect to matters relating to the compensation of the executives and non-employee directors of the Company.
In 2018,addition, management has retained a separate consultant, Willis Towers Watson, which advises management (but not the Consultant’s duties and responsibilities included:
How does the Compensation Committee evaluate risk in connection with executive compensation, programs?provides ad hoc analysis and recommendations, and reviews and comments on compensation proposals.
Compensation Risk Evaluation and Mitigation
The Committee believes appropriately structured compensation programs should take into consideration enterprise risks and discourage behavior that leads to inappropriate increases in the Company’s overall risk profile. Accordingly, the Committee and its Consultant regularly review the Company’s enterprise risks and executive compensation plan design to consider whether the plans motivate the appropriate behaviors and mitigate unnecessary or excessive risk-taking.
Compensation Discussion and Analysis
Each year, the Committee reviews a risk assessment prepared by management and the Consultant that focuses on the structure, key features and risk mitigating factors included in the Company’s executive compensation programs. This risk assessment:
n | Describes the process for establishing the Company’s executive compensation programs; | |
n | Reviews potential risks and mitigating factors related to the Company’s executive compensation programs; | |
n | Analyzes the relationship between the executive compensation programs and the Company’s enterprise risks identified through the Company’s business risk mitigation process; and | |
n | When appropriate, provides recommendations for potential enhancements to further mitigate compensation risks. |
The risk assessment, which includes a summary of all executive compensation programs and participation, helps the Committee evaluate: (i) the nature of the risks inherent in the Company’s executive compensation programs; and (ii) whether the Company has designed and implemented appropriate risk management processes that foster a culture of risk-awareness.
In 2018,2020, this assessment led to a conclusion by management, with the help ofwhich was affirmed by the Consultant, that the executive compensation programs of the Company were appropriately designed to mitigate compensation risk. As a result, the Committee believes that any risks arising from its executive compensation policies and practices are not likely to have a material adverse effect on the Company.
In addition, the following features of the Company’s executive compensation programs serve to mitigate excessive risk-taking:
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incentives
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risk-taking
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goals
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creation
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approach
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measures for NEOs
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integrity
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2021 Proxy Statement | 39 |
COMPENSATION DISCUSSION AND ANALYSIS
Say-on-Pay and Shareholder Engagement on Executive Compensation
The annual say-on-pay vote is one of the opportunities to receive feedback from shareholders regarding the Company’s executive compensation programs. The Committee took note of the results of the say-on-pay vote from the 2020 Annual Meeting, which resulted in approximately 75% of the shares being voting in favor of the say-on-pay proposal. In connection with the say-on-pay vote, and also as a matter of course, during 2020, CSX actively sought feedback from shareholders to better understand what motivated their votes. The Committee Chair participated in a majority of these conversations. Over the course of this engagement, we learned that shareholders were generally satisfied with the Company’s executive compensation programs.
What are the elementsElements of the Company’s 20182020 Executive Compensation Programs
As an organization focused on pay-for-performance, CSX provides competitive total compensation opportunities in line with similar Comparator Group companies. The Committee reviews the performance and accomplishments of each executive to ensure incentive payouts that are consistent with the Company’s overall executive compensation programs?program objectives.
The various components of the Company’s compensation programs include base salary and short and long-term incentive compensation. The Company also provides retirement and other employee benefits, non-qualified deferred compensation plans and limited perquisites. The NEOs generally participate in the same benefit programs as all eligible employees.
The Committee makes its decisions concerning the specific compensation elements and total compensation paid or awarded to the Company’s NEOs within the framework described herein. The objective is to provide total compensation opportunities that are competitive with those providedoffered by companies in the Comparator Group withand that appropriately incentivize individual performance. The actual paymentamount of incentive compensation paid is dependent upon both the achievement of both the Company performance goals and individual performance. The Committee bases its decisions on whether each award provides an appropriate incentive for individual performance that is consistent with the Company’s executive compensation objectives.
Pay Element | Form | Performance | Objective | |||||
Salary | ![]() | Cash |
| Based on assessment of | Recruit, engage and retain talented high-performing leaders | |||
Short-Term | ![]() | Cash |
| The Company’s performance measures for the
■ ■ Individual performance is also considered for determining the final payout for the executive |
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Long-Term | ![]() |
■ | The performance measures for the performance units issued as part of the 2020-2022 long-term incentive plan are:
■ Formulaic linear Relative Non-qualified Stock Options only have value if the price of CSX’s common stock increases after grant |
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The Company also provides retirement and other health and group benefits, non-qualified deferred compensation plans and limited perquisites. The NEOs generally participate in the same benefit programs as all eligible management employees.
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COMPENSATION DISCUSSION AND ANALYSIS
2020 Target Compensation Discussion and Analysis
What is the 2018 target compensation mixMix for the CEO and other NEOs?Other NEOs
The Company’s executive compensation philosophy requires that a substantial portion of total compensation be at-risk and consist of performance-based incentives that linkare linked to CSX’s financial and operating results. In addition, the Committee strives to strike an appropriate balance between short and long-term compensation. The mix between fixed and variable compensation and short-termshort and long-term compensation is designed to align the NEOs’ financial incentives with shareholder interests. In 2018, approximately 89%2020, 91% of the CEO’s targeted Total Direct Compensation and an average of 82% of the other NEOs’ targeted Total Direct Compensation was performance-based and at-risk. The at-risk componenttarget compensation mix for each of executive compensation means that if the Company did not meet or exceed the pre-established threshold performance levels, the executive would not receive a payout under the applicable short or long-term incentive plan.NEOs is shown below, with equity awards valued as described.
For 2018, the Company enhanced the mix of long-term incentive compensation for the executive team to be more strongly focused on performance, with long-term incentive compensation comprised of 60% Performance Units and 40% stock options. The chart below illustrates the amount of target Total Direct Compensation, including compensation that is at-risk, for the CEO and the other NEOs. Actual percentages of realized compensation may vary in a given year depending on the payouts under the incentive compensation programs and the Company’s stock price performance.
President and Chief Executive Officer |
![]() | Tenure 3.4 years | ||
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Responsibilities | |||
Mr. Foote has served as President and Chief Executive Officer since December 2017. He joined CSX in October 2017, as Executive Vice President and Chief Operating Officer, with responsibility for both operations and sales and marketing. Mr. Foote has more than 40 years of railroad industry experience. Prior to joining CSX, he was President and Chief Executive Officer of Bright Rail Energy. Before heading Bright Rail, he was Executive Vice President, Sales and Marketing with Canadian National Railway Company. At Canadian National, Mr. Foote also served as Vice President – Investor Relations and Vice President Sales and Marketing – Merchandise. | |||
2020 Accomplishments | |
■ | Established, aligned and communicated CSX’s five-year strategy supporting growth through innovation, harnessing technology and fostering a one-team workforce setting aggressive long-term growth objectives. |
■ | Named the 2020 Railroad Innovator of the Year by Progressive Railroading and RailTrends for outstanding achievements in the industry. |
■ | Drove safety improvements that reduced FRA personal injuries and led the industry in personal injury performance. |
■ | Delivered record operating ratio in 3 of 4 quarters excluding real estate and line sale gains. |
■ | Participated in listening sessions and advanced diversity, equity and engagement by ensuring CSX is committed through actions to address racial equity and social justice. |
2020 Target Compensation
Base Salary: | $1,250,000 | |
Target Annual Bonus: | $2,000,000 | |
Target Long-Term Incentives: | $11,000,000 | |
Target Total Direct Compensation: | $14,250,000 | |
50% of 2020 LTI was performance-based |
2021 Proxy Statement | 41 |
Table of Contents2018 BASE SALARY
COMPENSATION DISCUSSION AND ANALYSIS
Kevin S. Boone | Executive Vice President and Chief Financial Officer |
![]() | Age 44 | Tenure 3.5 years | |
Responsibilities | |||
Mr. Boone has served as Executive Vice President and Chief Financial Officer since October 2019. In this role, he is responsible for all financial aspects of the Company’s business including financial and economic analysis, accounting, tax, treasury, real estate and purchasing activities. Mr. Boone has more than 18 years of experience in finance, accounting, mergers and acquisitions, and transportation performance analysis. He joined CSX in September 2017, as Vice President of Corporate Affairs and Chief Investor Relations Officer and was later named Vice President, Marketing and Strategy leading research and data analysis to advance growth strategies for CSX. | |||
2020 Accomplishments
■ | Drove nearly $200 million of incremental productivity ($400 million in total). |
■ | Quickly reacted to the impact of COVID and identified new opportunities to reduce costs. |
■ | Positioned CSX with the strongest liquidity position in the industry with nearly $3 billion of cash. |
■ | Led team through diligence process and execution of agreement to acquire Pan Am Railways, which is expected to provide an opportunity to leverage operating team and drive additional growth, if approved. |
2020 Target Compensation
Base Salary: | $475,000 | |
Target Annual Bonus: | $427,500 | |
Target Long-Term Incentives: | $2,500,000 | |
Target Total Direct Compensation: | $3,402,500 | |
50% of 2020 LTI was performance-based |
Jamie J. Boychuk | Executive Vice President – Operations |
![]() | Age 43 | Tenure 3.8 years | |
Responsibilities | |||
Mr. Boychuk has served as CSXT’s Executive Vice President – Operations since October 2019. In this role, he is responsible for transportation, mechanical, engineering and network operations. Since joining CSXT in 2017, he has held the positions of Senior Vice President of Network, Engineering, Mechanical and Intermodal Operations; Vice President of Scheduled Railroading; and Assistant Vice President of Transportation Support. Mr. Boychuk previously worked at Canadian National Railway, where he served for 20 years in various operational roles of increasing responsibility. | |||
■ | Led the reduction of total daily train starts by 15% year-over-year and improved distributed power trains by 14% year-over-year. |
■ | Implemented a Furlough Mitigation program to reduce impact on T&E workforce during COVID-19 pandemic. |
■ | Led the Operations team that delivered an industry-leading Federal Railroad Administration (“FRA”) personal injury rate. |
■ | Achieved record levels of fuel, locomotive and T&E efficiencies. |
■ | Generated $22 million in Engineering productivity. |
2020 Target Compensation
Base Salary: | $500,000 | |
Target Annual Bonus: | $450,000 | |
Target Long-Term Incentives: | $2,500,000 | |
Target Total Direct Compensation: | $3,450,000 | |
50% of 2020 LTI was performance-based |
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How is base salary determined?Table of Contents
COMPENSATION DISCUSSION AND ANALYSIS
Nathan D. Goldman | Executive Vice President – Chief Legal Officer and Corporate Secretary |
![]() | Age 63 | Tenure 17.7 years | |
Responsibilities | |||
Mr. Goldman has served as Executive Vice President, Chief Legal Officer and Corporate Secretary of CSX since November 2017. In this role, he directs the Company’s legal affairs, government relations, risk management, public safety, environmental, corporate communications and internal audit functions. During his 17 years with the Company, Mr. Goldman has previously served as Vice President of Risk Compliance and General Counsel and has overseen work in compliance, risk management and safety programs. | |||
2020 Accomplishments
■ | Worked to successfully secure over $200 million in rail infrastructure and safety improvement grants. |
■ | Secured $745 million in state public funding to CSX on strategic growth projects. |
■ | Managed critical litigation to successful conclusions. |
■ | Actively engaged on critical legislation impacting the Company’s competitive interests. |
■ | Successfully engaged in messaging and clear action regarding social unrest and racial equity with both employees and community partners. |
2020 Target Compensation
Base Salary: | $500,000 | |
Target Annual Bonus: | $450,000 | |
Target Long-Term Incentives: | $2,000,000 | |
Target Total Direct Compensation: | $2,950,000 | |
50% of 2020 LTI was performance-based |
Mark K. Wallace | Executive Vice President – Chief Sales / Marketing Officer |
![]() | Age 51 | Tenure 4 years | |
Responsibilities | |||
Mr. Wallace has served as Executive Vice President of Sales and Marketing since July 2018. In this role, he is responsible for developing and implementing the Company’s commercial strategy. He joined the Company in March 2017 and previously served as Executive Vice President and Chief Administrative Officer, Executive Vice President of Corporate Affairs and Chief of Staff to the CEO. Prior to joining CSX, he served as the Vice President of Corporate Affairs and Chief of Staff at Canadian Pacific, a role he was appointed to in July 2012. | |||
2020 Accomplishments
■ | Led development of CSX’s five-year growth strategy including creation of a blueprint for cultural transformation at CSX. |
■ | Successfully hosted virtual customer engagement forums, customer town halls, and short-line conference comprised of 100 customers representing over $4.5 billion in revenue for CSX. |
■ | Led COVID-19 return-to-work efforts and team focused on Jacksonville headquarters offices, including design and implementation of safety protocols and communications. |
■ | Implemented technological advancements focused on customer service, automation, analytics and growth. |
2020 Target Compensation
Base Salary: | $550,000 | |
Target Annual Bonus: | $495,000 | |
Target Long-Term Incentives: | $2,500,000 | |
Target Total Direct Compensation: | $3,545,000 | |
50% of 2020 LTI was performance-based |
2021 Proxy Statement | 43 |
COMPENSATION DISCUSSION AND ANALYSIS
The Committee determines a base salary for each executive annually based on its assessment of the individual’s experience, scope of responsibilities, individual performance, and long-term shareholder value creation.experience. The Committee also considers salary data for similar positions within the Comparator Group. After considering this information and in light of the economic environment, including the impact of the COVID-19 pandemic on CSX, the Committee did not increase the base salary of any of the NEOs in 2020. Base salary may represent a larger or smaller percentage of total compensation ifactually paid, depending on whether actual Company and individual performance under the short and long-term incentive plans discussed belowherein fall short of or exceed pre-establishedthe applicable performance targets.
2018 SHORT-TERM INCENTIVE COMPENSATION2020 Short-Term Incentive Compensation
The Company’s 2018
Goal Setting Process for 2020 MICP
In January 2020, the Committee established the goals and measures under the 2020 Management Incentive Compensation Plan (the “2018“2020 MICP”) and developed a performance structure to drive business results and create value for shareholders. The 2020 MICP was designed to leverage the Company’s successful transition to scheduled railroading, an operating model that has enhanced customer service levels allowing the Company to focus on new business opportunities and revenue growth. The 2020 MICP was structured to reward executives and eligible employees for driving Company performance over a one-year period. As discussed earlier in the CD&A, the Committee annually reviewsEach NEO was provided an incentive opportunity based on the goals and measures used to drive business results and create value for shareholders. Each NEO has an incentive opportunityestablished by the Committee expressed as a percentage of base salary earned during the year (“Target Incentive Opportunity”). In 2018,2020, the Target Incentive Opportunity level for Mr. Foote was 125%160% of his base salary and the Target Incentive Opportunity level for Messrs. Lonegro, Harris, Wallace and Goldman was 90% of base salary.
Table of Contentssalary for Messrs. Boone, Boychuk, Goldman and Wallace.
Compensation Discussion and Analysis
What were2020 MICP Performance Measures
In January 2020, the Committee approved the performance measures for the 2018 MICP?2020 MICP, which included operating income, operating ratio and safety improvement targets. Each of these measures have proven to be critical drivers of CSX’s business success. In an effort to enhance focus on sustainable growth, the Committee adjusted the weightings of the operating income and operating ratio metrics from 45% each under the 2019 MICP to 60% and 30%, respectively, under the 2020 MICP. The safety metrics remained at a 10% weighting under the 2020 MICP.
Operating Income (60%) |
Directly tied to Operating Ratio targets and gauges the general health of the core business - quantifying our profitability. |
Operating Ratio (30%) |
A key indicator of the Company’s efficiency, this measure helps us maintain focus on maximizing the value of our service product, as well as ensuring that our processes are safe and cost efficient, which are main themes of our guiding principles. |
Safety (10%) |
Added in 2019 and continued in 2020, FRA Personal Injury and Train Accident rates underscore the critical importance of intensifying our focus on injury and accident prevention. |
To determine the payout under the MICP, the Committee assesses the Company’s performance against the performance goals for the year. In 2018, the financial goals for the 2018 MICP continued to focus on operating efficiency. The specificThese Company performance goals were operating income and operating ratio. Operating income is used to gauge the general health and profitability of the core business, while operating ratio indicates the efficiency of the Company’s operations.
The operating income and operating ratio performance goalsmeasures can each result in a payment between 0% and 100% of the NEO’s Target Incentive Opportunity, and each is weighted 50% of the potential total payout. Therefore, the actual payout can range between 0% and 200% of the NEO’s Target Incentive Opportunity. However, a thresholdIn addition, individual performance level must be achievedand Committee discretion allows for upward or downward payout adjustments based on either measure to receive a payout.individual performance and / or in the case of exceptional circumstances such as those experienced in 2020. As shown in theSummary Compensation Table, the actual 20182020 MICP payouts were paid in cash and reflect the Company’s financial and operational performance, and individual NEO performance.performance, taking into account the Committee’s exercise of discretion to recognize the successes of the management team in the midst of the COVID-19 pandemic.
