The Company’s executive compensation philosophy requires that a substantial portion of total compensation be at-risk and consist of performance-based incentives that are linked to CSX’s financial and operating results. In addition, the Committee strives to provide an appropriate balance between short and long-term incentive compensation. The mix between fixed and variable or at-risk compensation and short and long-term incentive compensation is designed to align the NEOs’ financial incentives with shareholder interests. In 2021, 72% of the CEO’s targeted Total Direct Compensation was performance-based and at-risk. The target compensation mix for each of the NEOs is shown below. In 2023, the percentage of Mr. Wallace tragically passed away in November 2021, butHinrichs’ total target compensation that was variable and at-risk was 75% and the average for the other NEOs was approximately 70%. The percentage of variable or at-risk compensation is includedcalculated as an NEO for SEC disclosure purposes since he would have been onethe sum of the next three most highly compensated executives had he remained employed through year end.target amount of short-term incentives, performance units granted and stock options granted divided by the total target compensation.
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| Joseph R. Hinrichs | | James M. Foote
Sean R. Pelkey | | Kevin S. Boone | |
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| President and Chief Executive Officer | | Age 68
Tenure 4.4 years
| Responsibilities
Mr. Foote has served as President and Chief Executive Officer since December 2017. He joined CSX in October 2017, as Executive Vice President and Chief Operating Officer, with responsibility for both operations and sales and marketing. Mr. Foote has more than 40 years of railroad industry experience. Prior to joining CSX, he was President and Chief Executive Officer of Bright Rail Energy. Before heading Bright Rail, he was Executive Vice President, Sales and Marketing with Canadian National Railway Company. At Canadian National, Mr. Foote also served as Vice President – Investor Relations and Vice President Sales and Marketing – Merchandise.
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2021 ACCOMPLISHMENTS
n | Advanced CSX’s long-term strategy through acquisitions, key growth initiatives, customer transactions and federal and state partnerships. |
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n | Progressed the One-CSX culture for all employees while leading the organization through a dynamic and challenging environment that included severe supply chain issues, labor shortages and an evolving political and social landscape. |
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n | Led the organization through safety efforts that resulted in zero fatalities. |
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n | Launched social justice and racial equity partnership with City Year called “10,000 Steps Towards Social Justice”, engaging employees in key communities across the rail network. |
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n | Ensured business continuity through hiring efforts that resulted in a 700% increase in conductor hires. |
2021 TARGET COMPENSATION
Base Salary: | $ | 1,500,000 |
Target Annual Bonus: | $ | 2,625,000 |
Target Long-Term Incentives: | $ | 12,500,000 |
Target Total Direct Compensation: | $ | 16,625,000 |
50% of 2021 LTI was performance-based | | |
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COMPENSATION DISCUSSION AND ANALYSIS
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| Sean R. Pelkey Executive Vice President and Chief Financial Officer | | Age 42
Tenure 16 years
| Responsibilities
In June, 2021, Mr. Pelkey was named Vice President and Acting Chief Financial Officer. In January 2022, Mr. Pelkey was promoted to Executive Vice President and Chief Financial Officer. In this role, he is responsible for all financial aspects of the Company’s business including financial and economic analysis, accounting, tax, treasury, real estate and purchasing activities. Mr. Pelkey has more than 16 years of experience in finance, investor relations and financial planning. Since joining CSX in 2005, he has held a variety of finance management roles, including Vice President - Finance, Assistant Vice President of Capital Markets, as well as several director and managerial roles in investor relations, financial planning and IT finance.
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2021 ACCOMPLISHMENTS
nCommercial Officer | | Added almost $200 million in value to the Company through various initiatives across all departments.
n | Assisted intermodal operations by identifying and acquiring container yards and negotiating contracts for variable storage off property. |
n | Supported the diligence and closing process for the acquisition of Quality Carriers. |
n | Realized over $500 million for real estate sales, including the multi-year Virginia transaction. |
2021 TARGET COMPENSATION
Base Salary: | $ | 516,000 |
Target Annual Bonus: | $ | 361,200 |
Target Long-Term Incentives: | $ | 342,261 |
Target Total Direct Compensation: | $ | 1,219,461 |
50% of 2021 LTI was performance-based | | |
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COMPENSATION DISCUSSION AND ANALYSIS
| | | | | | Kevin S. Boone
Executive Vice President – Sales & Marketing | Age 45
Tenure 4.5 years | | | | | | | | | | | | | | | | | | | Stephen Fortune | | Responsibilities
Mr. Boone has served as Executive Vice President – Sales and Marketing since June 2021. In this role, he is responsible for developing and implementing the Company’s commercial strategy. Mr. Boone previously served as
Nathan D. Goldman | | Jamie J. Boychuk | | | | | | | | | | Executive Vice President and Chief FinancialDigital & Technology Officer from October 2019 until June 2021. Mr. Boone has more than 20 years of experience in finance, accounting, mergers and acquisitions, and transportation performance analysis. He joined CSX in September 2017, as Vice President of Corporate Affairs and Chief Investor Relations Officer, and was later named Vice President - Marketing and Strategy leading research and data analysis to advance growth strategies for CSX. |
2021 ACCOMPLISHMENTS
n | | Led Sales & Marketing team that delivered $900 million in line haul revenue growth versus 2020, despite supply side constraints.