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COMPENSATION DISCUSSION AND ANALYSIS
2020 MICP Targets and Potential Payout Percentages
Operating Income (100% maximum payout) | ||
Threshold (10% payout) | Target (50% payout) | Maximum (100% payout) |
$3.850 billion | $4.035 billion | $4.190 billion |
Operating Ratio (100% maximum payout)1 | ||
Threshold (10% payout) | Target (50% payout) | Maximum (100% payout) |
66.3% | 64.8% | 63.5% |
Given CSX’s strong performance in 2019 and to accelerate our business transformation, we set the 2020 annual incentive targets with significant stretch and with much narrower performance shoulders than had been our practice. The 2020 MICP |
What was designed to leverage the payout underCompany’s strong customer service levels to create new business opportunities and grow revenue. The charts below illustrate the 2018 MICP?very narrow performance shoulders for both operating income and operating ratio in the 2020 MICP.
The Committee approved an operating income target for 2018 was set at $4.035the 2020 MICP of $4.93 billion and thean operating ratio target was set at 64.9%of 58.1% (adjusted for the actual average price of highway diesel fuel) based on the Company’s business plan. For 2018, the Company achieved above-targetThe threshold payout level for operating income of $4.869 billion and an above-target operating ratio of 60.3%. Operating income and operating ratio performancewere $4.83 billion and 58.6%, respectively. The 2020 operating income target of $4,930 million was set lower than the 2019 target and 2019 actual results of $4,955 million and $4,965 million, respectively, due to adjustments made to 2019 results based on one-time extraordinary items. These items, totaling $95 million, resulted in normalized 2019 results of $4,870 million, which was the basis for the 2020 operating Income targets. In addition, the 2020 MICP also included safety improvement targets for FRA Personal Injuries and FRA Train Accidents of 0.86 and 2.20, respectively.
Assessing 2020 Performance in the COVID-19 Environment
The COVID-19 pandemic significantly disrupted our business in a 200% payoutmanner that, in the opinion of target incentive opportunities, as both measures exceeded their maximum targetsthe Committee, rendered the performance goals under the 2020 MICP no longer attainable for purposes of $4.190 billionmeasuring and 63.6%, respectively.
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Similar to how management assessesrewarding the performance of all eligible employees,our management team in 2020. As previously noted, in the second quarter, CSX experienced the largest quarterly volume declines in Company history. In light of the continuing uncertainty and volatility related to the pandemic, the Committee annually assesseschose not to reset the individualgoals under the 2020 MICP during the performance period. Instead, the Committee indicated that it would use a principled approach to assessing payouts based on overall Company performance during the year focusing on five key areas:
n | Actions taken to keep employees, customers and the communities in which CSX operates safe; | |
n | The direct impact of COVID-19 on performance and what performance would likely have been excluding the impact of COVID-19; | |
n | CSX performance on critical operational and financial metrics, relative to the other Class I railroads; | |
n | Actions by management to manage the impacts of COVID-19, while also maximizing Company performance and positioning the Company for growth; and | |
n | Shareholder experience over 2020. |
The Company performed well above target levels during the first quarter of each NEO and determines payout amounts,2020 (producing a record first quarter operating ratio of 58.7%), which were capped at the maximum Company payoutbelieved to be a signal of 200% for 2018. The Committee approved a 200% annual incentive payout for allstrong performance to come over the rest of the NEOsyear. With the onset of the COVID-19 pandemic, which began to impact the Company’s business performance during the second quarter of 2020, the financial and such payouts were reflected inoperational targets under the “Non-Equity Incentive Plan Compensation” column of2020 MICP became unachievable. In theSummary Compensation Table. second quarter, volume and revenue dropped 20% and 26%, respectively.
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COMPENSATION DISCUSSION AND ANALYSIS
Notwithstanding the historic disruption caused by the COVID-19 pandemic, our management team demonstrated exceptional performance that proved critical to our Company’s overall success in 2020 in the following five key areas:
SAFETY: | Actions taken to keep employees, customers and the communities in which CSX operates safe. | |
n | The Company invested $10 million to protect its employees by prioritizing health and safety, and accelerating the Company’s total well-being strategy. | |
n | In response to the impact of the COVID-19 pandemic, the Company quickly developed and implemented technology solutions enabling remote work capabilities and efficiencies. | |
n | Management was able to minimize the impacts of the pandemic on the workforce by maintaining base salary levels and creating a furlough mitigation program. | |
n | The Company also actively engaged in messaging and implementing an action plan regarding social unrest and racial equity, engaging in conversations with union leaders and advocating at the local, state and federal government levels on behalf of CSX and the industry. | |
IMPACT OF COVID: | The direct impact of COVID-19 on performance and what performance would likely have been excluding the impact of COVID-19. | |
n | CSX had a record operating ratio in the first quarter of 2020. | |
n | Excluding second quarter results, CSX would have achieved a maximum payout under the operating ratio performance measure, which would have produced an MICP payout of 60% on this measure alone. | |
PERFORMANCE RELATIVE TO PEERS: | CSX performance on critical operational and financial metrics, relative to other Class I railroads. | |
n | CSX performance remained strong relative to class I peers, leading the industry in volume performance while continuing to deliver significant cost savings. | |
n | The Company continued to be an industry leader in safety, achieving record low numbers in personal injuries in 2020, which was the lowest among its Class I peers. | |
n | The total number of train accidents was 16% lower than in 2019, but the lower volumes resulted in fewer train miles, and a corresponding increase in the Company’s train accident rate in 2020. | |
PERFORMANCE, GROWTH & SUSTAINABILITY: | Actions to manage COVID-19 impacts, while maximizing performance and positioning for growth. | |
n | The Company effectively managed the network through periods of extreme volatility to drive additional structural efficiencies and create incremental operating leverage in both rapidly declining and rapidly rebounding volume environments, all while continuing to prioritize safety. | |
n | The Company was able to realize significant revenue growth in certain markets through efforts by the Sales and Marketing team during the pandemic to leverage its customer relationships. | |
n | As volumes declined with the onset of the pandemic, the Company found ways to control or reduce expenses by taking actions and driving productivity in asset efficiency, engineering, fuel savings and reduced overtime. These efforts resulted in a total year-over-year expense reduction of $751 million. | |
n | Swift actions taken to reduce cash outflows on both the expense and share buyback side, coupled with a debt issuance in March and elevated cash balances entering 2020 resulted in $3.8 billion of available liquidity at the end of the second quarter of 2020, when the impact of the pandemic was at its strongest. | |
n | The Company continued to be an industry leader in ESG performance for its achievements in sustainability, diversity and inclusion, community service and emissions reduction, receiving multiple accolades in these areas, including recognition by the Wall Street Journal as the highest ranking company in sustainability in the transportation sector. | |
n | The Company also became the first U.S. Class I railroad to operate at a fuel efficiency rate of less than one gallon of fuel per thousand gross ton miles for a quarter. | |
VALUE CREATION: | Shareholder experience over 2020. | |
n | By virtue of management executing a rapid response plan with the onset of the COVID-19 pandemic, CSX was able to reinforce customer confidence and maintain its operating and service advantage over other railroads. | |
n | In connection with these efforts, CSX stock prices reached an all-time high of $93.71 in 2020, with total shareholder return of 27.1% for the year. |
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Compensation Discussion and AnalysisTable of Contents
How has the 2018 MICP contributed to improved Company performance?COMPENSATION DISCUSSION AND ANALYSIS
The Committee believes that the short-term measuresthese achievements are directly aligned with the Company’s financialstrategic short and long-term goals, which are well-understooddirectly impacted by employees,executive leadership actions, support our long-term strategy, and help deliver shareholder value and retainensure retention of critical talent. Improvements in operating performance have been driven by the adoption of the scheduled railroading operating model. The Committee also believes that while sustained improvements in operating efficiencies and the focus on growth will continue to play a critical role in the continued creation of shareholder value.value, our management team was able to deliver shareholder value under exceptional circumstances, while positioning the Company to grow volumes as consumer demand returns.
Does
The 2020 MICP allowed for the 2018 MICP have a clawback provision?
Payouts madeCommittee to exercise its discretion in making payouts above actual results. In light of the achievements of our management team described above and their performance in the face of the unprecedented challenges brought on by the COVID-19 pandemic, the Committee determined that it was appropriate to make payments to each of our NEOs under the 20182020 MICP may be subjectat 75% of their respective Target Incentive Opportunities. The Committee believes that the payout was aligned with the overall business performance and stakeholder experience in 2020. The payout consisted of 10% of the Target Incentive Opportunities based on safety performance for 2020, and 65% of the Target Incentive Opportunities based on the Committee’s discretion in recognition of our NEOs performance during 2020, measured relative to recovery or clawback,the five key areas of focus. These payouts are reflected in the “Bonus” and an employee who has“Non-Equity Incentive Plan Compensation” columns, respectively, of the Summary Compensation Table. While the NEOs received a payout will be requiredof 75% for the 2020 MICP, eligible management employees who achieved performance expectations (approximately 2,500 employees) received an annual incentive compensation payout of 100% of their Target Incentive Opportunities.
2021 MICP Design
The 2021 MICP design continues to promptly returnemphasize safety, operating income and operating ratio with the monies (or any portionaddition of other operational and ESG-focused performance measures, which include customer service, fuel efficiency and initiative-based revenue growth. The addition of these measures is designed to enhance focus on items that employees have the ability to directly influence, align to shareholder expectations, and support the One-CSX initiative. The goal of the monies requested by the Company)“One-CSX” initiative is to promote a culture, rooted in eacha set of the following circumstances: (i) if it is determinedcore values, 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 bypositions the Company or (ii) if the payout is otherwise required to be recovered by law or court order (i.e. garnishment).an employer of choice to attract and retain the best talent and assure that every employee understands and delivers on strategic priorities.
Long-Term Incentive Compensation
The 2018 MICP contains provisions requiring NEOs to repay the Company portions 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; and (ii) the payment amount received exceeded the otherwise proper payment based on the restated financials.
LONG-TERM INCENTIVE COMPENSATION
Long-termCompany’s long-term incentive compensation program is intended to promote behaviors that support business initiatives to drive shareholder value over a multi-year period. This isto:
n | Engage and reward employees for extraordinary results that will maximize shareholder value; | |
n | Reinforce a pay-for-performance culture with a significant portion of total compensation at risk; and | |
n | Align NEO interests with those of shareholders with a focus on generating sustainable performance over a multi-year period. |
These goals are accomplished by providing equity-based incentives focused on financial performance measures that: (i) have a historically high correlation to shareholder returns; (ii) are within management’s direct control; and (iii) encourage long-term commitment to delivering shareholder value. Long-term incentives have been granted under the shareholder-approved 2010 CSX Stock and Incentive Award Plan (the “2010 Stock Plan”). Subject to approval by shareholders at the Annual Meeting, the Company adopted the and 2019 Stock and Incentive Award Plan (the “2019 Stock Plan” and together with the 2010 Stock Plan, the “Stock Plans”), under which future awards would be granted..
The 2010 Stock Plans allow for different types of equity-based awards and provide flexibility in compensation design to attract, retain and engage high-performing NEOs and eligible participants.executives. The Committee determines the mix of equity vehicles annually to ensure alignment with market practice, motivate the appropriate long-term results-driven behaviors, and align Company and NEO performance to shareholder interests and maximize value creation.
2021 Proxy Statement | 47 |
COMPENSATION DISCUSSION AND ANALYSIS
Elements of Long-Term Incentive Compensation
The mix has historically included performance units, stock options and/or RSUs to align the NEOs’ interests with those of shareholders, and achieve key performance goals and absolute stock price appreciation.
What forms of long-term incentive compensation are granted to NEOs?
ALong-Term Incentive Plan (“LTIP”) provides a significant portion of the NEOs’ compensation is provided under the annual long-term incentive plan (“LTIP”).compensation. Each year, a market competitive long-term incentive target grant value is identifieddetermined by the Committee for each eligible position levelNEO, as part of the Committee’s annual review process, based on factors described above and converted into the appropriate value of equity awards. The awards have generally consisted of performance units and non-qualified stock options. The number of performance units stock options and/or RSUsis 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 orgrant. The number of non-qualified stock options is determined based on the award value divided by the Black-Scholes value for that same period, as applicable.period. The grants associated with each three-year cycle are reviewed and approved by the Committee each year for allthe NEOs and other eligible participants, including the NEOs.participants. These grants are made and the performance targets set following the annual Board review of the Company’s business plan for the applicable upcoming three-year period.
For 2020, as part of its review process, the Committee increased the incentive target value for Mr. Foote to $11 million and for Messrs. Boone, Boychuk and Wallace to $2.5 million. Each three-year LTIP cycle isgrant was comprised of equity-basedperformance units and non-qualified stock options awards, that arewhich were designed to emphasizedrive long-term value and growth through the achievement of Company performance while aligning NEO interests with those of shareholders by: (i) linkinggoals and increased stock prices. Since the payout’s value to share price; (ii) focusing on long-term shareholder value creation; (iii) incenting the appropriate behaviors; and (iv) mitigating excessive risk. The three-year performance cycles run concurrently, so the Company may have up to three active cycles during a given year. The 2016-2018For example, the 2018-2020 performance cycle closed on December 31, 2018,2020, and was paid out in January 2019.2021. The 2017-2019, 2018-20202019-2021, 2020-2022 and 2019-20212021-2023 cycles remain in progress. Forprogress, which help ensure that our employees remain focused on sustainable long-term performance. Although the 2016-2018 and 2017-2019 LTIPs, the NEOs received performance units, stock options and RSUs. For the 2018-2020 and 2019-2021 LTIPs, the NEOs received performance units and stock options. The removal of RSUs from the LTIP equity mix for NEOs was designed to increase the portiongoals established under each of the outstanding LTIP grant subjectcycles have been adversely affected by the impacts of the pandemic, the Committee chose not to performance conditions in further supportreset goals on any of our pay-for-performance culture.
Table of Contentsthe in-flight plans.
Compensation Discussion and Analysis
Performance Units.Units. Performance units are granted at the beginning of the applicable performance periodcycle in accordance with the LTIP, as described below. Awards are paid in the form of CSX common stock at the end of the performance period assumingbased on the attainmentlevel of achievement on Company performance goals. Performance units are generally subject to forfeiture if a participant’s employment terminates before the end of the performance cycle for any reason other than death, disability, retirement or other limited circumstances, as approved by the Committee. In such instances, participants other than Messrs. Foote and Harris,generally receive a pro-rata portion of their award based on the number of months completed in the LTIP cycle. TheMr. Foote is currently eligible for retirement for purposes of the LTIP and his employment agreements for Messrs. Foote and Harris provideagreement provides that, in connection with thehis retirement, their full awardshis outstanding performance units will continueremain outstanding and eligible to vest based on performance through the end of any outstanding LTIP cycles.
Performance unit payouts for each LTIP cycle, if any, do not occur until approved by the Committee in January of the year following the last year of the three-year performance cycle. These payouts can vary from the target grants in terms of both the number of shares paid out due to financial performance and the market value of CSX common stock at the time of payout compared to the price on the original grant date.payout. Based on actual performance, as discussed below, the performance unit payouts for the NEOs at the end of the performance cycle can range from 0% to 200% or 0% to 250% of the target grants (the 2019-2021 can range 0% to 225%),depending on the cycle, and can be of lessorlesser or greater value than the original grant value based on the level of achievement on the performance goals and the price of CSX common stock.
Non-qualified Stock Options.Options Nonqualified. Non-qualified stock options require stock price appreciation to deliverprovide any value.value to the NEOs. As a result, they reinforce leadership’s focus on the importance of value creation for shareholders. StockNon-qualified stock options provide participants with the right but not the obligation, to buy CSX stock at an agreed-upon price within 10 years of the date of grant. The exercise price of the non-qualified stock options is established as the closing stock price on the date of grant. The Stock Plans prohibit the repricing of outstanding non-qualified stock options without the approval of shareholders. StockFor outstanding LTIP cycles, non-qualified stock options are subject to forfeiture if a participant’s employment terminates before the end of the vesting period for any reason other than death, disability, retirement or other limited circumstances, as approved by the Committee. In such instances, participants receive a pro-rata portion of the award based on the number of months completed in the cycle. The employment agreementsagreement for Messrs.Mr. Foote and Harris provideprovides that, in connection with theirhis retirement, theirthe full awards will continue to vest in accordance with their terms.
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What were the performance measuresCOMPENSATION DISCUSSION AND ANALYSIS
Performance Measures for the 2016-2018 LTIP?2018-2020 LTIP
The 2016-2018
For performance units granted under the 2018-2020 LTIP usedcycle, final year operating ratio and return on assets (“ROA”) on ancumulative free cash flow were selected and were equally weighted basis to measure the Company’s performance. These measures were selected prior to the implementation of the scheduled railroading operating model.
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, and created value for shareholders. ROAFree cash flow was chosen as a performance measure as it is a key measure of the financial health of the business and has a high correlation to drive efficient asset utilization.shareholder returns and aligns with CSX’s financial business plan. Operating ratio and ROAfree cash flow were each weighted 50% of the total payout opportunity and were measured independently of the other.
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The threshold, target and maximum payouts for each measure are 10%, 50% and 100%, of the performance units subject to the award respectively, generating a total target payout of 100% of the performance units and a maximum possible payout of 200% of the performance units for the 2016-20182018-2020 LTIP. The 2016-20182018-2020 LTIP measured cumulativefinal year operating ratio and average ROAcumulative free cash flow over a 12-quarter period from January 20162018 through December 2018. The ROA goals required a minimum capital spend of $6 billion during the cycle.2020.
In addition to operating ratio and ROA,free cash flow, the Committee maintainedperformance units for this LTIP cycle had a formulaic linear upward or downward discretion on the payouts for NEOs who received this grant (Messrs. Lonegro and Goldman) based on relative total shareholder return (“Relative TSR”). If modifier of up to 25% (subject to the Company’s 2016-2018 Relative TSR was in200% overall cap) based on CSX’s stock price performance compared to the bottom quartile of any of three different performance comparison groupspeer group (weighted 80% core peers and 20% additional correlated companies) for the 12-quarter period the Committee had discretion to reduce the payout by up to 30%.from January 2018 through December 2020.
The Committee recognizes that operating ratio is a measure in the short and long-term plans, but believes inclusion in both plans (beginning in 2017 with the implementation of scheduled railroading for the short-term plan) reflects the criticality of the alignment between operating ratio and the Company’s focus on operating efficiencies as a key principle of scheduled railroading.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 short and long-term incentive cycle, and makes changes as appropriate.
Compensation Discussion and Analysis
What were the financial goalsFinancial Goals for the 2016-2018 LTIP?2018-2020 LTIP
The LTIP targets for the 2016-2018performance units granted under the 2018-2020 LTIP were set to provide an incentive to continue growingincentivize long-term shareholder value.value creation. The goals were set in February 20162018 based on the three-year business plan at the time of the adoption and preceded the leadership change and implementation of scheduled railroading. At the time of approval of the 2016-2018 LTIP, the Company was forecasting an operating ratio for 2016, of 72.7%, which was higher than the prior year operating ratio of 69.7%. This projection was based on a forecasted 4% decrease in freight volume in 2016, driven largely by anticipated declines in coal and crude oil volumes.its adoption. The cumulative operating ratio for the 2016-2018 LTIP was projected to be between 71.0% and 72.0%.
Based on these assumptions, the targets under the 2016-20182018-2020 LTIP were as follows:
Cumulative Operating Ratio (100% maximum payout) | ||
Threshold (10% payout) | Target (50% payout) | Maximum (100% payout) |
75.5% | 72.0% - 71.0% | 69.5% |
Return on Assets (100% maximum payout) | ||
Threshold (10% payout) | Target (50% payout) | Maximum (100% payout) |
5.0% | 6.2% - 6.7% | 8.0% |
Final Year Operating Ratio (100% maximum payout) | Cumulative Free Cash Flow (100% maximum payout) | |||||||||
Threshold | Target | Maximum | Threshold | Target | Maximum | |||||
(10% payout) | (50% payout) | (100% payout) | (10% payout) | (50% payout) | (100% payout) | |||||
62.8% | 61.8% | 59.8% | $8,000M | $8,150M | $8,500M |
At the time the 2016-20182018-2020 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 $2.62$2.75 - $3.12$3.25 per gallon. A similarThis potential adjustment is included indesigned to mitigate the plan design for each LTIP due to the significantpositive and negative impact volatile fuel prices may have on expenses and operating ratio. BasedPursuant to the terms of the 2018-2020 LTIP, the final year operating ratio targets were adjusted based on an average price per gallon of highway diesel fuel of $2.72 during$2.57, which fell below the 2016-2018 LTIP, norange of $2.75 – $3.25 per gallon. This adjustment made the operating ratio goal adjustments were made.target more difficult to achieve.
Beginning in 2017, the Company’s operating model was substantially changed with the implementation of scheduled railroading, which shifted focus to improved efficiencies and cost reduction. These changes had an overwhelmingly positive impact on operating performance, earnings, and shareholder value creation.
2021 Proxy Statement | 49 |
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What was the actual payoutTable of Contents
COMPENSATION DISCUSSION AND ANALYSIS
Payout for the 2016-2018 LTIP?2018-2020 LTIP Performance Units
Based on a cumulativefinal year operating ratio of 65.0%58.8% and an average ROAa cumulative free cash flow of 8.03%$9.3 billion for the cycle, the 2016-2018payout for the performance units, which comprised 60% of 2018-2020 LTIP, was paid out at 200% in January 2019.of target. The Company’s Relative TSR performance against the S&P 500, S&P 500 Transportation Industry and peer railroadsgroup was in the top quartile of all three comparison groups for the cycle, providing an upward modifier of 125%, but the maximum payout for the 2018-2020 LTIP was capped at 200% so no upward adjustment was applied.
Performance Measures for the Committee determined that there was no basis for a downward adjustment and did not exercise its downward discretion in this regard. Messrs. Foote, Harris and Wallace did not receive a payout under the 2016-2018 LTIP since they were not employed with CSX in 2016, when the cycle and awards were approved and granted by the Committee.Outstanding LTIPs
What are
In determining the performance measures for the outstanding LTIPs?
Similar toperformance units for each LTIP cycle, the 2016-2018 LTIP,Committee: (i) considers information on various return-based measures; and (ii) actively monitors the 2017-2019 LTIP uses operating ratio and ROA on an equally weighted basis to measureeffectiveness of existing measures in driving the Company’s performance. Beginning withstrategic business objectives and delivering shareholder returns. For performance units, the 2018-20202019-2021 LTIP ROA was replaced with free cash flow, which is a key driver of total shareholder return and can be impacted by all employees. The 2018-2020 and 2019-2021 LTIPs useuses operating ratio and free cash flow on an equally weighted basis to measure the Company’s performance and the 2020-2022 LTIP uses operating income and free cash flow on an equally weighted basis to measure the Company’s performance. In determiningOne of the metrics was changed for the 2021-2023 LTIP to address some of the impacts of the economic uncertainty brought about by the COVID-19 pandemic. The 2021-2023 LTIP uses the average annual operating income growth rate and free cash flow on an equally weighted basis, as the performance measures for each cycle, the Committee: (i) considers information on various return-based measures; and (ii) actively monitors the appropriateness of shifting measures to furtherperformance units. The average annual operating income growth rate measure aligns with the Company’s business strategiesobjective of profitable growth and drive shareholder returns.provides the ability to recover and potentially receive a payout in the event of an economic downturn in one year of the program.
The 2018-20202019-2021 and 2019-20212020-2022 LTIPs are comprised of performance units and nonqualifiednon-qualified stock options.options for the NEOs, and the 2021-2023 LTIP is comprised of performance units, non-qualified stock options and restricted stock units. The number of performance units and restricted 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 the 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 2019-2021 LTIP, mix was achieved by determiningthe Committee approved a market competitive LTIP grant value andfor the NEOs allocating 60% of the value to performance units, and 40% for non-qualified stock options. The allocation for the 2020-2022 LTIP was 50% performance units and 50% for non-qualified stock options. Due to continued uncertainty of the macroeconomic environment in light of the COVID-19 pandemic, for the 2021-2023 LTIP, the Committee determined that a more stable equity vehicle was appropriate and approved the inclusion of restricted stock options to continue to drive shareholder value inunits (“RSUs”) for a pay-for-performance culture.portion of the LTIP. For the 2021-2023 LTIP, the allocation was 50% performance units, 25% non-qualified stock option and 25% RSUs. The performance units for these twothree 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 NEOs; however, the payouts are limited to a maximum of 200%CEO and 225% for the 2018-2020 and 2019-2021 LTIPs, respectively.Executive Vice Presidents, which includes all NEOs. This modifier is designed to appropriately align NEO payouts with share price performance relative to a transportation-related peer group.
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Compensation DiscussionCOMPENSATION DISCUSSION AND ANALYSIS
Clawback Provision
Payouts made under the MICP and Analysis
DoesLTIPs are subject to recovery or clawback in certain circumstances. Under such clawback provisions, an employee who has received a payout will be required to promptly return the LTIP have a clawback provision?
The clawback provisionmonies (or any portion of the monies requested by the Company) in each LTIP requiresof the following circumstances: (i) if it is determined that the NEOs repayemployee 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, amounts in excess of an otherwise proper award in the event that(ii) if the Company is required to restate its financial statementsfile an accounting restatement due to accounting irregularities discovered within three years after an LTIP payout.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 AGREEMENTSEmployment Agreements
Does the Company have separate employment agreements for the NEOs?
In connection with the leadership changes in 2017 and 2018, the Company provided individual employment letter agreements to Messrs. Foote, Harris and Wallace. Mr. Foote hadentered into an employment agreement upon his hiring as Executive Vice President and Chief Operating Officer in October 2017, which was canceled pursuant to asuperseded by an employment letter agreement entered into upon his promotion to President and CEO in December 2017, except for2017. This agreement incorporated certain provisions from his prior agreement relating to: (i) severance benefits; (ii) vesting of long-term incentive awards after retirement; and (iii) employment benefits following a change of control.
Messrs. Harris and
Mr. Wallace receivedentered into an employment letter agreementsagreement upon their recruitment and relocation to the Company’s headquarters. These agreements remainhis hiring as Executive Vice President in place.March 2017. This agreement expires on March 29, 2021. No other NEOs have individual employment agreements. AllThe individual employment agreements have been filed and can be reviewed on the U.S. Securities and Exchange Commission website at www.sec.gov.
Non-Compete and Non-Solicitation Agreements:Agreements
Vice presidents and above, including the
The President and CEO, and executive vice presidents, senior vice presidents, vice presidents, as well as certain other key employees, are required to enter into formal non-compete and non-solicitation agreements with the Company as a condition for participation in each LTIP cycle. The non-compete agreements precludeagreement precludes an executive from working for a 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.
SEVERANCE AND CHANGE-OF-CONTROL AGREEMENTS
Are NEOs eligible for severance benefits?Severance Agreements
Yes. As of December 31, 2018, each NEO was eligible for certain severance benefits under the Company’s “Section 16 Officer Severance Plan,” which expired on February 22, 2019, or his employment agreement, as applicable.
Mr. Foote is eligible for the following severance benefits under his employment letter agreement with the Company dated December 22, 2017:
n | Lump sum cash payment equal to two times his base salary plus two times his target MICP; | |
n | Pro-rata payment of MICP award; and | |
n | Unless he is terminated for cause, his unvested equity awards will remain outstanding and vest per the original vesting schedules, with any performance-based awards remaining subject to satisfaction of pre-established performance goals. |
Mr. Wallace is eligible for the following severance benefits under his employment agreement with the Company dated March 29, 2017:
n | Pro-rata vesting of his unvested equity awards, per the original vesting schedules, with any performance-based awards remaining subject to satisfaction of pre-established performance goals; | |
n | Pro-rata | |
n | Lump sum cash payment equal to two times his | |
n | Reimbursement for all reasonable relocation costs for moving outside the |
As of December 31, 2018,2020, Messrs. Lonegro and Goldman each were eligible for the following severance benefits under the Section 16 Officer Severance Plan:
The Section 16 Officer Severance Plan provided eligible executives with severance payments and benefits in the event that an individual’s employment with the Company or one of its subsidiaries was terminated involuntarily by the Company other than “for cause” or terminated voluntarily by the eligible employee for “good reason” (each as defined in the Section 16 Officer Severance Plan). Following expiration of the Section 16 Officer Severance Plan on February 22, 2019, Messrs. LonegroBoone, Boychuk, and Goldman were eligible for benefits under the Company’s general severance policy available to all management employees. Under the general severance policy, the NEOs are eligible to receive: (i) up to one year’sseverance based on tenure (certain weeks of salary for 20 or morebased on CSX years of service;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 1one year; and (iv) prorationprorated vesting of certain outstanding incentive awards.
Compensation Discussion and Analysis
Messrs. Harris and Wallace negotiated separate employment letter agreements upon their recruitment and relocation to the Company’s headquarters, and as a result have different severance benefits. In the event their employment is terminated by the Company other than “for cause” or terminated by the executive for “good reason,” they are entitled to receive the benefits outlined below.
The severance benefits for Mr. Harris include:
The severance benefits for Mr. Wallace include:
Notwithstanding the foregoing, if an NEO is entitled to severance benefits under his respective Change-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, 20182020 are described herein.
2021 Proxy Statement | 51 |
Does the Company provide Table of Contents
COMPENSATION DISCUSSION AND ANALYSIS
Change-of-Control Agreements to its NEOs?
Yes.
The Company provides “double-trigger” change of controlchange-of-control benefits pursuant to agreements that are designed to ensure management objectivity as it makes strategic business decisions. The Company’s policy for severance benefits upon a change-of-control: (i) requires a “double-trigger” (i.e., payments are conditioned upon a change-of-control as well as separation from employment) to receive severance; (ii) prohibits Company reimbursement for the payment of excise taxes; (iii) defines “bonus” as the current “target” amount; and (iv) requires a contract term not to exceed three years. The policy also provides that the payment of severance benefits, without shareholder approval, is limited to 2.99 times base salary plus bonus for NEOs.
All NEOs are subject to the terms of the change-of-control agreements described above and as further detailed under the section entitled “Post-Termination and Change-of-Control Payments.”
What types of
Retirement Health and Group Benefits are provided to the NEOs?Programs
Retirement Programs:
CSX’s retirement programs currently consist of two components: a defined contribution 401(k) plan and a now closed defined benefit pension plan. The retirement programs described below are provided to the NEOs under the following plans:
n | The CSX Corporation 401(k) Plan (“CSXtra Plan”); | |
n | CSX Pension Plan (the “Pension Plan”); and | |
n | Special Retirement Plan for CSX Corporation and Affiliated Corporations (the “Special Retirement Plan”). |
CSXtra Plan
The NEOs along with all other CSX non-union employees, may contribute to the CSXtra Plan, a defined contribution 401(k) plan. Participants may contribute on a pre-tax andor after-tax basis and receive Company matching contributions. The Company’s matching contribution is equal to 100% on the employee’s first 1% contribution,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.
Compensation Discussion and Analysis
Qualified CSX Pension Plan
The Pension Plan, which has been closed to new employees since January 1, 2020, is qualified under the Internal Revenue Code (the “Code”) and covers the NEOs and all of CSX’s non-union employees. In general, pension benefits accrue in two different ways: (i) for employees externally hired or promoted from CSX union positions on or afterwho were employed with the Company prior to January 1, 2003,2020. For the NEOs, pension benefits accrue based on a “cash balance” formula; and (ii)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 employees externally hired or promoted from CSX union positions before January 1, 2003, benefits accruethat 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 “finalmonthly 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 pay” formula. Mr. Lonegroannual interest crediting rate used for 2020 was 3.66%. The resulting benefit is subject to a cap imposed under Section 415 of the only NEOCode (the “415 Limit”). The 415 Limit for 2020 was $230,000 (for a life annuity at age 65) and is subject to adjustment for future cost of living changes. Further, under the “final average pay” formula. All other NEOs are underCode, the “cash balance” formula. Further information on the Pension Plan canmaximum amount of pay that may be found in the discussion followingtaken into account for any year is limited. This limit (the “Compensation Limit”) is $285,000 for 2020 and is also subject to adjustment for future cost of living changes.
n | Vesting — Benefits under this formula vest upon the earlier of the completion of three years of service or attainment of age 65. | |
n | Form of Payment of Benefits— Benefits under this formula may be paid upon termination of employment or retirement as a lump sum or in various annuity forms. The valuation method and actuarial factors used to determine the present value of accumulated benefits shown in the table are described in the 2020 Annual Report. |
52 | ![]() |
Table of ContentsPension Benefits Table.
COMPENSATION DISCUSSION AND ANALYSIS
Special Retirement Plan of CSX and Affiliated Corporations
The Special Retirement Plan is a nonqualifiednon-qualified plan for allthat covers CSX employees, including the NEOs, whose base salarywho were hired before January 1, 2020 and short-term incentive exceeds the current year IRS compensation limit.is now closed to new employees. The Special Retirement Plan primarily provides for the payment of benefits that arewould otherwise limitednot be available under the Pension Plan due to the qualified plan Code provisions. Further information on415 Limit and the Compensation Limit, both described above. The purpose of the Special Retirement Plan is to assist CSX in retaining key executives by allowing the Company to offer competitive pension benefits.
Under the Special Retirement Plan, participants receive non-qualified pension benefits on base salary and short-term incentive compensation that exceed the $285,000 compensation limit under the Code and the $230,000 benefit cap under Section 415 of the Code. These benefits are calculated using the cash balance formula described above for all of the NEOs, without regard to the 415 Limit or the Compensation Limit.
Non-qualified pension benefits can be foundpaid in the discussion followingsame form as under the Pension Plan. Pension benefits 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.
The valuation method and actuarial factors used to determine the present value of accumulated benefits shown in the 2020 Pension Benefits Table.for the Special Retirement Plan are described in the 2020 Annual Report.
Health and Group Benefits: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 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 medical plan for management employees hired or promoted from a union position prior to January 1, 2003. Only Mr. Lonegro is eligible for benefits under the post-retirement medical plan. The Company stopped providing post-retirement medical benefits for all management employees, including executive-level employees, hired or promoted from a union position on or after that date.
Executive Deferred Compensation Plan:Plan
CSX offers a voluntary, nonqualifiednon-qualified Executive Deferred Compensation Plan (“EDCP”) for the benefit of its executives and other eligible employees. The purpose ofUnder the EDCP, isthe 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 provide participants withallow them to receive the opportunity to:full Company matching contribution of up to 3.5% of base salary not otherwise available to them under the CSXtra Plan.
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 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 did not apply; and (ii) contributions made under the EDCP were instead made under CSX’s 401(k) plan.