n | Increased TRANSFLO footprint by creating new terminal in Atlanta and establishing a franchise model in West Virginia. |
n | Led efforts to help East Coast ports reduce congestion at their terminals. |
n | Provided key leadership in the integration of Quality Carriers and partnered to secure incremental intermodal and chemical multi-modal volumes. |
2021 TARGET COMPENSATION
Base Salary: | $ | 700,000 | Target Annual Bonus: | $ | 700,000 | Target Long-Term Incentives: | $ | 3,000,000 | Target Total Direct Compensation: | $ | 4,400,000 | 50% of 2021 LTI was performance-based | | |
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COMPENSATION DISCUSSION AND ANALYSIS
| | | | Jamie J. Boychuk Executive Vice President, – Operations | Age 44
Tenure 4.8 years | | Responsibilities
Mr. Boychuk has served as CSX Transportation, Inc.’s (“CSXT’s”) Executive Vice President – Operations since October 2019. In this role, he is responsible for transportation, mechanical, engineering and network operations. Since joining CSXT in 2017, he has held the positions of Senior Vice President of Network Engineering, Mechanical and Intermodal Operations; Vice President of Scheduled Railroading; and Assistant Vice President of Transportation Support. Mr. Boychuk previously worked at Canadian National Railway, where he served for 20 years in various operational roles of increasing responsibility.
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2021 ACCOMPLISHMENTS
n | Led the Operations team that achieved improvements in train accident safety and the third best year of train velocity in CSX history. |
n | Responded to economic recovery and volume resurgence with subsequent increase in locomotive fleet and corresponding headcount increases. |
n | Worked with key public stakeholders towards an Amtrak Gulf Coast service solution. |
n | Led Intermodal team that opened 13 additional container yards to adapt to global supply chain challenges helping keep terminals fluid while generating supplemental revenue. |
n | Improved public safety by closing 79 at-grade crossings and eight grade separated structures. |
2021 TARGET COMPENSATION
Base Salary: | $ | 700,000 | Target Annual Bonus: | $ | 700,000 | Target Long-Term Incentives: | $ | 3,000,000 | Target Total Direct Compensation: | $ | 4,400,000 | 50% of 2021 LTI was performance-based | | |
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COMPENSATION DISCUSSION AND ANALYSIS
| | | | Nathan D. Goldman
Executive Vice President – Chief Legal Officer and Corporate Secretary | | Age 64
Tenure 18.7 years | Responsibilities
Mr. Goldman has served asFormer Executive Vice President – Chief Legal Officer and Corporate Secretary of CSX since November 2017. In this role, he directs the Company’s legal affairs, government relations, risk management, public safety, environmental, corporate communications and internal audit functions. Mr. Goldman has previously served as Vice President of Risk Compliance and General Counsel and has overseen work in compliance, risk management and safety programs. Operations | | | | | | | | | | | | | | | | | | | | | | |
2021 ACCOMPLISHMENTS
| n | | | | | | | | | | | | | | | | | | Supported key strategic growth initiatives (such as the acquisition of Quality Carriers and the proposed acquisition of Pan Am Systems, Inc.) with strategic communications and regulatory compliance. |
nSalary | Leveraged advanced data analytics to increase effectiveness and efficiency of audits, investigations and SOX testing. |
n | Achieved 1,000+ days injury free in CSX Police Department for first time in Company history. |
nCash-based Short-term Incentives | Successfully petitioned STB to consider adoption of an acceptable small shipper dispute resolution process. | Performance Units |
2021 TARGET COMPENSATION
Base Salary: | $ | 550,000 | Target Annual Bonus: | $ | 495,000 | Target Long-Term Incentives: | $ | 2,200,000 | Target Total Direct Compensation: | $ | 3,245,000 | 50% of 2021 LTI was performance-based | | |
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| | | | | Diana B. Sorfleet
Executive Vice President and Chief Administrative Officer | Age 57
Tenure 10.7 years | | | Responsibilities
Ms. Sorfleet has served as Executive Vice President and Chief Administrative Officer since July 2018. In this role, she is responsible for information technology, human resources, labor relations, people systems and analytics, medical, total rewards and aviation. She joined the Company in 2011, and has previously served as Chief Human Resources Officer. Prior to joining CSX, she served as vice president for diversity and development at Exelon, one of the nation’s leading competitive energy providers.