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 qualified 401(k) plan. Participants may elect to change the investment of deferred amounts, other than deferred stock awards.
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.date. Participants may elect to receive payment in the form of a lump sum or in semi-annual installments over a period of up to 10 years (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.
53 |
Compensation Discussion and AnalysisCOMPENSATION DISCUSSION AND ANALYSIS
Employee Stock Purchase Plan
In 2018, shareholders approved the
The CSX Employee Stock Purchase Plan (“ESPP”), which provides eligible employees the right to purchase shares of CSX common stock in accordance with the terms of the ESPP. All employees who have been employed by the Company at least 30 days prior to the beginning of the enrollment period are eligible to participate in the ESPP.
Under the ESPP, employees may purchase shares at the lesser of: (i) 85% of the fair market value of a share of CSX common stock on the grant date; andfirst day of an offering; or (ii) 85% of the fair market value of a share of CSX common stock on the expiration date.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.
What perquisites were provided to the NEOs in 2018?
Other Benefits
The perquisites provided to NEOs in 20182020 included: (i) financial planning services of up to $12,000; (ii) excess liability insurance; and (iii)(ii) an annual health and well-being examination. TheseThe aggregate cost to the Company of these perquisites were valued atwas approximately $15,000 for each NEO.
Additionally, pursuant to Company policy, Mr. Foote, as CEO, is required to travel by Company aircraft at all times for security purposes and to ensure efficient use of his time. Other senior-level executives have access to the Company aircraft and may use it on a limited basis for personal reasons. The amounts related to the NEO’s use of the Company aircraft are disclosed in theSummary Compensation Table.
Does the Company have stock ownership guidelines for the NEOs?
Yes. Stock Ownership Guidelines
CSX believes that, in order to align the interests of management with those of its shareholders, it is important that NEOs and other senior leaders hold a significant ownership position in CSX common stock relative to their base salary. To achieve this, linkage, 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 |
Each
Policy Prohibiting Hedging / Pledging of the individuals covered by these guidelines must retain 100% of their net shares issued until the guidelines are achieved and have five years in which to do so.CSX Stock
Does the Company have an anti-hedging / anti-pledging policy?
Yes. 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. The Mantle Ridge group of entities, which are controlled by Mr. Hilal, pledged shares of CSX common stock as collateral under a secured credit facility with a third-party lender prior to Mr. Hilal becoming a director.
54 | ![]() |
Compensation Discussion and AnalysisCOMPENSATION DISCUSSION AND ANALYSIS
2018 SUMMARY COMPENSATION TABLE
The2020 Summary Compensation Tablepresents
The Summary Compensation Table and the accompanying footnotes describe the amount and type of compensation for the NEOs infor 2020 and, if applicable, 2019 and 2018.
Name and Principal Position | Year | Salary | Bonus(1) | 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(5) | Total | ||||||||
James M. Foote President and Chief Executive Officer | 2018 | $ | 1,220,833 | — | $ | 5,310,204 | $ | 3,524,190 | $ | 3,052,083 | $ | 441,428 | $ | 221,863 | $ | 13,770,601 | |
2017 | $ | 149,919 | $ | 400,000 | $ | 1,027,812 | $ | 1,045,626 | — | $ | 8,849 | $ | 15,355 | $ | 2,647,561 | ||
Frank A. Lonegro Executive Vice President and Chief Financial Officer | 2018 | $ | 500,000 | — | $ | 1,180,057 | $ | 783,158 | $ | 900,000 | $ | 357,103 | $ | 20,741 | $ | 3,741,059 | |
2017 | $ | 500,000 | — | $ | 1,950,165 | $ | 743,772 | $ | 715,500 | $ | 869,559 | $ | 34,684 | $ | 4,813,680 | ||
2016 | $ | 500,000 | — | $ | 1,520,986 | $ | 386,150 | $ | 643,500 | $ | 484,797 | $ | 31,825 | $ | 3,567,258 | ||
Edmond L. Harris Executive Vice President Operations – CSX Transportation, Inc. | 2018 | $ | 589,130 | $ | 250,000 | $ | 2,824,310 | $ | 1,455,954 | $ | 1,060,435 | $ | 179,196 | $ | 154,621 | $ | 6,513,646 |
Mark K. Wallace Executive Vice President Sales and Marketing | 2018 | $ | 550,000 | — | $ | 3,367,141 | $ | 783,158 | $ | 990,000 | $ | 139,665 | $ | 118,199 | $ | 5,948,163 | |
2017 | $ | 450,362 | $ | 550,000 | $ | 2,316,531 | $ | 582,595 | $ | 825,000 | $ | 108,187 | $ | 378,989 | $ | 5,211,664 | |
Nathan D. Goldman Executive Vice President, Chief Legal Officer and Corporate Secretary | 2018 | $ | 500,000 | — | $ | 1,180,057 | $ | 783,158 | $ | 900,000 | $ | 182,544 | $ | 36,523 | $ | 3,582,282 |
Name | Year | Salary ($) | Bonus(2) ($) | Stock Awards(3) ($) | Option Awards(4) ($) | Non-Equity Incentive Plan Compensation(5) ($) | Change in Pension Value and Nonqualified Deferred Compensation Earnings(6) ($) | All Other Compensation(7) ($) | Total ($) | |||||||||
James M. Foote President & Chief Executive Officer | 2020 | 1,250,000 | 1,300,000 | 5,989,727 | 6,006,842 | 200,000 | 338,576 | 221,570 | 15,306,715 | |||||||||
2019 | 1,250,000 | — | 6,096,711 | 3,993,136 | 3,425,391 | 534,271 | 228,024 | 15,527,533 | ||||||||||
2018 | 1,220,833 | — | 5,310,204 | 3,524,190 | 3,052,083 | 441,428 | 221,863 | 13,770,601 | ||||||||||
Kevin S. Boone(1) Executive Vice President & Chief Financial Officer | 2020 | 475,000 | 277,875 | 1,361,291 | 1,365,194 | 42,750 | 70,665 | 31,007 | 3,623,782 | |||||||||
2019 | 399,928 | 995,402 | 1,481,381 | 599,756 | 78,450 | 27,956 | 3,582,873 | |||||||||||
2018 | ||||||||||||||||||
Mark K. Wallace Executive Vice President & Chief Sales and Marketing Officer | 2020 | 550,000 | 321,750 | 1,361,291 | 1,365,194 | 49,500 | 92,798 | 113,188 | 3,853,721 | |||||||||
2019 | 550,000 | — | 1,219,356 | 798,634 | 860,310 | 132,808 | 42,602 | 3,603,710 | ||||||||||
2018 | 550,000 | — | 3,367,141 | 783,158 | 990,000 | 139,665 | 118,199 | 5,948,163 | ||||||||||
Jamie J. Boychuk(1) Executive Vice President – Operations, CSXT | 2020 | 500,000 | 292,500 | 1,361,291 | 1,365,194 | 45,000 | 74,190 | 26,121 | 3,664,296 | |||||||||
2019 | 392,696 | — | 1,007,915 | 1,686,335 | 645,054 | 81,938 | 23,885 | 3,837,823 | ||||||||||
2018 | ||||||||||||||||||
Nathan D. Goldman Executive Vice President & Chief Legal Officer | 2020 | 500,000 | 292,500 | 1,089,048 | 1,092,151 | 45,000 | 136,918 | 47,674 | 3,203,291 | |||||||||
2019 | 500,000 | — | 1,219,356 | 2,001,314 | 711,000 | 172,086 | 33,600 | 4,637,356 | ||||||||||
2018 | 500,000 | — | 1,180,057 | 783,158 | 900,000 | 182,544 | 36,523 | 3,582,282 |
(1) | No amounts are included for Messrs. Boone and Boychuk as they were not NEOs for 2018. |
(2) | Bonus – The amounts included in this column represent the |
Stock Awards – Amounts disclosed in this column are related to LTIP performance units, RSUs and restricted stock granted in | |
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 | |
Non-Equity Incentive Plan Compensation – The | |
Change in Pension Value and | |
All Other Compensation – The values in this column for 2020 include amounts for personal usage of Company aircraft, financial planning/tax preparation services, | |
55 |
Compensation Discussion and AnalysisCOMPENSATION DISCUSSION AND ANALYSIS
2018 GRANTS OF PLAN-BASED AWARDS TABLE2020 Grants of Plan-Based Awards Table
In 2018,2020, the 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 Awards (units)(3) | All Other Option Awards (#)(4) | Exercise Price of Option Awards ($) | Grant Date Fair Value of Stock and Option Awards(5) | |||||||||||
Name | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (units) | Target (units) | Maximum (units) | |||||||||
James M. Foote | Feb. 6, 2018 | 9,867 | 98,666 | 197,332 | $ | 5,310,204 | ||||||||||
Feb. 6, 2018 | 242,229 | $ | 53.82 | $ | 3,524,190 | |||||||||||
$ | 152,604 | $ | 1,526,041 | $ | 3,052,081 | |||||||||||
Frank A. Lonegro | Feb. 6, 2018 | 2,193 | 21,926 | 43,852 | $ | 1,180,057 | ||||||||||
Feb. 6, 2018 | 53,829 | $ | 53.82 | $ | 783,158 | |||||||||||
$ | 45,000 | $ | 450,000 | $ | 900,000 | |||||||||||
Edmond L. Harris | Feb. 6, 2018 | 2,193 | 21,926 | 43,852 | $ | 1,180,057 | ||||||||||
Feb. 6, 2018 | 53,829 | $ | 53.82 | $ | 783,158 | |||||||||||
Jan.10, 2018 | 53,652 | $ | 58.48 | $ | 851,886 | |||||||||||
Aug. 3, 2018 | 23,074 | $ | 1,644,253 | |||||||||||||
$ | 53,022 | $ | 530,217 | $ | 1,060,435 | |||||||||||
Mark K. Wallace | Feb. 6, 2018 | 2,193 | 21,926 | 43,852 | $ | 1,180,057 | ||||||||||
Feb. 6, 2018 | 53,829 | $ | 53.82 | $ | 783,158 | |||||||||||
Aug. 2, 2018 | 30,765 | $ | 2,187,084 | |||||||||||||
$ | 49,500 | $ | 495,000 | $ | 990,000 | |||||||||||
Nathan D. Goldman | Feb. 6, 2018 | 2,193 | 21,926 | 43,852 | $ | 1,180,057 | ||||||||||
Feb. 6, 2018 | 53,829 | $ | 53.82 | $ | 783,158 | |||||||||||
$ | 45,000 | $ | 450,000 | $ | 900,000 |
Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | Estimated Future Payouts Under Equity Incentive Awards(2) (# units) | All Other Stock | All Other Option | Exercise Price of Option | Grant Date Fair Value of Stock and Option | |||||||||||||||||
Name | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (units) | Target (units) | Maximum (units) | Awards(3) (units) | Awards(4) (#) | Awards ($) | Awards(5) ($) | |||||||||||
James M. Foote | Feb. 18, 2020 | 14,125 | 75,333 | 188,333 | 5,989,727 | |||||||||||||||||
Feb. 18, 2020 | 318,159 | 79.51 | 6,006,842 | |||||||||||||||||||
50,000 | 2,000,000 | 4,000,000 | ||||||||||||||||||||
Kevin S. Boone | Feb. 18, 2020 | 3,210 | 17,121 | 42,803 | 1,361,291 | |||||||||||||||||
Feb. 18, 2020 | 72,309 | 79.51 | 1,365,194 | |||||||||||||||||||
10,687 | 427,500 | 855,000 | ||||||||||||||||||||
Mark K. Wallace | Feb. 18, 2020 | 3,210 | 17,121 | 42,803 | 1,361,291 | |||||||||||||||||
Feb. 18, 2020 | 72,309 | 79.51 | 1,365,194 | |||||||||||||||||||
12,375 | 495,000 | 990,000 | ||||||||||||||||||||
Jamie J. Boychuk | Feb. 18, 2020 | 3,210 | 17,121 | 42,803 | 1,361,291 | |||||||||||||||||
Feb. 18, 2020 | 72,309 | 79.51 | 1,365,194 | |||||||||||||||||||
11,250 | 450,000 | 900,000 | ||||||||||||||||||||
Nathan D. Goldman | Feb. 18, 2020 | 2,568 | 13,697 | 34,243 | 1,089,048 | |||||||||||||||||
Feb. 18, 2020 | 57,847 | 79.51 | 1,092,151 | |||||||||||||||||||
11,250 | 450,000 | 900,000 |
(1) | Estimated |
(2) | Estimated Future |
(3) | All Other Stock Awards – |
(4) | All Other Option Awards – The |
(5) | Grant Date Fair Value of Stock and Option Awards – The values in this column reflect the grant date fair value of performance units |
56 | ![]() |
Compensation Discussion and AnalysisCOMPENSATION DISCUSSION AND ANALYSIS
2018 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END2020 Outstanding Equity Awards at Fiscal Year End
The table below presents information pertaining to all outstanding equity awards held by the NEOs as of December 31, 2018.2020. Stock awards are comprised of outstanding performance units, non-qualified stock options, RSUsrestricted stock and restricted stock.RSUs.
Options | Stock Awards | ||||||||||
Name | Number of Securities Underlying Exercisable Options (#) | Number of Securities Underlying Unexercisable Options (#) | Option Exercise Price | Option Expiration Date | 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) ($) | |||
James M. Foote | — | 242,229 | $ | 53.82 | 02/06/28 | — | — | 236,176 | $ | 14,673,615 | |
— | 76,040 | $ | 52.92 | 10/25/27 | — | — | — | — | |||
Frank A. Lonegro | — | 53,829 | $ | 53.82 | 02/06/28 | 47,375 | $ | 2,943,409 | 97,586 | $ | 6,063,018 |
— | 59,312 | $ | 48.39 | 02/22/27 | — | — | — | — | |||
— | 82,599 | $ | 24.13 | 02/10/26 | — | — | — | — | |||
Edmond L. Harris | — | 53,829 | $ | 53.82 | 02/06/28 | 23,074 | $ | 1,433,588 | 43,852 | $ | 2,724,525 |
— | 53,652 | $ | 58.48 | 01/10/28 | — | — | — | — | |||
Mark K. Wallace | — | 53,829 | $ | 53.82 | 02/06/28 | 42,715 | $ | 2,653,883 | 91,652 | $ | 5,694,339 |
— | 47,966 | $ | 47.28 | 03/29/27 | — | — | — | — | |||
Nathan D. Goldman | — | 53,829 | $ | 53.82 | 02/06/28 | 27,016 | $ | 1,678,504 | 49,226 | $ | 3,058,411 |
— | 5,931 | $ | 48.39 | 02/22/27 | — | — | — | — | |||
— | 11,013 | $ | 24.13 | 02/10/26 | — | — | — | — | |||
38,241 | — | $ | 24.99 | 12/08/25 | — | — | — | — |
Option Awards | Stock Awards | |||||||||||||||
Name | Number of Securities Underlying Unexercised Options (#) (Exercisable) | Number of Securities Underlying Unexercised Options (#) (Unexercisable)(1) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested(2) | Market Value of Shares or Units of Stock That Have Not Vested ($)(3) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested(4) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(5) | ||||||||
James M. Foote | 76,040 | — | 52.92 | 10/25/27 | 127,206 | 11,543,945 | ||||||||||
— | 242,229 | 53.82 | 2/6/28 | |||||||||||||
75,515 | 153,318 | 68.09 | 2/6/29 | |||||||||||||
— | 318,159 | 79.51 | 2/18/30 | |||||||||||||
Kevin S. Boone | 5,323 | — | 52.78 | 10/1/27 | 5,450 | 494,588 | 21,959 | 1,992,779 | ||||||||
— | 5,028 | 53.82 | 2/6/28 | |||||||||||||
1,480 | 3,005 | 68.09 | 2/6/29 | |||||||||||||
— | 82,169 | 70.45 | 12/4/29 | |||||||||||||
— | 72,309 | 79.51 | 2/18/30 | |||||||||||||
Mark K. Wallace | 47,966 | — | 47.28 | 3/29/27 | 30,765 | 2,791,924 | 26,469 | 2,402,062 | ||||||||
— | 53,829 | 53.82 | 2/6/28 | |||||||||||||
15,103 | 30,664 | 68.09 | 2/6/29 | |||||||||||||
— | 72,309 | 79.51 | 2/18/30 | |||||||||||||
Jamie J. Boychuk | 4,087 | — | 53.96 | 5/26/27 | 7,649 | 694,147 | 22,055 | 2,001,491 | ||||||||
— | 4,286 | 53.82 | 2/6/28 | |||||||||||||
1,784 | 3,622 | 68.09 | 2/6/29 | |||||||||||||
— | 80,000 | 78.94 | 4/17/29 | |||||||||||||
— | 72,309 | 79.51 | 2/18/30 | |||||||||||||
Nathan D. Goldman | 13,241 | — | 24.99 | 12/8/25 | 24,757 | 2,246,698 | ||||||||||
11,013 | — | 24.13 | 2/10/26 | |||||||||||||
5,931 | — | 48.39 | 2/22/27 | |||||||||||||
— | 53,829 | 53.82 | 2/6/28 | |||||||||||||
15,103 | 30,664 | 68.09 | 2/6/29 | |||||||||||||
— | 70,431 | 70.45 | 12/4/29 | |||||||||||||
— | 57,847 | 79.51 | 2/18/30 |
(1) | Number of Securities Underlying Unexercised Options (Unexercisable) – All stock options were granted 10 years prior to the Option Expiration Date listed in the table above. The stock options granted to all NEOs prior to 2019, to Mr. Boychuk on April 17, 2019 and to Messrs. Boone and Goldman on December 4, 2019, in each case, vest and become exercisable on the third anniversary of the date of grant, generally subject to the NEO’s continued service through the applicable vesting date. The other stock options granted to the NEOs in 2019, and the stock options granted to the NEOs in 2020, vest and become exercisable on a three-year graded vesting schedule on each of the first three anniversaries of the grant date, generally subject to the NEO’s continued service through the applicable vesting date. |
(2) | Number of Shares or Units of Stock That Have Not |
Market | |
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not | |
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not |
2021 Proxy Statement | 57 |
Compensation DiscussionCOMPENSATION DISCUSSION AND ANALYSIS
2020 Option Exercises and AnalysisStock Vested Table
2018 OPTION EXERCISES AND STOCK VESTED TABLE
The table below presents the value of performance units, non-qualified stock options, RSUs and restricted stock that vested in 2018.2020.
Option Awards | Stock Awards | |||||||
Name | Shares Acquired on Exercise | Value Realized on Exercise | Shares Acquired on Vesting(1) | Value Realized on Vesting(2) | ||||
James M. Foote | — | — | — | — | ||||
Frank A. Lonegro | — | — | 59,588 | $ | 3,861,834 | |||
Edmond L. Harris | — | — | — | — | ||||
Mark K. Wallace | — | — | 6,573 | $ | 408,380 | |||
Nathan D. Goldman | — | — | 9,162 | $ | 579,605 |
Option Awards | Stock Awards | |||||||
Name | Shares Acquired on Exercise(1) | Value Realized on Exercise(2) | Shares Acquired on Vesting(3) | Value Realized on Vesting(4) | ||||
James M. Foote | — | — | 236,176 | 20,451,805 | ||||
Kevin S. Boone | — | — | 4,469 | 385,529 | ||||
Mark K. Wallace | — | — | 55,802 | 4,515,855 | ||||
Jamie J. Boychuk | — | — | 6,667 | 551,916 | ||||
Nathan D. Goldman | 25,000 | 1,263,801 | 45,195 | 3,950,038 |
(1) | Shares Acquired on Exercise – Reflects the number of shares acquired on the exercise of non-qualified stock options that were exercised by Mr. Goldman on August 11, 2020. |
(2) | Value Realized on Exercise – The value in this column reflects the number of non-qualified stock options exercised by Mr. Goldman, multiplied by the difference between the grant’s exercise price of $24.99 and the Company’s common stock price at the time of exercise on August 11, 2020 of $75.54 per share. |
(3) | Shares Acquired on Vesting – Shares acquired through stock awards include: (i) performance units that were paid out pursuant to the |
Value Realized on Vesting – The values in this column reflect: (i) the number of performance units paid out pursuant to the |
As reflected by the2020 Pension Benefits Table, and as
As described below, CSX maintains closed defined benefit pension plans (qualified and nonqualified)non-qualified) under which the NEOs are eligible for benefits.
Name | Plan Name | Number of Years Credited Service | Present Value of Accumulated Benefits(1) | Payments During Last FY | ||
James M. Foote | Qualified CSX Pension Plan | 1.25 | $ | 31,402 | — | |
Nonqualified Special Retirement Plan | 1.25 | $ | 418,875 | — | ||
Frank A. Lonegro | Qualified CSX Pension Plan | 18.583 | $ | 680,917 | — | |
Nonqualified Special Retirement Plan | 18.583 | $ | 2,062,600 | — | ||
Edmond L. Harris | Qualified CSX Pension Plan | 1.000 | $ | 29,778 | — | |
Nonqualified Special Retirement Plan | 1.000 | $ | 149,418 | — | ||
Mark K. Wallace | Qualified CSX Pension Plan | 1.833 | $ | 43,597 | — | |
Nonqualified Special Retirement Plan | 1.833 | $ | 204,255 | — | ||
Nathan D. Goldman | Qualified CSX Pension Plan | 15.583 | $ | 353,107 | — | |
Nonqualified Special Retirement Plan | 15.583 | $ | 447,430 | — |
Name | Plan Name | Number of Years Credited Service | Present Value of Accumulated Benefits(1) | Payments During Last Fiscal Year | |||||
James M. Foote | Qualified CSX Pension Plan | 3.250 | $ | 96,169 | |||||
Nonqualified Special Retirement Plan | 3.250 | $ | 1,226,955 | ||||||
Kevin S. Boone | Qualified CSX Pension Plan | 3.333 | $ | 71,880 | |||||
Nonqualified Special Retirement Plan | 3.333 | $ | 148,754 | ||||||
Mark K. Wallace | Qualified CSX Pension Plan | 3.833 | $ | 95,948 | |||||
Nonqualified Special Retirement Plan | 3.833 | $ | 377,510 | ||||||
Jamie J. Boychuk | Qualified CSX Pension Plan | 3.667 | $ | 78,962 | |||||
Nonqualified Special Retirement Plan | 3.667 | $ | 159,087 | ||||||
Nathan D. Goldman | Qualified CSX Pension Plan | 17.583 | $ | 447,571 | |||||
Nonqualified Special Retirement Plan | 17.583 | $ | 661,970 |
(1) | For each of the NEOs, pension benefits accrue based on a “cash balance” formula. Under the cash balance formula, benefits are expressed in the form of a hypothetical account balance. For each month of service, the NEO’s account is credited with a percentage of the participant’s pay for that month. The percentage of pay credited is determined based on the participant’s age and years of service. |
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Qualified CSX Pension Plan
Cash Balance Formula for Employees Hired on or After January 1, 2003
Non-union 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. Messrs. Foote, Goldman, Harris and Wallace are covered under the Cash Balance Pay Formula as described below.
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 2018 was 3.66%. The resulting benefit is subject to a cap imposed under Section 415 of the Code (the “415 Limit”). The 415 Limit for 2018 was $220,000 (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 $275,000 for 2018 and is also subject to adjustment for future cost of living changes.
Compensation Discussion and Analysis
Final Average Pay FormulaCOMPENSATION DISCUSSION AND ANALYSIS
For management employees hired or promoted from a union position prior to January 1, 2003, the final average pay formula provides for a benefit in the form of a life annuity starting at age 65. The compensation used under this formula includes the highest aggregate base salary and short-term incentive payments for the employee’s highest consecutive 60-month period. The benefit is equal to 1.5% of the employee’s final average pay multiplied by their years of CSX service. This amount is then reduced by 40% of the employee’s Social Security benefits or 60% of the employee’s Railroad Retirement benefits, or both, as applicable. Mr. Lonegro was hired before January 1, 2003, and as such, is eligible for benefits based on the final average pay formula. He is the only NEO under this formula. The 415 Limit and Compensation Limit also apply in determining benefits under the final average pay formula.
Special Retirement Plan of CSX and Affiliated Corporations
The Special Retirement Plan is a nonqualified plan that covers CSX employees, including the NEOs, whose compensation exceeds the Compensation Limit. The purpose of the Special Retirement Plan is to assist CSX in attracting and retaining key executives by allowing the Company to offer competitive pension benefits.
The formula duplicates the qualified plan formula but provides for the payment of benefits that would otherwise not be provided under the Pension Plan due to the 415 Limit and the Compensation Limit, both described above.
Nonqualified pension benefits can be paid in the same form as under the Pension Plan. Pension benefits 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.
The valuation method and actuarial factors used to determine the present value of accumulated benefits shown in thePension Benefits Tablefor the Special Retirement Plan are described in the 2018 Annual Report.
Compensation Discussion and Analysis
2018 NONQUALIFIED DEFERRED COMPENSATION TABLE
TheNonqualified2020 Non-qualified Deferred Compensation Table
The following table presents a summary of 20182020 contributions made under the EDCP,Executives’ Deferred Compensation Plan, as well as 2018associated 2020 earnings, distributions and year-end balances. Two types of deferrals are represented below: cash and CSX stock deferrals. Cash deferrals include deferred portions of an NEO’s base salary and short-term incentive payments. CSX stock deferrals include deferred portions of compensation payable in the form of CSX common stock.
Name | Executive Contributions in Last Fiscal Year(1) ($) | Registrant Contributions in Last Fiscal Year(2) ($) | Aggregate Earnings in Last Fiscal Year(3) ($) | Aggregate Distributions in Last Fiscal Year(4) ($) | Aggregate Balance Last in Fiscal Year ($) | |||||
James M. Foote | $ | 73,250 | $ | 35,073 | ($ | 8,479 | ) | — | $ | 90,896 |
Frank A. Lonegro | $ | 13,500 | $ | 7,875 | ($ | 21,450 | ) | — | $ | 918,697 |
Edmond L. Harris | $ | 17,875 | $ | 10,427 | $ | 27 | — | $ | 25,756 | |
Mark K. Wallace | — | — | — | — | — | |||||
Nathan D. Goldman | $ | 13,500 | $ | 7,875 | $ | 142 | — | $ | 46,235 |
Name | Executive Contributions Last Fiscal Year(1) | Registrant Contributions Last Fiscal Year(2) | Aggregate Earnings Last Fiscal Year(3) | Aggregate Withdrawals/ Distributions Last Fiscal Year | Aggregate Balance Last Fiscal Year End | |||||
James M. Foote | 75,000 | 33,789 | 66,800 | — | 419,113 | |||||
Kevin S. Boone | 11,425 | 6,665 | 485 | -141,746 | 35,728 | |||||
Mark K. Wallace | 15,925 | 9,290 | 9,478 | — | 58,523 | |||||
Jamie J. Boychuk | — | — | — | — | — | |||||
Nathan D. Goldman | 12,925 | 7,539 | 4,777 | — | 95,751 |
(1) | Executive Contributions in Last |
(2) | Registrant Contributions in Last Fiscal Year |
(3) | Aggregate Earnings in Last Fiscal Year |
POTENTIAL PAYOUTS UNDER CHANGE-OF-CONTROL AGREEMENTSPotential Payouts Under Change-of-Control Agreements
The following table presents the severance benefits to which each of the NEOs would be entitled as of December 31, 2018,2020, under his or her Change-of-Control Agreement upon the hypothetical termination of employment following a change-of-control: (i) by CSX other than for “cause”cause or “disability”;disability; (ii) by the NEO for “good reason”;good reason; or (iii) upon a constructive termination. The definitions of “change of control”, “cause”, “disability”, “good reason” and “constructive termination.” A change-of-control would not resulttermination” are set forth in retirement benefit increases or excise tax gross ups. Further, the pro-rata bonus payment would be based on target bonus instead ofChange-of-Control Agreements. No payments have been made to any NEO pursuant to the highest annual bonus.Change-of-Control Agreements.
Name | Severance(1) | Pro-rata Bonus Payment(2) | Equity(3) | Welfare Benefit Values(4) | Outplacement(5) | Aggregate Payments | ||||||
James M. Foote | $ | 8,513,542 | $ | 3,052,081 | $ | 10,050,059 | $ | 29,416 | $ | 20,000 | $ | 21,665,098 |
Frank A. Lonegro | $ | 2,882,167 | $ | 900,000 | $ | 10,445,034 | $ | 73,368 | $ | 20,000 | $ | 14,320,569 |
Edmond L. Harris | $ | 3,458,600 | $ | 1,060,435 | $ | 3,438,999 | $ | 5,256 | $ | 20,000 | $ | 7,983,290 |
Mark K. Wallace | $ | 3,170,383 | $ | 990,000 | $ | 5,918,213 | $ | 73,368 | $ | 20,000 | $ | 10,171,964 |
Nathan D. Goldman | $ | 2,882,167 | $ | 900,000 | $ | 4,552,980 | $ | 73,368 | $ | 20,000 | $ | 8,428,515 |
Name | Severance(1) | Pro-Rata Bonus Payment(2) | Equity(3) | Welfare Benefit Values(4) | Outplacement Benefits | Aggregate Payments | ||||||
James M. Foote | 9,717,500 | 1,500,000 | 44,499,647 | 22,392 | 40,000 | 55,779,539 | ||||||
Kevin S. Boone | 2,698,475 | 320,625 | 6,411,362 | 79,189 | 40,000 | 9,549,651 | ||||||
Mark K. Wallace | 3,124,550 | 371,250 | 13,883,410 | 79,452 | 40,000 | 17,498,662 | ||||||
Jamie J. Boychuk | 2,840,500 | 337,500 | 5,868,881 | 78,576 | 40,000 | 9,165,457 | ||||||
Nathan D. Goldman | 2,840,500 | 337,500 | 11,818,524 | 56,736 | 40,000 | 15,093,260 |
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Compensation Discussion and AnalysisCOMPENSATION DISCUSSION AND ANALYSIS
How is change-of-control defined?
Under the agreements described below,Benefits Provided Following a “change-of-control” generally includes any of the following:Change-of-Control
Each Change-of-Control Agreement provides for salary and certain benefits to be continued at no less than specified levels generallythat for a period of up to 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”), 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.
If a change-of-control occurs, what benefits are provided during the Employment Period where no termination has occurred?
During the Employment Period, CSX is required to:
n | Pay the executive an annual base salary that is at least equal to the highest base salary payable to the executive in the 12-month period immediately preceding the Employment Period (although certain reductions in salary that are also applicable to | |
n | Provide the executive with an opportunity to earn an annual incentive payment at a minimum, target and maximum level that is not less favorable than the executive’s opportunity to earn such annual incentives prior to the Employment Period (although certain reductions also applicable to | |
n | Ensure the executive is eligible to participate in incentive, retirement, health and group benefits and other retirement–related benefit plans and to benefit from paid vacation and other policies of CSX and its affiliates, on a basis not less favorable than the benefits generally available to the executive before the Employment Period (or the benefits generally available to |
If a change-of-control occurs, what benefits are provided
Benefits Provided if the NEONEO’s Employment is terminated?Terminated Following a Change-of-Control
Under the
Each Change-of-Control Agreements, CSX will provide severance payments and other benefits to NEOs upon their termination of employment during the Employment Period. The amount of benefits depends on the reason for termination as discussed below.
Compensation Discussion and Analysis
Termination Without “Cause,” Resignation for “Good Reason” or “Constructive Termination.”
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 without “cause”,other than for cause or disability, if the NEO resigns for “good reason”good reason or upon a “constructive termination.”constructive termination (as such terms are defined in the Change-of-Control Agreements). An NEO whose employment is terminated without “cause”cause in anticipation of a change-of-control is also entitled to the following benefits.
Cash Severance Payment—A lump sum cash severance payment equal to the sum of the following:
NEO’s “annual bonus” based upon the | ||
n | 2.99 times the sum of the NEO’s annual base salary and the NEO’s “target annual bonus” |
Medical and Other Group Benefits—The equivalent of continued medical and life insurance and other health and group benefits 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 peerother executives, whichever is more favorable).
Outplacement—Outplacement services at a cost to CSX not to exceed $20,000.$40,000.
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.Change-of-Control Benefits
Definitions:
“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” applies 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:
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Are there any other “change-of-control” rights available to the NEOs other than those contained in the executives’ Change-of-Control Agreements?
Yes. Pursuant to the terms of the 2010 Stock Plan,Plans, in the event of a change-of-control combined with involuntarytermination of employment termination, equity awards are impacted as follows:(i) by CSX without cause; (ii) by the NEO for good reason, in either case, within three years following a change of control:
Performance-based equity awards are deemed earned at target levels and cancelled in exchange cash payment equal to the fair market value of a share multiplied by the shares subject the awards at target levels; | ||
n | RSUs and unvested stock options are | |
n | Restricted stock |
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Compensation Discussion and AnalysisCOMPENSATION DISCUSSION AND ANALYSIS
What is the impact
Impact of a change-of-controlChange-of-Control on deferred compensationDeferred Compensation (EDCP) and retirement plan benefits?Retirement Plan Benefits
In accordance with the terms of the EDCP, distribution of the entire account balance shall be made to participants upon a change-of-control unless(as defined in the individual participant elects otherwise.EDCP). The Special Retirement Plan also contains certain change-of-control provisions.
Does the Company provide tax gross-ups
No Tax Gross-Ups for excess parachute payments?Excess Parachute Payments
No.
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.
Post-Employment Compensation - Termination withoutWithout 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 NEO’sNEOs would be entitled as of December 31, 2018,2020, under the applicable severance arrangement assuming the NEO was terminated “without cause” by the Company or by the executive for “good reason.”