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2021 ACCOMPLISHMENTS
nNon-qualified Stock Options | Drove productivity, efficiency, safety and customer service through technology solutions that included new ShipCSX tools, and autonomous inspection analytics. |
n | Completed multiple security assessments to baseline the Company’s security posture and reduce risk. |
n | Advanced culture change initiatives in support of CSX’s business strategy and supported launch of social justice and racial equity partnerships. |
n | Expanded employee hiring, training and development opportunities to support business results. Hiring included over 1,000 conductors in 2021.Restricted Stock Units |
2021 TARGET COMPENSATION
Base Salary: | $ | 550,000 | Target Annual Bonus: | $ | 495,000 | Target Long-Term Incentives: | $ | 2,200,000 | Target Total Direct Compensation: | $ | 3,245,000 | 50% of 2021 LTI was performance-based | | |
| | | | | | 20222024 Proxy Statement | 4770 |
Compensation Discussion and Analysis | Compensation Decisions Table
2023 Compensation Decisions CSX provides competitive total compensation opportunities in line with similar Comparator Group companies with a focus on pay-for-performance and shareholder value creation. All compensation decisions for the CEO are made by the non-management members of ContentsCOMPENSATION DISCUSSION AND ANALYSIS
2021the Board, and all compensation decisions for the other NEOs are made by the Committee in consultation with the CEO. This rigorous review process is designed to ensure that executive compensation reflects considerations based on market practice, internal equity and the business needs of CSX.
In September 2022, the Board appointed Mr. Hinrichs as President and CEO to continue driving the Company’s growth and delivering for our shareholders, based on his proven and relevant track record around operational excellence, serving customers and building a company culture of trust and strong employee engagement. The Committee approved an overall compensation package for Mr. Hinrichs intended to strike the appropriate balance of fairly compensating him relative to peers, the Comparator Group and other S&P 500 CEOs, while aligning with shareholder expectations. To better demonstrate and provide support for our 2023 compensation decisions, the scorecards below include biographical information and career highlights for each NEO, along with their respective 2023 accomplishments and an overview of their actual compensation. Unlike the charts above, which show the target compensation mix for each of the NEOs, the actual compensation charts below include 2023 base salary earnings, 2023 MICP payouts based on Company and individual performance and long-term incentives (“LTIs”) granted in 2023. The percentage of LTIs that is performance based is calculated by the amount of performance units granted divided by the total LTI awards granted.
Compensation Discussion and Analysis | Compensation Decisions | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Joseph R. Hinrichs, 57 President and Chief Executive Officer Tenure 1.5 years | | | | | Sean R. Pelkey, 44 Executive Vice President and Chief Financial Officer Tenure 18.7 years | | | | | | | | | | | | | Responsibilities | | | Responsibilities | | Mr. Hinrichs joined CSX in September 2022 as President and Chief Executive Officer. Mr. Hinrichs has more than 30 years of experience in the global automotive, manufacturing operations and energy sectors. Prior to joining CSX, he served as President of Ford Motor Company’s automotive business. He began his career with General Motors in 1989 as an engineer and quickly ascended into management. Between management roles at Ford and General Motors, Mr. Hinrichs oversaw investments in small entrepreneurial businesses for Ryan Enterprises, a private equity firm. Mr. Hinrichs brings to CSX a commitment to operational excellence, experience building global businesses through investment in people and culture and a deep understanding of balancing safety and efficiency in a complex industry. | | | Mr. Pelkey was named Vice President and Acting Chief Financial Officer in June 2021, and promoted to Executive Vice President and Chief Financial Officer in January 2022. In this role, he is responsible for all financial aspects of the Company’s business, including financial and economic analysis, accounting, tax, treasury and purchasing activities. Mr. Pelkey has more than 18 years of experience in finance, investor relations and financial planning. Since joining CSX in 2005, he has held a variety of finance management roles, including Vice President – Finance and Assistant Vice President of Capital Markets, as well as several director and managerial roles in investor relations, financial planning and IT finance. | | 2023 Accomplishments | | | 2023 Accomplishments | | nAdvanced ONE CSX culture, including implementing recurring employee engagement surveys, holding all-employee quarterly town halls, supporting Business Resource Groups (BRGs) and increasing employee participation in community and CSX-sponsored events. Results include an increase in the CSX employee trust score, Glassdoor improved rankings and being named one of America’s Greatest Workplaces for Diversity by Newsweek and Best Place to Work for Disability Inclusion by Disability:IN. nDrove strategies to create long-term and profitable business, including merchandise, intermodal initiatives, TRANSFLO and completion of the integration of Pan Am. nDrove operational improvements including Total Trip Plan Compliance YoY improvement of 20%, Network Velocity YoY improvement of 12%, Network Dwell YoY improvement of 17% and Customer Switch Performance YoY improvement of 12%. nLowest number of personal injuries among the Class I railroads but reaffirmed the need to further enhance safety training and diligence for all employees in light of three employee fatalities in 2023. nSuccessfully negotiated leading edge paid sick time benefits policies for employees who are covered under a collectively bargained agreement. | | | nDelivered $220 million of direct value across departments, including tax and insurance program efficiencies, interest rate swaps and procurement activities on goods and services. nFacilitated a working team towards the production of hydrogen locomotives at our Huntington location and secured a deal to operate battery-electric locomotives at our Port of Baltimore location. nRepositioned cash during the regional banking scrutiny to mitigate CSX risk, along with extending the Company’s credit facility for another five years to ensure access to liquidity if needed during highly disruptive events. nHelped foster a more cohesive ONE CSX culture within the Finance organization and the broader Company through a series of strategic grassroots initiatives aimed at increasing collaboration, employee development and community involvement. | | 2023 Actual Compensation | | | | 2023 Actual Compensation | | | | | | | Base Salary: | | | $ | 1,400,000 | | | | Base Salary: | | | $ | 660,000 | | | Annual Bonus Earned: | $ | 2,415,000 | | | | Annual Bonus Earned: | $ | 759,000 | | | Long-Term Incentives Granted: | $ | 10,000,035 | | | | Long-Term Incentives Granted: | $ | 2,325,019 | | | Total Actual Compensation: | $ | 13,815,035 | | | | Total Actual Compensation: | $ | 3,744,019 | | | 60% of 2023 LTIs granted were performance based | | | 60% of 2023 LTIs granted were performance based |
Compensation Discussion and Analysis | Compensation Decisions | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Kevin S. Boone, 47 Executive Vice President and Chief Commercial Officer Tenure 6.5 years | | | | | Stephen Fortune, 54 Executive Vice President and Chief Digital & Technology Officer Tenure 2.0 years | | | | | | | | | | | | | Responsibilities | | | Responsibilities | | Mr. Boone has served as Executive Vice President and Chief Commercial Officer since June 2021. In this role, he is responsible for developing and implementing the Company’s commercial strategy. Mr. Boone previously served as Executive Vice President and Chief Financial Officer from October 2019 until June 2021. Mr. Boone has more than 20 years of experience in finance, accounting, mergers and acquisitions and transportation performance analysis. He joined CSX in September 2017, as Vice President – Corporate Affairs, and was later named Vice President – Sales & Marketing leading research and data analysis to advance growth strategies for CSX. | | | Mr. Fortune joined CSX in April 2022 as Executive Vice President and Chief Digital & Technology Officer. Mr. Fortune is responsible for leading CSX’s technology strategy development and implementation and supporting business growth through innovative digital solutions, as well as overseeing all aspects of the Company’s information technology systems operations. Mr. Fortune brings decades of experience as a corporate technology leader. Prior to CSX, he served 30 years at BP, most recently as Chief Information Officer of the global BP Group. He began his BP career as a chemical and process engineer before moving into operations management and transitioning into information technology in 2003. | | 2023 Accomplishments | | | 2023 Accomplishments | | nExceeded total revenue plan, including growing line-haul revenue by almost $500 million, despite international headwinds impacting the Company’s export coal rates and international intermodal volume. nSignificant wins across multiple lines of business, including TRANSFLO, Westrock, LyondellBasell, multiple LPG customers, multiple automotive manufacturers and domestic intermodal partners. nTDSI AAR audit scores continue to remain high, including leading the industry at destination ramps with an almost perfect score. nFocused on leadership and skill development of the Sales and Marketing organization and support of organizational ONE CSX initiatives. | | | nRealigned strategy for the modernization of the CSX technology vision, placing the employee and customer at its core, and guided by the central focus on safety, which includes the five-year effort to replace the mainframe-based Core Dispatch system and updated tablets for the Company’s train and engine employees. nIn partnership with Sales and Marketing, transformed the ShipCSX tool with new tools that make it easier for customers to do business with CSX, in addition to introducing a user-friendly coal reservation system, Intermodal Time on Terminal tool, tracking Car Order Fill, and Automotive Supply performance tools. nFocused on proactive measures to increase cybersecurity awareness within CSX, including the implementation of robust security measures and threat partner mitigation. nLaunched the Train and Engine Portal and upgraded technological devices, significantly improving operational efficiency and creating a more collaborative ONE CSX employee work experience. | | 2023 Actual Compensation | | | | 2023 Actual Compensation | | | | | | | Base Salary: | | | $ | 725,000 | | | | Base Salary: | | | $ | 650,000 | | | Annual Bonus Earned: | $ | 833,750 | | | | Annual Bonus Earned: | $ | 747,500 | | | Long-Term Incentives Granted: | $ | 3,150,014 | | | | Long-Term Incentives Granted: | $ | 2,325,019 | | | Total Actual Compensation: | $ | 4,708,764 | | | | Total Actual Compensation: | $ | 3,722,519 | | | 60% of 2023 LTIs were performance based | | | 60% of 2023 LTIs granted were performance based |