Name | Severance(1) | Stock Awards(2) | Option Awards(2) | Non-Equity Incentive Plan Compensation(3) | Pension Enhancement(4) | Other Compensation(5) | Total Compensation Payable | |||||||
James M. Foote | $ | 5,625,000 | $ | 7,336,807 | $ | 2,713,251 | $ | 3,052,081 | — | $ | 32,876 | $ | 18,760,015 | |
Frank A. Lonegro | $ | 1,450,000 | $ | 5,469,180 | $ | 3,796,108 | $ | 900,000 | $ | 2,678,045 | $ | 52,304 | $ | 14,400,580 |
Edmond L. Harris | $ | 1,740,000 | $ | 2,795,850 | $ | 643,149 | $ | 1,060,435 | — | $ | 32,000 | $ | 6,271,434 | |
Mark K. Wallace | $ | 2,090,000 | $ | 2,130,748 | $ | 591,761 | $ | 990,000 | — | $ | 151,668 | $ | 5,954,177 | |
Nathan D. Goldman | $ | 1,450,000 | $ | 2,246,621 | $ | 590,074 | $ | 900,000 | $ | 176,729 | $ | 52,304 | $ | 5,415,728 |
Name | Severance(1) | Stock Awards(2) | Option Awards(2) | Non-Equity Incentive Plan Compensation(3) | Other Compensation(4) | Total Compensation Payable | ||||||
James M. Foote | 6,500,000 | 23,916,074 | 20,583,573 | 1,500,000 | 59,464 | 52,559,111 | ||||||
Kevin S. Boone | 118,750 | 1,755,983 | 2,970,212 | 320,625 | 58,599 | 5,224,169 | ||||||
Mark K. Wallace | 2,090,000 | 5,837,914 | 5,922,820 | 371,250 | 78,484 | 14,300,468 | ||||||
Jamie J. Boychuk | 125,000 | 1,947,207 | 2,188,696 | 337,500 | 58,548 | 4,656,951 | ||||||
Nathan D. Goldman | 375,000 | 3,487,553 | 6,960,586 | 337,500 | 66,184 | 11,226,823 |
(1) | Severance – Per their employment agreements, Messrs. Foote and Wallace would |
(2) | Stock and Option Awards – This includes a prorated amount of all outstanding equity awards as of December 31, |
(3) | |
(4) | Other Compensation – Each NEO would |
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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.
Compensation Committee
Steven T. Halverson (Chair)Donna M. AlvaradoLinda H. RieflerJohn J. Zillmer
March 12, 2019
As required by Section 953(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 as of December 31, 2018.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 2018,2020, the last completed fiscal year:
n | The annual total compensation of the individual identified as the Company’s median employee, other than the CEO, was | |
n | The annual total compensation of the CEO was | |
n | Based on this information, the ratio for |
Due to changes in the Company’s workforce from 2017, the
The Company identified a new median employee as of year-end 2018.2020. To identify the median employee, as well as to determine the annual total compensation of Mr. Foote, the following analysis occurred:
1. | As of December 31, |
2. | The median employee was identified by using |
3. | All employees who were full-time, part-time, or seasonal, including management and union, as well as furloughed employees who received any wages within the calendar year were included in the analysis. Employees from the Company’s consolidated subsidiaries were also included. In accordance with SEC rules, all non-U.S. employees were excluded from the analysis. As of December 31, 2020, we employed 49 non-U.S. employees, all in Canada, which represented less than 1% of our overall employee population. |
4. | Annualized compensation was determined for any full or part-time employees who were employed at year-end but did not work for the Company the entire fiscal year, including those who were furloughed for part of the year. No cost of living or other adjustments were made to compensation. |
5. | The use of Medicare Wages is a consistently applied measure |
6. | Once the median employee was identified, the Company determined the sum of all elements of such employee’s compensation for |
7. | The annual total compensation for Mr. Foote includes the amount reported in the “Total” column of theSummary Compensation Tableincluded 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 |
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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’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, 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 financial 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 and long-term strategic goals. In order to align executive pay with the Company’s financial performance and the creation of sustainable shareholder value, a significant 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 fiduciary duties of, or impose any additional fiduciary duties on, the Company or the Board. The Board and the Compensation and Talent Management Committee 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 20202022 Annual Meeting, of Shareholders, unless the Board modifies its policy of holding an advisory (non-binding) vote to approve the compensation of the Company’s NEOs on an annual basis.
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The Board unanimously recommends that the shareholders vote FOR this proposal. |
In its efforts to attract, motivate and retain highly qualified employees, the Company provides equity-based incentive awards designed to align employee interests with those of shareholders. In this regard, the Board is seeking shareholder approval of the CSX 2019 Stock and Incentive Plan (the “2019 Stock Plan”), which gives the Company the ability to provide these incentives through issuances of stock, restricted stock, stock options, and other stock-based awards. The 2019 Stock Plan is intended to replace the Company’s existing equity compensation plan, the CSX Stock and Incentive Award Plan (as amended, the “2010 Stock Plan”), which was previously approved by shareholders.
CONSIDERATIONS FOR THE APPROVAL OF THE 2019 STOCK PLAN
In designing the 2019 Stock Plan, the Board and the Compensation Committee carefully considered the Company’s anticipated future equity needs, historical equity compensation practices and the advice of the Compensation Committee’s independent compensation consultant. The aggregate number of shares of CSX common stock, $1.00 par value (“Shares”) being requested for authorization under the 2019 Stock Plan pursuant to awards granted after the 2019 Stock Plan’s approval is 28 million Shares. If the 2019 Stock Plan is approved by shareholders, the 2019 Stock Plan will replace the 2010 Stock Plan (which is the only equity plan of the Company in place as of the date of this Proxy Statement), and no additional grants will be made under the 2010 Stock Plan. Among the factors considered by the Compensation Committee in determining the share reserve under the 2019 Stock Plan were the following:
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Item 4: Vote to Approve the CSX 2019 Stock and Incentive Award Plan
If approved, the 28 million Shares reserved for issuance under the 2019 Stock Plan would, when combined with Shares subject to outstanding equity awards under the 2010 Stock Plan as reflected in the table above, increase the overhang percentage to approximately 4%. As noted above, if the 2019 Stock Plan is approved by shareholders, no additional equity awards will be granted under the 2010 Stock Plan after the date of the Annual Meeting and all such future awards will be granted under the 2019 Stock Plan.
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2017 | 2018 | 2019 | |||
Stock options granted | 10,462 | (1) | 1,009 | 843 | |
Service-based restricted shares and restricted share units granted | 328 | 164 | 65 | ||
Actual performance-based shares and units earned | 460 | 1,172 | — | ||
Weighted average basic common shares outstanding during the fiscal year | 911 | 857 | — |
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The 2019 Stock Plan has been designed to build upon the effectiveness of the 2010 Stock Plan and incorporates additional corporate governance best practices to further align the Company’s equity compensation programs with the interests of shareholders. Some of the corporate governance best practices included in the 2019 Stock Plan, or that relate to stock ownership, are as follows:
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The following paragraphs summarize the material terms of the 2019 Stock Plan, including the provisions regarding eligibility, the types of awards that may be made, the performance criteria that may be applied to awards. The summary is qualified in its entirety by reference to the full text of the 2019 Stock Plan attached hereto asAppendix A.
GENERAL
The 2019 Stock Plan provides for the grants of stock options (both nonqualified and incentive stock options), SARs, RSUs, restricted stock units, performance awards, dividend equivalents and other cash- and stock-based awards (collectively, “Incentive Awards”) to the Company’s employees, non-employee directors and individual consultants. Any award may be granted alone or in tandem with other awards, and may be granted in addition to, or in substitution for, other types of awards. Compensation payable to Board members in the form of Shares will also be paid from the 2019 Stock Plan.
STOCK SUBJECT TO 2019 STOCK PLAN; ADJUSTMENTS
The Board has reserved a total of 28 million shares of common stock for issuance under the 2019 Stock Plan. If an Incentive Award is forfeited, cancelled, expires, terminates or is otherwise settled in cash without the issuance of Shares, the Shares subject to such awards will become available for further awards under the 2019 Stock Plan. Shares (i) tendered or withheld in payment of an exercise price of a stock option or to satisfy tax withholding obligations associated with an award, (ii) subject to a stock-settled SAR granted under the 2019 Stock Plan that were not issued upon the exercise of such SAR, and (iii) repurchased by the Company on the open market with option proceeds in respect of the exercise of a stock option will not again be available for issuance under the 2019 Stock Plan.
Item 4: Vote to Approve the CSX 2019 Stock and Incentive Award Plan
In the event the Compensation Committee determines that, as a result of any dividend or other distribution (other than an ordinary dividend or distribution), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, separation, rights offering, split-up, spin-off, combination, repurchase or exchange of Shares or other securities of the Company, issuance of warrants or other rights to purchase Shares or other securities of the Company, issuance of Shares pursuant to the anti-dilution provisions of securities of the Company, or other similar corporate transaction or event affecting Shares, or of changes in applicable laws, regulations or accounting principles, an adjustment is appropriate to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the 2019 Stock Plan, the Compensation Committee will adjust equitably any or all of: (i) the number and type of Shares or other securities that thereafter may be made the subject of awards, including the aggregate limits under the 2019 Stock Plan; (ii) the number and type of Shares or other securities subject to outstanding awards; and (iii) the grant, purchase, exercise or hurdle price for any award or, if deemed appropriate, make provision for a cash payment to the holder of an outstanding award.
Purpose
The purpose of the 2019 Stock Plan is to motivate and reward employees and other individuals to perform at the highest level and contribute significantly to the success of the Company, thereby furthering the best interests of the Company and its shareholders.
Eligibility
The Company’s employees, non-employee directors and individual consultants, including advisors, are eligible to receive awards under the 2019 Stock Plan to the extent the receipt of such awards is permitted by applicable law, stock market or exchange rules and regulations or accounting or tax rules and regulations. As of March 4, 2019, there were approximately 22,314 employees and 10 non-employee directors eligible to receive awards under the 2010 Stock Plan. The average number of individuals who received awards under the Company’s 2010 Stock Plan during each of the last three years was approximately 600, although the Compensation Committee reserves the power to make grants more widely in the future. The basis for participation in the 2019 Stock Plan is the Compensation Committee’s decision, in its sole discretion, that an Incentive Award to an eligible participant will further the 2019 Stock Plan’s purposes of motivating and rewarding participants to perform at the highest level and contribute to the Company’s success. In exercising its discretion, the Compensation Committee will consider the recommendations of management and the purposes of the 2019 Stock Plan.
Administration
The 2019 Stock Plan is administered by the Compensation Committee, unless another committee is designated by the Board. The Compensation Committee may delegate the authority to grant awards under the 2019 Stock Plan, to the extent permitted by applicable law, to (i) one or more officers of the Company (except that such delegation will not be applicable to any award for a person then covered by Section 16 of the Securities Exchange Act of 1934 (the “Exchange Act”)) and (ii) one or more committees of the Board. All decisions of the Compensation Committee are final, conclusive and binding upon all parties.
The Compensation Committee has authority under the 2019 Stock Plan to:
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Item 4: Vote to Approve the CSX 2019 Stock and Incentive Award Plan
Stock Options
The 2019 Stock Plan authorizes the grant of incentive stock options and nonqualified stock options. Incentive stock options are stock options that satisfy the requirements of Section 422 of the Code. Nonqualified stock options are stock options that do not satisfy the requirements of Section 422 of the Code. Options granted under the 2019 Stock Plan entitle the grantee, upon exercise, to purchase a specified number of Shares from CSX at a specified exercise price per Share. The Compensation Committee determines the period of time during which an option may be exercised, the vesting schedule, the method and form by which each option is to be exercised, and the expiration date of each option, provided that no option will be exercisable more than 10 years after the grant date. The exercise price per Share covered by an option will be determined by the Compensation Committee and may not be less than 100 percent of the fair market value of a Share on the date of grant.
Stock Appreciation Rights
The Compensation Committee may grant SARs under the 2019 Stock Plan. Subject to the terms of the award, SARs entitle the participant to receive a distribution in an amount equal to the number of Shares subject to the portion of the SAR exercised multiplied by the excess, if any, of the fair market value of a Share on the date of exercise of the SAR over the exercise or hurdle price of the SAR. Such distributions are payable in cash or Shares, or a combination thereof, as determined by the Compensation Committee. The terms and conditions applicable to stock options also apply to SARs.
Restricted Stock
The 2019 Stock Plan also authorizes the grant of restricted stock on terms and conditions established by the Compensation Committee, which will include the designation of a restriction period during which the shares are not transferable and are subject to forfeiture.
Restricted Stock Units
RSUs may be granted subject to terms and conditions as determined by the Compensation Committee. In the case of RSUs, no shares are issued at the time of grant. Rather, upon the lapse of any applicable vesting schedule and other restriction, an RSU entitles a participant to receive Shares or cash, or a combination thereof, as determined by the Compensation Committee.
Performance Awards
The Compensation Committee may grant performance awards to participants subject to terms and conditions as determined by the Compensation Committee. Performance awards may be denominated in cash, Shares or units, or a combination thereof, and may be earned based on the achievement of one or more performance conditions specified by the Compensation Committee. The Compensation Committee will make all determinations regarding the achievement of performance goals. Settlement of performance awards will be in cash, Shares, other awards or property, net settlement, or any combination thereof. The Compensation Committee may, in its discretion, increase or reduce the amount of a settlement to be made in connection with a performance award.
Dividend Equivalents
The 2019 Stock Plan authorizes grants of dividend equivalents to any participant either in combination with, or separately from, Incentive Awards. A dividend equivalent permits the participant to receive payments equivalent to the dividends paid to holders of Shares. Dividend equivalents are payable in cash or Shares, or a combination thereof, as determined by the Compensation Committee.
Other Cash and Stock-Based Awards
The 2019 Stock Plan authorizes the making of other cash- or stock-based awards. The Compensation Committee will establish the terms and conditions applicable to each award.
Change in Control
The 2019 Stock Plan provides that, upon termination of employment by the employer without cause or by the participant with good reason, within three years after a change in control event:
Item 4: Vote to Approve the CSX 2019 Stock and Incentive Award Plan
Duration, Amendment and Termination
The 2019 Stock Plan will automatically terminate on May 3, 2029, if not earlier terminated under the terms of the 2019 Stock Plan. The Board may amend, suspend, discontinue or terminate the 2019 Stock Plan at any time except that no change may be made to the 2019 Stock Plan: (i) without shareholder approval if such approval is required by applicable law or the rules of the stock market or exchange on which the Shares are principally quoted or traded, or (ii) without the consent of the affected participant if such action would materially adversely impact a pending Incentive Award or adversely impact any Incentive Award following a change in control. Accordingly, the Board may generally amend the provisions of the 2019 Stock Plan described in this proposal.
Minimum Vesting Requirements
Each Incentive Award granted pursuant to the 2019 Stock Plan will vest over a period of not less than one year following the date of grant. However, the Compensation Committee may reduce or eliminate this requirement upon the participant’s termination of service. In addition, the Compensation Committee may grant awards that are not subject to these minimum vesting requirements with respect to 5% of the maximum aggregate number of Shares available for issuance under the 2019 Stock Plan (as may be adjusted in accordance with the terms of the 2019 Stock Plan).
Prohibition on Repricing
Subject to the adjustment provision described above, the Compensation Committee may not directly or indirectly, through cancellation or regrant or any other method, reduce, or have the effect of reducing, the exercise or hurdle price of any award established at the time of grant without approval of the Company’s shareholders.
Restrictions on Transfer; Deferral
Except as otherwise permitted by the Compensation Committee and provided in the Incentive Award, Incentive Awards may not be transferred or exercised by another person except by will or by the laws of descent and distribution.
Cancellation or “Clawback” of Awards
The Compensation Committee may, to the extent permitted by applicable law and stock exchange rules or by any applicable Company policy, cancel or require reimbursement of any Incentive Awards granted, Shares issued or cash received upon the vesting, exercise or settlement of any awards granted under the 2019 Stock Plan or the sale of Shares underlying such awards.
Federal Income Tax Information
The following is a general summary of the current federal income tax treatment of Incentive Awards, which are authorized to be granted under the 2019 Stock Plan, based upon the current provisions of the Code and regulations promulgated thereunder. The rules governing the tax treatment of such awards are technical, so the following discussion of tax consequences is necessarily general in nature and does not purport to be complete. In addition, statutory provisions are subject to change, as are their interpretations, and their application may vary in individual circumstances. Finally, this discussion does not address the tax consequences under applicable state and local law.
Incentive Stock Options.A participant will not recognize income on the grant or exercise of an incentive stock option. However, the difference between the exercise price and the fair market value of the stock on the date of exercise is an adjustment item for purposes of the alternative minimum tax. If a participant does not exercise an incentive stock option within certain specified periods after termination of employment, the participant will recognize ordinary income on the exercise of an incentive stock option in the same manner as on the exercise of a nonqualified stock option, as described below.
The general rule is that gain or loss from the sale or exchange of shares acquired on the exercise of an incentive stock option will be treated as capital gain or loss. If certain holding period requirements are not satisfied, however, the participant generally will recognize ordinary income at the time of the disposition. Gain recognized on the disposition in excess of the ordinary income resulting therefrom will be capital gain, and any loss recognized will be a capital loss.
Nonqualified Stock Options, SARs, RSUs, Performance Awards, Stock Awards, and Dividend Equivalents.A participant generally is not required to recognize income on the grant of a nonqualified stock option, SARs, RSUs, a performance award, a stock award, or dividend equivalents. Instead, ordinary income generally is required to be recognized on the date the nonqualified stock option or stock appreciation right is exercised, or in the case of RSUs, performance awards, stock awards, and dividend equivalents, upon the issuance of shares and/or the payment of cash pursuant to the terms of the award. In general, the amount of ordinary income required to be recognized: (i) in the case of a nonqualified stock option, is an amount equal to the excess, if any, of the fair market value of the shares on the exercise date over the exercise price; (ii) in the case of SARs, the amount of cash and/or the fair market value of any shares received upon exercise plus the amount of taxes withheld from such amounts; and (iii) in the case of RSUs, performance awards, stock awards, and dividend equivalents, the amount of cash and/or the fair market value of any shares received in respect thereof, plus the amount of taxes withheld from such amounts.
Item 4: Vote to Approve the CSX 2019 Stock and Incentive Award Plan
Restricted Stock.Unless a participant who receives an award of restricted stock makes an election under Section 83(b) of the Code (“Section 83(b) Election”) as described below, the participant generally is not required to recognize ordinary income on the award of restricted stock. Instead, on the date the shares vest (i.e., become transferable or no longer subject to forfeiture), the participant will be required to recognize ordinary income in an amount equal to the excess, if any, of the fair market value of the shares on such date over the amount, if any, paid for such shares. If a participant makes a Section 83(b) Election to recognize ordinary income on the date the shares are awarded, the amount of ordinary income required to be recognized is an amount equal to the excess, if any, of the fair market value of the shares on the date of award over the amount, if any, paid for such shares. In such case, the participant will not be required to recognize additional ordinary income when the shares vest.
Gain or Loss on Sale or Exchange of Shares.In general, gain or loss from the sale or exchange of shares granted or awarded under the 2019 Stock Plan will be treated as capital gain or loss, provided that the shares are held as capital assets at the time of the sale or exchange. However, if certain holding period requirements are not satisfied at the time of a sale or exchange of shares acquired upon exercise of an incentive stock option (a “disqualifying disposition”), a participant generally will be required to recognize ordinary income upon such disposition.
Deductibility by Company.The Company generally is not allowed a deduction in connection with the grant or exercise of an incentive stock option. However, if a participant is required to recognize income as a result of a disqualifying disposition, the Company will be entitled to a deduction equal to the amount of ordinary income so recognized. In general, in the case of nonqualified stock options (including incentive stock options that are treated as nonqualified stock options, as described above), SARs, restricted stock, RSUs, performance awards, stock awards, and dividend equivalents, the Company will be allowed a deduction in an amount equal to the amount of ordinary income recognized by a participant, provided that certain income tax reporting requirements are satisfied. However, the Company may be subject to limits on tax deductibility relating to compensation described herein under certain statutory provisions, including Section 162(m) of the Code.
Parachute Payments.Where payments to certain employees that are contingent on a change in control exceed limits specified in the Code, the employee generally is liable for a 20% excise tax on, and the corporation or other entity making the payment generally is not entitled to any deduction for, a specified portion of such payments. The Compensation Committee has in the past, and may in the future, make awards as to which the vesting thereof is accelerated by a change in control of the Company. Such accelerated vesting would be relevant in determining whether the excise tax and deduction disallowance rules would be triggered with respect to certain Company employees.
Accounting Treatment
Under present accounting rules, the grant of Incentive Awards will generally result in a charge against CSX’s earnings, based upon the fair market value of the Incentive Awards at the date of the grant, and the charge will generally be taken over the vesting period of the Incentive Award. However, in the case of SARs intended to be settled in cash, the excess, if any, from time to time of the fair market value of the common stock subject to SARs, over the exercise price of the SARs, will result in a charge against CSX’s earnings. The amount of the charge will increase or decrease based on changes in the market value of the common stock and will decrease to the extent SARs are cancelled. CSX has not issued any SARs to date.
Registration With the SEC
If our shareholders approve the 2019 Stock Plan, we plan to file a registration statement on a Form S-8 (and/or an amendment to our existing registration statement that has been filed with respect to the 2010 Stock Plan) with the SEC, as soon as reasonably practicable after such approval, to register the Shares available for issuance under the 2019 Stock Plan.
New Plan Benefits
As described above, the Compensation Committee, in its discretion, will select the participants who receive awards and the size and types of those awards under the 2019 Stock Plan, if the 2019 Stock Plan is approved by our shareholders. Therefore, the awards that will be made to particular individuals or groups of individuals in the future under the 2019 Stock Plan are not currently determinable. Additionally, a new plan benefits table for the 2019 Stock Plan and the benefits or amounts that would have been received by or allocated to participants for the last completed fiscal year under the 2019 Stock Plan if the 2019 Stock Plan was then in effect, as described in the federal proxy rules, are not provided because all awards made under the 2019 Stock Plan will be made at the Compensation Committee’s discretion, subject to the terms of the 2019 Stock Plan. Therefore, the benefits and amounts that would have been received or allocated under the 2019 Stock Plan for 2018 are also not determinable at this time.
The following table sets forth information about the Company’s equity compensation plans as of December 31, 2018.2020.
Plan category | Number of securities to be issued upon exercise of outstanding options, warrants and rights (in thousands) | Weighted-average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans (in thousands)(1) |
Equity compensation plans approved by security holders | 4,573 | $34.89 | 19,360 |
Equity compensation plans not approved by security holders | — | — | — |
TOTAL | 4,573 | $34.89 | 19,360 |
Plan category | Number of securities to be issued upon exercise of outstanding options, warrants and rights (in thousands) | Weighted-average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans (in thousands)(1) | |||
Equity compensation plans approved by security holders | 4,217 | $ 60.88 | 12,470 | |||
Equity compensation plans not approved by security holders | 0 | 0 | — | |||
TOTAL | 4,217 | $ 60.88 | 12,470 |
(1) | The number of shares remaining available for future issuance under plans approved by shareholders includes |
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Ownership of our Stock | ||
Security Ownership of Management and Certain Beneficial Owners
The following table sets forth, as of March 4, 2019,8, 2021, the beneficial ownership of CSX common stock by each director, director nominee and NEO, and the directors and executive officers of the Company as a group. The business address of each of the Company’s directors and executive officers is CSX Corporation, 500 Water Street, Jacksonville, Florida 32202.
Name of Beneficial Owner(1) | Amount of Beneficial Ownership | Shares for which Beneficial Ownership can be Acquired within 60 Days(2) | Total Beneficial Ownership | Percent of Class(3) |
Donna M. Alvarado | 124,302 | — | 124,302 | * |
John B. Breaux | 206,823 | — | 206,823 | * |
Pamela L. Carter | 46,157 | — | 46,157 | * |
James M. Foote | 5,739 | — | 5,739 | * |
Steven T. Halverson | 129,401 | — | 129,401 | * |
Paul C. Hilal(4)(5) | 38,057,315 | — | 38,057,315 | 4.68% |
John D. McPherson | 115,901 | — | 115,901 | * |
David M. Moffett | 15,171 | — | 15,171 | * |
Linda H. Riefler | 13,859 | — | 13,859 | * |
J. Steven Whisler | 48,240 | — | 48,240 | * |
John J. Zillmer | 167,388 | — | 167,388 | * |
Frank A. Lonegro | 150,113 | 82,599 | 232,712 | * |
Nathan D. Goldman | 96,037 | 49,254 | 145,291 | * |
Edmond L. Harris | 23,411 | — | 23,411 | * |
Mark K. Wallace | 51,747 | — | 51,747 | * |
All current executive officers and directors as a group (a total of 17) | 39,073,655 | 190,117 | 39,263,772 | 4.83% |
Name of Beneficial Owner(1) | Amount of Beneficial Ownership | Shares for which Beneficial Ownership can be Acquired within 60 Days | Total Beneficial Ownership | Percent of Class(2) | ||||
Donna M. Alvarado | 119,813 | — | 119,813 | * | ||||
Thomas P. Bostick | 1,910 | — | 1,910 | * | ||||
James M. Foote | 184,313 | 567,235 | 751,548 | * | ||||
Steven T. Halverson | 96,846 | — | 96,486 | * | ||||
Paul C. Hilal(3) | 2,521,735 | — | 2,521,735 | * | ||||
John D. McPherson | 123,087 | — | 123,087 | * | ||||
David M. Moffett | 19,599 | — | 19,599 | * | ||||
Linda H. Riefler | 18,257 | — | 18,257 | * | ||||
Suzanne M. Vautrinot | 4,168 | — | 4,168 | * | ||||
James L. Wainscott | 1,910 | — | 1,910 | * | ||||
J. Steven Whisler | 55,887 | — | 55,887 | * | ||||
John J. Zillmer | 157,217 | — | 157,217 | * | ||||
Kevin. S. Boone | 18,754 | 37,444 | 56,198 | * | ||||
Jamie J. Boychuk | 21,106 | 36,080 | 57,186 | * | ||||
Nathan D. Goldman | 95,787 | 133,807 | 229,594 | * | ||||
Mark K. Wallace | 62,910 | 156,409 | 219,319 | * | ||||
All current executive officers and directors as a group (a total of 18) | 3,567,246 | 1,012,191 | 4,579,437 | * |
(1) | 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. |
(2) |
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Based on | |
By virtue of ultimately controlling the managing member of Mantle Ridge GP LLC, the general partner of Mantle Ridge LP, which is in turn the sole member of both MR S and P Index Annual Reports LLC and MR Argent Advisor LLC, | |
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2021 Proxy Statement | 65 |
Security Ownership of Management and Certain Beneficial OwnerOWNERSHIP OF OUR STOCK
The following table sets forth information regarding the beneficial ownership of CSX common stock as of March 4, 20198, 2021 for each person known to us to be the beneficial owner of more than 5% of the outstanding shares of CSX common stock.
Name and Address of Beneficial Owner | Amount of Beneficial Ownership | Percent of Class |
BlackRock, Inc.(1) | ||
55 East 52ndStreet | ||
New York, NY 10055 | 49,404,831 | 5.90% |
The Vanguard Group(2) | ||
100 Vanguard Blvd. | ||
Malvern, PA 19355 | 66,473,008 | 7.87% |
Name and Address of Beneficial Owner | Amount of Beneficial Ownership | Percent of Class | ||
BlackRock, Inc.(1) 55 East 52nd Street New York, NY 10055 | 47,701,700 | 6.2 | ||
Capital Research Global Investors(2) 333 South Hope Street Los Angeles, CA 90071 | 52,107,116 | 6.8 | ||
Capital World Investors(2) 333 South Hope Street Los Angeles, CA 90071 | 70,004,980 | 9.2 | ||
The Vanguard Group(3) 100 Vanguard Blvd. Malvern, PA 19355 | 62,475,594 | 8.17 |
(1) | As disclosed in its Schedule |
(2) | As disclosed in its Schedule |
(3) | As disclosed in its Schedule 13G/A filed on February 10, 2021. |
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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 to be held on May 7, 2021. This Proxy Statement and the 2020 Annual Report are available at www.proxyvote.com.
As permitted by rules adopted by the SEC, we are making our proxy materials available to our shareholders electronically via the Internet. We have mailed many of our shareholders a Notice containing instructions on how to access this Proxy Statement and the 2020 Annual Report and vote online. If you received a Notice by mail, you will not receive a printed copy of the proxy materials in the mail. Instead, the Notice instructs you on how to access and review all of the important information contained in the Proxy Statement and the 2020 Annual Report. The Notice also instructs you on how you may submit your voting instructions over the Internet. If you received a Notice by mail and would like to receive a printed copy of our proxy materials, you should follow the instructions for requesting such materials included in the Notice.
Annual Report on Form 10-K
The 2020 Annual Report (without exhibits) is available on www.csx.com. The 2020 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 2020 Annual Report in one of the following manners:
n | Send your request by mail to CSX Corporation, | |
n | Call CSX Shareholder Relations at (904) 359-3256. |
March 24, 2021
By Order of the Board of Directors
Nathan D. Goldman
Executive Vice President-Chief Legal Officer
and Corporate Secretary
2021 Proxy Statement | 67 |
ADDITIONAL INFORMATION
Neither the Board 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.
Section 16(a)Householding of the Securities Exchange Act of 1934 requires the Company’s directors and executive officers, and any certain persons owning more than 10% of CSX 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 2018.
Table of ContentsProxy Materials
The SEC’s rules permit companies and intermediaries (e.g., brokers, banks and other nominees) to satisfy the delivery requirements for proxy statements with respect to two or more security holders sharing the same address by delivering a single proxy statement addressed to those security holders. This process, which is commonly referred to as “householding,”householding, potentially means extra convenience for security holders and cost savings for companies.
As in prior years, a number of brokers with account holders who are CSX shareholders will be “householding”householding our proxy materials. As indicated in the notice previously provided by these brokers to CSX shareholders, a single copy of the proxy materials will be delivered to multiple shareholders sharing an address unless contrary instructions have been received from an affected shareholder. Once you have received notice from your broker that it will be “householding”householding communications to your address, “householding”householding will continue until you are notified otherwise or until you revoke your consent. Shareholders who participate in “householding”householding continue to receive separate proxy cards, voting instructions or noticenotices 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, Florida 32202, or by telephone at (904) 359-3256. If a separate copy of this Proxy Statement and the 20182020 Annual Report is requested for the Annual Meeting, it will be mailed promptly following receipt of the request.
A street name shareholder who received a copy of the proxy materials at a shared address may also request a separate copy of the Proxy Statement and the 20182020 Annual Report by contacting us at CSX Corporation, Office of the Corporate Secretary, 500 Water Street, C160, Jacksonville, Florida 32202, or by telephone at (904) 359-3256.
Street name shareholders sharing an address who received multiple copies of the annual proxy materials and wish to receive a single copy of these materials in the future should contact their broker, bank or other nominee to make this request. If you would like to opt out of householding for future deliveries of your annual proxy materials, please contact your broker, bank or other nominee.