Compensation Discussion and Analysis | Compensation Decisions | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Nathan D. Goldman, 66 Executive Vice President, Chief Legal Officer and Corporate Secretary Tenure 20.7 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 and internal audit functions. Mr. Goldman has previously served as Vice President of Risk Compliance and General Counsel and has overseen work in compliance, risk management and safety programs. | | | | | 2023 Accomplishments | | | | | | | | | | Jamie J. Boychuk, 46 Former Executive Vice President – Operations Tenure 6.2 years | | nSupported development of key sustainability initiatives and ESG reporting, including biodiesel testing, hydrogen locomotive design and build and securing a grant for electric locomotives. nPartnered with communities to win an industry-leading $2.6 billion in public funding for projects which will increase safety, capacity, connectivity and efficiency. nIncreased first responders training and outreach to touch a total of 4,800 external partners during over 70 events to ensure readiness in the event of a community incident. nEngaged in a number of internal and external initiatives and programs targeted at strengthening ONE CSX communities. | | | | | | | | | | | | | Responsibilities | | | | Mr. Boychuk was involuntarily separated without cause from his position as Executive Vice President – Operations of CSX Transportation, Inc. (“CSXT”) in August 2023. | | 2023 Actual Compensation | | | | 2023 Actual Compensation | | | | | | | | Base Salary: | | | $ | 570,000 | | | | Base Salary: | | | $ | 433,424 | | | Annual Bonus Earned: | $ | 589,950 | | | | Annual Bonus Earned: | $ | 498,438 | | | Long-Term Incentives Granted: | $ | 2,325,019 | | | | Long-Term Incentives Granted: | $ | 3,150,014 | | | Total Actual Compensation: | $ | 3,484,969 | | | | Total Actual Compensation: | $ | 4,081,876 | | | 60% of 2023 LTIs granted were performance based | | | 60% of 2023 LTIs granted were performance based. Base salary and annual bonus earned are prorated based on the partial year of service; LTIs reflect the full amount granted but will prorate based on the partial year of service. |
Compensation Discussion and Analysis | Compensation Decisions 2024 Compensation Decisions In February 2024, the Board reviewed the compensation levels for Mr. Hinrichs and, based on this review, determined that increases to his annual base salary, target annual bonus opportunity and target long-term incentive opportunity were appropriate. As a result, on February 16, 2024, the Board approved a base salary increase from $1,400,000 to $1,500,000, a target annual bonus opportunity increase from 150% of base salary to 175% of base salary and a target long-term incentive opportunity increase from $10,000,000 to $11,400,000. In addition, the Board approved an increase in the annual cap on the aggregate incremental cost to the Company of Mr. Hinrichs’ personal use of corporate aircraft that will be covered by the Company from $175,000 to $250,000. When the Board appointed Mr. Hinrichs as President and CEO in September 2022, the Board set Mr. Hinrichs’ compensation at a level intended to compensate him fairly, while also acknowledging that he was new to the rail industry and aiming to provide a runway with him to increase his compensation over time, as warranted. Specifically, the Board anticipated that if Mr. Hinrichs performed in a manner commensurate with the Board’s hopes and expectations and was able to make measurable progress on some of the Company’s key strategic goals, including (i) building and improving the overall CSX culture and morale among employees, (ii) increasing service levels and customer engagement and (iii) continuing the Company’s efforts to increase safety, then the Board would want to increase his compensation over time. The Board believes that improvements in these areas, while continuing the Company’s operational excellence, will unlock additional opportunities for CSX and increase its competitiveness and shareholder value over the long term. Over his first 18 months at CSX, Mr. Hinrichs has exceeded the Board’s expectations in virtually all of these areas. nMr. Hinrichs has truly transformed the Company’s culture. He has championed the ONE CSX culture by actively engaging on the ground with employees and advancing cultural changes. This has resulted in significant improvement in employee engagement and satisfaction, and Company culture has gone from being a pain point to an area of great pride. nMr. Hinrichs has led negotiations to make CSX the first U.S. railroad to come to agreement with unions to provide paid sick leave to union employees of certain crafts—a critical step in preventing a nationwide railroad strike—and is continuing to lead the industry for the next round of collective bargaining set to kick off later this year. nFrom a service perspective, Mr. Hinrichs has supported CSX becoming an industry leader in service. Under his leadership in just the first year of his tenure, the Company has the best and, importantly, most consistent level of service to its customers as reflected in nearly every customer service metric in the industry. With Mr. Hinrichs as our President and CEO, CSX was the first railroad to be released from Surface Transportation Board (STB) reporting of certain of these metrics. nOn safety, CSX has been one of the leaders among Class I railroads with the lowest number of injuries in 2023 and the second lowest train accident rates in an environment where the Company was training over 2,000 new train and engine service employees. Unfortunately, rail is an inherently dangerous industry and there have been some challenges, including three fatalities in 2023. The Board believes that the changes in culture described above and Mr. Hinrichs’ commitment to improving safety at all levels and decision to bring on an industry veteran Chief Operating Officer, Michael A. Cory, will yield improvement to the Company’s safety record. Moreover, these goals were achieved on top of continued strong financial performance, with CSX outperforming most rails (all but Canadian Pacific Kansas City Limited) on revenue growth in 2023. The Board believes that the foundational changes that Mr. Hinrichs has been able to implement will make CSX stronger and more successful over the long term, and the Board believes that it is in the Company’s best interests to recognize and reward him for his work thus far and continue to incentivize him over the coming years. Notably, most of the increases in compensation provided to Mr. Hinrichs are in the form of performance-based compensation, and so Mr. Hinrichs will only experience these increases if the Company continues to meet or exceed its financial and operational goals.