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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 2021 and the consideration of an advisory (non-binding) vote on compensation for our Named Executive Officers. |
Q: How can I participate in the Annual Meeting? |
A: This year, CSX will host its virtual Annual Meeting at 10:00 a.m. (EDT) on Friday, May 7, 2021. There will be no physical location for shareholders to attend. Shareholders may participate online at www.virtualshareholdermeeting.com/CSX2021. The Annual Meeting will begin promptly at 10:00 a.m. (EDT). We encourage you to access the Annual Meeting prior to the start time. Online access will be available beginning at 9:45 a.m. (EDT). |
To participate in the Annual Meeting, including to vote your shares electronically and submit questions during the Annual Meeting, you will need the 16-digit control number included on your proxy card or on your Notice. Even if you plan to participate in the Annual Meeting, we recommend that you vote by proxy prior to the Annual Meeting so that your vote will be counted if you later decide not to participate in the Annual Meeting. |
The virtual meeting platform is fully supported across browsers (Internet Explorer, Firefox, Chrome and Safari) and devices (desktops, laptops, tablets and cell phones) running the most updated version of applicable software and plugins. Participants should ensure that they have a strong internet connection wherever they intend to participate in the Annual Meeting. |
Q: How can I submit a question? |
A: If you would like to submit a question, you may do so before or during the Annual Meeting. If you would like to submit your question any time before the start of the meeting, you may log in to www.proxyvote.com and enter your 16-digit control number. Once past the login screen, click on “Question for Management,” type in your question, and click “Submit.” Alternatively, if you would like to submit your question during the Annual Meeting, you may log in to the virtual meeting website at www.virtualshareholdermeeting.com/CSX2021 using your 16-digit control number, type your question into the “Ask a Question” field, and click “Submit,” or call 1-877-328-2502. |
We do not place restrictions on the type or form of questions that may be asked; however, we reserve the right to edit or reject redundant questions or questions that we deem profane or otherwise inappropriate. During the live Q&A session of the Annual Meeting, we will answer questions as they come in and address those asked in advance, as time permits. Shareholders will be limited to one question each unless time otherwise permits. |
2021 Proxy Statement | 69 |
ANNUAL MEETING QUESTIONS & ANSWERS
Q: What is the benefit of a virtual meeting? | |
A: The Board believes that a virtual meeting format will provide the opportunity for full and equal participation by all shareholders, from any location around the world, while substantially reducing the costs associated with hosting an in-person meeting. Additionally, a virtual meeting format reduces health and safety risks associated with the ongoing COVID-19 pandemic to our officers, directors, employees and shareholders. | |
In order to encourage shareholder participation and transparency, CSX will: | |
n | provide shareholders with the ability to submit appropriate questions in advance of the Annual Meeting to ensure thoughtful responses from management and the Board; |
n | provide shareholders with the ability to submit appropriate questions in real-time during the Annual Meeting through the virtual meeting website; |
n | provide management with the ability to answer as many questions as possible in accordance with the meeting rules of conduct in the time allotted for the Annual Meeting without discrimination; and |
n | publish all appropriate questions submitted in accordance with the Annual Meeting rules of conduct with answers following the Annual Meeting, including those not addressed directly during the Annual Meeting. |
CSX has considered concerns raised by investor advisory groups and other shareholder rights advocates that virtual meetings may diminish stockholder voice or reduce accountability. Accordingly, we have designed our virtual meeting format to enhance, rather than constrain, shareholder access, participation and communication. CSX believes its virtual meeting will afford a greater number of our shareholders the opportunity to participate in the Annual Meeting while (i) still affording participants the same rights they would have had at an in-person meeting, (ii) substantially reducing the time and expense associated with holding an in-person meeting and (iii) substantially reducing the health and safety risks in connection with the ongoing COVID-19 pandemic. | |
Q: What if I have technical difficulties or trouble accessing the virtual meeting? | |
A: We will have technicians ready to assist you with any technical difficulties you may have accessing the virtual meeting. If you encounter any difficulties accessing the virtual meeting during the check-in or meeting time, please call the technical support number that will be posted on the Virtual Shareholder Meeting log-in page or at www.proxyvote.com. Technical support will be available starting at 9:00 a.m. EDT on May 7, 2021. | |
Q: Why did I receive a notice in the mail regarding the Internet availability of proxy materials instead of a full set of proxymaterials? | |
A: In accordance with rules adopted by the SEC, we may furnish proxy materials, including this Proxy Statement and our 2020 Annual Report, to our shareholders by providing access to such documents on the Internet instead of mailing printed copies. Most shareholders will not receive printed copies of the proxy materials unless requested. Instead, the Notice, which was mailed to most of our shareholders, instructs you as to how you may access and review all of the proxy materials on the Internet. The Notice also instructs you as to how you may submit your proxy on the Internet. If you would like to receive a paper or email copy of our proxy materials, you should follow the instructions for requesting such materials in the Notice. | |
Q: How do I get electronic access to the proxy materials? | |
A: The Notice provides you with instructions on how to: | |
n | view CSX’s proxy materials for the Annual Meeting on the Internet; and |
n | instruct CSX to send future proxy materials to you electronically by email. |
Choosing to receive your future proxy materials by email will save us the cost of printing and mailing documents to you and will reduce the impact of the printing and mailing of these materials on the environment. If you choose to receive future proxy materials by email, you will receive an email next year with instructions containing a link to those materials and a link to the proxy voting site. Your election to receive proxy materials by email will remain in effect until terminated. |
70 | ![]() |
ANNUAL MEETING QUESTIONS & ANSWERS
Q: Who is soliciting my vote? |
A: The Board of Directors is soliciting your vote on the matters being submitted for shareholder approval at the Annual Meeting. The Company will pay the costs of preparing proxy materials and soliciting proxies, including the reimbursement, upon request, of trustees, brokerage firms, banks and other nominee record holders for the reasonable expenses they incur to forward proxy materials to beneficial owners. In addition to using mail, proxies may be solicited in person, by telephone or by electronic communication by officers and employees of the Company acting without special compensation. |
Q: Who is entitled to vote? |
A: Only shareholders of record at the close of business on March 8, 2021 (the “Record Date”) are entitled to notice of, and to vote at, the Annual Meeting or any adjournments or postponements thereof, unless a new record date is set in connection with any such adjournments or postponements. On March 8, 2021, there were issued and outstanding 759,495,860 shares of CSX common stock, the only outstanding class of voting securities of the Company. |
Q: How many votes do I have? |
A: You will have one vote for every share of CSX common stock you owned at the close of business on the Record Date. |
Q: How many shares must be present to hold the Annual Meeting? |
A: The Company’s bylaws provide that a majority of the outstanding shares of stock entitled to vote constitutes a quorum at any meeting of shareholders. If a share is represented for any purpose at the Annual Meeting, it is deemed to be present for the transaction of all business. Abstentions and shares held of record by a broker, bank or other nominee that are voted on any matter are included in determining the number of shares present. |
Shares held by a broker, bank or other nominee that are not voted on any matter at the Annual Meeting (“broker non-vote”) will not be included in determining whether a quorum is present. |
Your vote is important and we urge you to vote by proxy even if you plan to participate in the Annual Meeting. |
Q: What are the vote requirements for each proposal? |
A:Election of Directors. In an uncontested election, a director is elected by a majority of votes cast for his or her election by the shares entitled to vote at a meeting at which a quorum is present. In accordance with the Company’s Corporate Governance Guidelines, in an uncontested election, any incumbent director nominated for re-election as a director who is not re-elected in accordance with the Company’s bylaws is required to promptly tender his or her resignation for consideration following certification of the shareholder vote. For more information on the procedures in these circumstances, see Principles of Corporate Governance. |
Other Proposals. The proposal to ratify the appointment of EY as the Company’s Independent Registered Public Accounting Firm for 2021 (Item 2) and the proposal to approve, on an advisory (non-binding) basis, of the compensation of the Company’s NEOs (Item 3) will be approved if the votes cast in favor of the proposal exceed the votes cast against the proposal. |
Abstentions are not considered votes cast on any proposal and will have no effect on the outcome of the vote for Items 1, 2, or 3. “Broker non-votes” are not considered votes cast on Items 1 or 3, and will have no effect on the outcome of the vote. Brokers will have discretionary voting power regarding Item 2 in the event that beneficial owners, who own their shares in “street name,” do not provide voting instructions regarding Item 2. |
2021 Proxy Statement | 71 |
ANNUAL MEETING QUESTIONS & ANSWERS
Q: How do I vote? | |
A: To vote by proxy, you must do one of the following: | |
Vote by Internet.If you are a shareholder of record, you can vote your shares via the Internet 24 hours a day by following the instructions in the Notice. The website address for Internet voting is indicated in the Notice. If you are a beneficial owner, or you hold your shares in “street name” (that is, through a bank, broker or other nominee), please check your voting instruction card or contact your bank, broker or nominee to determine whether you will be able to vote via the Internet. | |
Vote by Telephone.If you are a shareholder of record, you can vote your shares by telephone 24 hours a day by calling 1-800-690- 6903 on a touch-tone telephone. Easy-to-follow voice prompts enable you to vote your shares and confirm that your instructions have been properly recorded. If you are a beneficial owner, or you hold your shares in “street name,” please check your voting instruction card or contact your bank, broker or nominee to determine whether you will be able to vote by telephone. | |
Vote by Mail.If you requested printed proxy materials and choose to vote by mail, complete, sign, date and return your proxy card in the postage-paid envelope provided if you are a shareholder of record or your voting instruction card if you hold your shares in “street name.” Please promptly mail your proxy card or voting instruction card to ensure that it is received prior to the Annual Meeting. | |
To vote during the Annual Meeting, you must visit www.virtualshareholdermeeting.com/CSX2021 at the time of the Annual Meeting and enter the 16-digit control number included on your proxy card or on your Notice. Even if you plan to participate in the Annual Meeting, we recommend that you vote by proxy as described above prior to the Annual Meeting so that your vote will be counted if you later decide not to participate in the Annual Meeting. | |
Q: Can I change my vote? | |
A: Yes. If you are a shareholder of record, you may change your vote or revoke your proxy any time before it is voted (i) by delivering written notice to CSX Corporation, | |
Q: Will my shares be voted if I do not provide voting instructions to my broker? | |
A: If you hold your shares in “street name” through a bank, broker or other nominee, the bank, broker or other nominee is required to vote those shares in accordance with your instructions. If you do not give instructions to the banker, broker or other nominee, the bank, broker or other nominee will be entitled to vote your shares with respect to “discretionary” items but will not be permitted to vote your shares with respect to “non-discretionary” items (those shares are treated as “broker non-votes”). | |
The proposal to ratify the appointment of EY as CSX’s Independent Registered Public Accounting Firm for 2021 is considered a routine matter for which a bank, broker or other nominee will have discretionary voting power if you do not give instructions with respect to this proposal. The proposals to: (i) elect directors; and (ii) vote on an advisory (non-binding) resolution on executive compensation are non- routine matters for which a bank, broker or other nominee will not have discretionary voting power and for which specific instructions from owners who hold their shares in “street name” are required in order for a broker to vote your shares. | |
Q: What happens if I return my proxy card but do not give voting instructions? | |
A: If you are a shareholder of record and sign, date and return the proxy card but do not give voting instructions, the shares represented by that proxy will be voted as recommended by the Board. | |
The Board unanimously recommends a vote: | |
1. | FORthe election of the 11 director nominees named in this Proxy |
2. | FOR the ratification of the appointment of EY as CSX’s Independent Registered Public Accounting Firm for 2021; and |
3. | FOR the approval, on an advisory (non-binding) basis, of the compensation of the Named Executive Officers as disclosed in these materials. |
72 | ![]() |
ANNUAL MEETING QUESTIONS & ANSWERS
Q: What happens if other matters are properly presented at the Annual Meeting? |
A: If any other matters are properly presented for consideration at the Annual Meeting, the persons named as proxies on the enclosed proxy card will have discretion to vote on those matters for you. On the date we filed this Proxy Statement with the SEC, the Board did not know of any other matters to be brought before the Annual Meeting. |
Q: How are votes counted? |
A: Votes are counted by an independent inspector of elections appointed by the Company. |
Q: What happens if the Annual Meeting is postponed or adjourned? |
A: Unless a new record date has been fixed, your proxy will still be in effect and may be voted at the reconvened meeting. You will still be able to change your vote or revoke your proxy with respect to any item until the polls have closed for voting on such item. |
Q: What is the deadline for consideration of shareholder proposals for the 2022 Annual Meeting of Shareholders? |
A:Shareholder Proposals for Inclusion in Next Year’s Proxy Statement.A shareholder who wants to submit a proposal to be included in the proxy statement for the 2022 Annual Meeting must send the proposal to CSX Corporation, Office of the Corporate Secretary, 500 Water Street, C160, Jacksonville, Florida, 32202, so that it is received on or before November 22, 2021, unless the date of the 2022 Annual Meeting is changed by more than 30 days from May 7, 2022, in which case the proposal must be received a reasonable time before the Company begins to print and mail its proxy materials for the 2022 Annual Meeting. |
Shareholder Proposals or Director Nominees Not to be Included in Next Year’s Proxy Statement. A shareholder who wants to nominate a director or submit a proposal that will not be in the proxy statement but will be considered at the 2022 Annual Meeting, pursuant to the CSX bylaws, must send notice and the required information to CSX Corporation, Office of the Corporate Secretary, 500 Water Street, C160, Jacksonville, FL 32202, so that it is received no earlier than the close of business on January 6, 2022, nor later than the close of business on February 6, 2022, unless the date of the 2022 Annual Meeting is more than 30 days before or more than 70 days after May 7, 2022, in which case the nomination or proposal must be received no earlier than the 120th day prior to the date of the 2022 Annual Meeting and no later than the close of business on the later of the 90th day prior to the date of the 2022 Annual Meeting or the 10th day following the day on which the Company first publicly announces the date of the 2022 Annual Meeting. |
Director Nominees for Inclusion in Next Year’s Proxy Statement (Proxy Access).The Company’s bylaws provide “proxy access” by allowing a shareholder, or a group of up to 20 shareholders, owning 3% or more of the Company’s outstanding common stock continuously for at least three years to submit director nominees (up to the greater of two directors or the number of directors representing 20% of the Board) for inclusion in the Company’s proxy statement, subject to the other requirements set forth in the bylaws. To include a director nominee in the Company’s proxy statement for the 2022 Annual Meeting, the proposing shareholder(s) must send notice and the required information to CSX Corporation, Office of the Corporate Secretary, 500 Water Street, C160, Jacksonville, Florida, 32202, so that it is received by November 22, 2021. |
Q: Does the Board consider director nominees recommended by shareholders? |
A: Yes. The Governance and Sustainability Committee of the Board will review recommendations as to possible nominees received from shareholders and other qualified sources. The Governance and Sustainability Committee will evaluate possible nominees received from shareholders using the same criteria it uses for other director nominees. Shareholder recommendations should be submitted in writing addressed to the Chair of the Governance and Sustainability Committee, CSX Corporation, 500 Water Street, C160, Jacksonville, Florida 32202, and should include a statement about the qualifications and experience of the proposed nominee. Shareholders who wish to nominate a director nominee should do so in accordance with the nomination provisions of the Company’s bylaws. A shareholder nomination for the 2022 Annual Meeting must be delivered to the Company within the time periods described above and set forth in the Company’s bylaws. |
2021 Proxy Statement | 73 |
Important Notice Regarding the Availability of Proxy Materials for the Annual Shareholders Meeting to be held on May 3, 2019. This Proxy Statement and the 2018 Annual Report are available at www.proxyvote.com.
As permitted by rules adopted by the SEC, we are making our proxy materials available to our shareholders electronically via the Internet. We have mailed many of our shareholders a Notice containing instructions on how to access this Proxy Statement and the 2018 Annual Report and vote online. If you received a Notice by mail, you will not receive a printed copy of the proxy materials in the mail. Instead, the Notice instructs you on how to access and review all of the important information contained in the Proxy Statement and the 2018 Annual Report. The Notice also instructs you on how you may submit your voting instructions over the Internet. If you received a Notice by mail and would like to receive a printed copy of our proxy materials, you should follow the instructions for requesting such materials included in the Notice.
ANNUAL REPORT ON FORM 10-K
The 2018 Annual Report (without exhibits) is available onwww.csx.com. The 2018 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 2018 Annual Report in one of the following manners:
March 20, 2019
By Order of the Board of DirectorsNathan D. GoldmanExecutive Vice President-Chief Legal Officerand Corporate Secretary
Neither the Board 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.
CSX 2019 STOCK AND INCENTIVE AWARD PLAN
Section 1. Purpose
The purpose of the CSX 2019 Stock and Incentive Award Plan (as amended from time to time, the“Plan”) is to motivate and reward employees and other individuals to perform at the highest level and contribute significantly to the success of CSX Corporation (the“Company”), thereby furthering the best interests of the Company and its shareholders.
Section 2. Definitions
As used in the Plan, the following terms shall have the meanings set forth below:
Appendix A
Notwithstanding the foregoing or any provision of any Award Agreement to the contrary, for any Award that provides for accelerated distribution on a Change in Control of amounts that constitute “deferred compensation” (as defined in Section 409A of the Code), if the event that constitutes such Change in Control does not also constitute a change in the ownership or effective control of the Company, or in the ownership of a substantial portion of the Company’s assets (in either case, as defined in Section 409A of the Code), such amount shall not be distributed on such Change in Control but instead shall vest as of such Change in Control and shall be distributed on the scheduled payment date specified in the applicable Award Agreement, except to the extent that earlier distribution would not result in the Participant who holds such Award incurring interest or additional tax under Section 409A of the Code.
Appendix A
Appendix A
Section 3. Eligibility
Section 4. Administration
Section 5. Shares Available for Awards
Appendix A
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Appendix A
Appendix A
Appendix A
Appendix A
Appendix A
C/O BROADRIDGE
P.O. BOX 1342
BRENTWOOD, NY 11717
![]() ![]() | SCAN TO VIEW MATERIALS & VOTE | ![]() | ![]() |
VOTE BY INTERNET
Before The Meeting -- Go towww.proxyvote.com/csxor 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 2, 2019.6, 2021. Follow the instructions to obtain your records and to create an electronic voting instruction form.
During The Meeting -- Go towww.virtualshareholdermeeting.com/CSX2019CSX2021
You may attend the meeting via the Internet and vote during the meeting. Have the information that is printed in 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 2, 2019.6, 2021. Have your proxy card in hand when you call and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: | ||
D37347-P51086 | KEEP THIS PORTION FOR YOUR RECORDS | |
DETACH AND RETURN THIS PORTION ONLY | ||
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. |
CSX CORPORATION
CSX CORPORATION | |||||||||
The Board of Directors recommends you vote FOR Proposals 1, 2 | |||||||||
Election of Directors | |||||||||
Nominees: | For | Against | Abstain | ||||||
1a. | Donna M. Alvarado | ||||||||
1b. | Thomas P. Bostick | o | o | o | |||||
1c. | James M. Foote | o | o | o | |||||
1d. | Steven T. Halverson | o | o | o | |||||
1e. | Paul C. Hilal | o | o | o | |||||
1f. | David M. Moffett | o | o | o | |||||
1g. | Linda H. Riefler | o | o | o | |||||
1h. | Suzanne M. Vautrinot | o | o | o | |||||
1i. | James L. Wainscott | o | o | o | |||||
1j. | J. Steven Whisler | o | o | o | |||||
1k. | John J. Zillmer | o | o | o | |||||
For | Against | Abstain | |||||||
2. | The ratification of the appointment of Ernst & Young LLP as the Independent Registered Public Accounting Firm for | |||||||||||||
2021; and | o | o | o | |||||||||||
3. | Advisory (non-binding) resolution to approve compensation for the | |||||||||||||
![]() | 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 |
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.
D37348-P51086 |
CSX CORPORATION
This Proxy is Solicited on Behalf of the Board of Directors for the Annual Meeting of Shareholders
to be held on May 3, 20197, 2021
The undersigned hereby appoints NATHAN D. GOLDMAN and MARK D. AUSTIN, and each of them, as proxies, each with full power of substitution, to act and vote the shares which the undersigned is entitled to vote at the Annual Meeting of Shareholders to be hosted online at www.virtualshareholdermeeting.com/CSX2019CSX2021 on May 3, 2019,7, 2021, at 10:00 a.m. (EDT), and at all adjournments or postponements thereof, and authorizes them to represent and to vote all stock of the undersigned on the proposals listed on the reverse side of this card as directed and, in their discretion, upon such other matters as may properly come before the meeting, all as more fully described in the Proxy Statement.
The proxy will be voted as directed. If no direction is made, the proxy will be voted: "FOR"“FOR” Proposals 1, 2 3 and 4.3. Your Internet or telephone vote authorizes the named proxies to vote the shares in the same manner as if you marked, signed and returned your proxy card. If you vote your proxy via the Internet or by telephone, please DO NOT mail back this proxy card. Proxies submitted by telephone or the Internet must be received by 11:59 p.m. Eastern Time on Thursday, May 2, 2019.6, 2021.
Continued and to be signed on reverse side