Compensation Discussion and Analysis | 2023 Base Salary 2023 Base Salary The Committee determines a base salary for the CEO and each NEO annually based on its assessment of the individual’s scope of responsibilities, performance and 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, the Committee made the following adjustments for certain NEOs. Base salary may represent a larger or smaller percentage of total compensation actually paid, depending on whether actual Company and individual performance under the short and long-term incentive plans discussed herein fall short of or exceed the applicable performance targets. In 2021,2023, the Committee reviewed the annual compensation of the Company’s NEOs and approved, or recommended Board approval forin connection with the CEO, changes to base salaries that consideredreflected the consideration of market data, individual performance, overall responsibilities, internal equity and functional experience. For Mr. Foote, In January 2023, the Committee recommended, and the Board approved an increase to his annuala base salary to $1,500,000. The Committee approved increases to the base salariesincrease for Mr. Boone, Executive Vice President – Sales and Marketing (EVP - CFO at the time of approval), Mr. Boychuk, Executive Vice President – Operations, Mr. Goldman, Executive Vice President – Chief Legal Officer and Corporate Secretary, Ms. Sorfleet, Executive Vice President and Chief Administrative Officer, and Mr. Pelkey, Executive Vice President and Chief Financial Officer, (Vice Presidentto $660,000, based on performance, achievement of his 2022 goals and Acting Chief Financial Officer atpositioning within the time of approval). The new base salaries were as follows: Messrs. Boone and Boychuk – $700,000; and Mr. Goldman and Ms. Sorfleet - $550,000. These adjustments wereComparator Group. This adjustment was effective as of January 1, 2021. In June 2021, the Committee approved2023. The CEO and no other NEOs received a base salary increase in 2023. | | | | | | | | | | | | | | | NEO | 2023 Annual Base Salary | Changes from 2022 | Reasons for Changes | Joseph R. Hinrichs | | $ | 1,400,000 | | — | % | No change from 2022 | Sean R. Pelkey | | $ | 660,000 | | 10 | % | Due to performance, achievement of his 2022 goals and positioning within the Comparator Group | Kevin S. Boone | | $ | 725,000 | | — | % | No change from 2022 | Stephen Fortune | | $ | 650,000 | | — | % | No change from 2022 | Nathan D. Goldman | | $ | 570,000 | | — | % | No change from 2022 | Jamie J. Boychuk | | $ 725,000* | — | % | No change from 2022 |
* Mr. Boychuk was involuntarily separated without cause under circumstances that made him eligible for Mr. Pelkey of $516,000severance benefits under the Company’s executive severance plan in connection with his promotion to Vice President and Acting Chief Financial Officer.2021 August 2023. His actual base salary paid in 2023 was $433,424.
Short-Term Incentive Compensation Goal Setting Process for 2021the 2023 MICP In January 2021,2023, the Committee established and approved the goalsmeasures and measurestargets under the 20212023 Management Incentive Compensation Plan (the “2021 MICP”)(MICP) and developed a performance structure to drive business results and create value for shareholders. The 2021 MICP was designed to deliver results that drive profitability, improve safety, enhance customer service and grow revenue, while optimizing assets and controlling costs. In addition to the safetyfinancial and customer service goals, the Committee included an ESG-focused measuremeasures related to safety and fuel efficiency which can helpin the Company and customers reduce carbon emissions.plan. The 2021Committee established the following target 2023 MICP incentive opportunities (“Target Incentive Opportunity”) for each NEO. | | | | | | NEO | Target Incentive Opportunity (% of Base Salary) | Joseph R. Hinrichs | 150 | % | Sean R. Pelkey | 100 | % | Kevin S. Boone | 100 | % | Stephen Fortune | 100 | % | Nathan D. Goldman | 90 | % | Jamie J. Boychuk* | 100 | % |
* Mr. Boychuk was involuntarily separated without cause under circumstances that made him eligible for severance benefits under the Company’s executive severance plan in August 2023. His actual 2023 MICP payout was prorated to reflect his partial year of service. The 2023 MICP was structured to reward executives and eligible employees for driving Company performance over a one-year period. Each NEO was provided an incentive opportunitya Target Incentive Opportunity based on the goals established by the Committee expressed as a percentage of base salary earned during the year (“Target Incentive Opportunity”).and positioning of similar roles in the Comparator Group. In 2021,2023, the Target Incentive Opportunity level for Mr. FooteHinrichs was 175%150% of base salary, 100% of base salary for Messrs. Boone, Boychuk, Fortune and Wallace,Pelkey and 90% of base salary for Ms. SorfleetMr. Goldman. The Target Incentive Opportunity levels for Messrs. Hinrichs, Boone, Boychuk, Fortune and Mr. Goldman and 70%remained the same as in 2022. The increase in the Target Incentive Opportunity of 90% to 100% for Mr. Pelkey.2021Pelkey was driven by the responsibilities of his role and the positioning of similar roles in the Comparator Group.
Compensation Discussion and Analysis | Short-Term Incentive Compensation 2023 MICP Performance Measures In January 2021,2023, the Committee approved the performance measures for the 20212023 MICP, which included financial performance measures, safety improvement,and operational, customer service and ESG-related targets.measures of safety and fuel efficiency. The financial measures account for 70% of the MICP’s overall weighting. These measures have proven to bebeen critical drivers of CSX’s business success. In an effort to enhance focus on sustainable growth, theThe Committee approved weightings for each of the performance measures as set forth below. | | Operating Income | | Directly tied to Operating Ratio targets and gauges the general health of the core business – quantifying our profitability. | | | Operating Ratio | | A key indicator of the Company’s efficiency, this measure helps us maintain focus on maximizing the value of our service product, as well as ensuring that our processes are safe and cost efficient, which are main themes of our guiding principles. | | | Safety | | FRA Personal Injury and Train Accident rates underscore the critical importance of intensifying our focus on injury and accident prevention. | | | Trip Plan Compliance | | Trip Plan Compliance is a measure of successfully executing the trip plan for freight cars (including lntermodal) based on commitments to our customers. | | | Fuel Efficiency | | Fuel Efficiency measures our fuel productivity using gallons of fuel divided by gross ton miles. | | | Initiative-based Revenue Growth | | Initiative-based Revenue Growth measures our ability to gain new business. |
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To determine the payout under the MICP, the Committee first assesses the Company’s performance against each of the goals for the year. These Company performance measures can result in a payment between 0% and 200% of the NEO’s Target Incentive Opportunity. In addition, upward Upward or downward payout adjustments may be made based on a determination of exceptional individual performance.performance; however, no individual performance adjustments were applied to 2023 payouts for any NEO. The individual performance modifier has been a standard component of the MICP design for over 10 years. Last year, after the voting results of our 2022 “Say-on-Pay” proposal and intensive shareholder outreach and engagement efforts focused on our executive compensation program, the Committee re-evaluated the circumstances under which individual performance adjustment(s) might be appropriate and determined that such circumstances should be exceptional. To build on that commitment, the Committee recently enhanced the rigor around the review process—through which the Committee determines payout adjustments—to ensure that such process evaluates truly exceptional achievement against pre-established performance goals set at the beginning of the year, as well as other outstanding accomplishments that impact shareholder value creation, our customers and employee culture. No individual performance adjustments were applied to 2023 payouts for any NEO. Upward payout adjustments for each of the NEOs are capped at 150% of the Company’s MICP payout, with a maximum total payout under the MICP of 250% of the NEO’s Target Incentive Opportunity. If the Committee believes that any instance of adjustment is merited—upward or downward—fulsome and specific disclosure of how compensation decisions are tied to goals and performance will be provided. As shown in the Summary“Summary Compensation Table,,” the 20212023 MICP payouts reflectwere based solely on the Company’s financial and operational performance. 2021
2023 MICP Targets and Payout Percentages In light of the continuing economic uncertainties and widespread supply chain challengeshigh inflation that existed in January 2021,2023 when the plan2023 MICP was adopted, the Committee approved annual incentive targets reflective of the challenging economic environment and with a wider performance range than recent years. The 2021 MICP was designed tothat would continue to build on the Company’s strong customer service levels to createand drive new business opportunities and drive revenue growth. As such, the 2023 MICP operating income target was set $523 million below the 2022 MICP operating income actual. The Committee believesCompany was cycling $238 million of prior year real estate gains and expected a normalizing supply chain environment to result in reduced intermodal storage revenue as well as lower export coal pricing. The Company disclosed that, sustained improvements inas expected, actual 2023 results were impacted by the prior year Virginia real estate transaction, declining intermodal storage revenue and lower export coal benchmarks, totaling nearly $700 million of operating efficienciesincome impact on a combined basis.
Compensation Discussion and the focus on growth will continue to play a critical role in the continued creation of shareholder value. Analysis | Short-Term Incentive Compensation The specific threshold, target and maximum payout goals and applicable weighting for each performance measure isare set forth in the table below. Performance Measure1 | | Weighting | | | Threshold1 | | Target | | Maximum | Financial Goals – 60% | Operating Income | | 30% | | $ | 3,800M | | $ | 4,540M | | $ | 4,830M | Operating Ratio2 | | 30% | | | 61.5% | | | 58.8% | | | 57.2% | Initiative-based Revenue Growth | | 10% | | $ | 150M | | $ | 200M | | $ | 275M | Operational and ESG Goals – 30% (Customer Service, Environment & Growth) | Trip Plan Compliance | | 10% | | | 80% | | | 82.5% | | | 85% | Fuel Efficiency | | 10% | | | 1.03 | | | 0.98 | | | 0.95 | FRA Personal Injury Rate | | 5% | | | 0.99 | | | 0.90 | | | 0.85 | FRA Train Accident Rate | | 5% | | | 2.65 | | | 2.40 | | | 2.35 | Total Payout Opportunity | | | | | 2.5% - 50%1 | | | 100% | | | 200% |
| | 1 | Performance measure payouts are independent and could result in a threshold payout range from 2.5% to 50%. | 2 | The 2021 MICP allowed a formulaic adjustment to the operating ratio performance goal by a pre-determined amount if the average cost of highway diesel fuel was outside the range of $2.25 to $2.75 per gallon. This adjustment is designed to account for the potential impact that volatile fuel prices have on expenses and operating ratio. Because the 2021 average price per gallon was $3.28 for highway diesel fuel, which was outside the top end of the range, the operating ratio goals were adjusted as follows: threshold of 62.1%, target of 59.4% and maximum of 57.8%. |
The Committee believes that the measures for the 2021 MICP were directly aligned with the Company’s strategic short-term goals, wereare directly impacted by executive leadership actions, supported our long-term strategy, helped deliver shareholder value and ensured retention of critical talent. For 2021,The following table demonstrates the Company achieved above-maximum operating income of $5.594 billionCompany’s 2023 achievements against each target and above-maximumthe overall resulted payout. | | | | | | | | | | | | | | | | | | | | | | | | | | | Performance Measure(1) | Threshold(1) (0% – 50% payout) | Target (100% payout) | Maximum (200% payout) | Individual Measure Payouts | | Resulted Company Payout | | Total Payout for All NEOs | Financial Goals – 70% weighting | | | | | | Operating Income (30% weighting) | | 33% | | | | | Operating Ratio(2) (30% weighting) | | 32% | | | | | Initiative-based Revenue Growth(3) (10% weighting) | | 20% | | 115% | | 115%(5) | ESG (Safety and Environmental) and Operational Goals(4) – 30% weighting | | | | FRA Personal Injury Rate (5% weighting) | | 10% | | | FRA Train Accident Rate (5% weighting) | | 0% | | | | | Trip Plan Compliance (10% weighting) | | 20% | | | | | Fuel Efficiency (10% weighting) | | 0% | | | | |
(1)Performance measure payouts are determined independently and each measure could result in a threshold payout range from 0% to 50% as shown, where applicable, in the table. (2)The 2023 MICP allowed a formulaic adjustment to the operating ratio performance goal by a predetermined amount if the average cost of 55.3%. FRA Personal Injuries were slightly below target at 0.92, while FRA Train Accidents fell below threshold at 2.90. Forhighway diesel fuel was outside the Operationalrange of $4.00 to $4.50 per gallon. This adjustment is designed to account for the potential impact that volatile fuel prices have on expenses and ESG goals,operating ratio. Because the Company achieved: 76.5% trip plan compliance,2023 average price per gallon was $4.21 for highway diesel fuel, which was below threshold;within the range, there was no adjustment to the operating ratio goals. (3)Initiative-based Revenue Growth is a non-GAAP measure calculated by the amount of newly generated line-haul revenue associated with specific customer initiatives in the year. Line-haul revenue is the revenue generated from moving traffic, excluding fuel efficiencysurcharge, before any costs or expenses are deducted. (4)Certain safety actuals and operations performance can continue to settle over time. The Company’s 2023 achievements demonstrated in this table reflect actuals as of 0.960, which was just below maximum; and $341 million of initiative-based revenue growth, which was well ahead of maximum. As such,around the Company’stime the Committee approved the overall resulted payout in early 2024. (5)No individual performance on each of these goalsadjustments were applied to 2023 payouts for 2021, resulted in a payout of 160% of target incentive opportunities.Similar to how management evaluates the performance of all eligible employees, theany NEO.
The Committee annually assesses the individual performance of each NEO and determines payout amounts, which wereare capped at the maximum Company payout of 250% of target for 2021.2023. Based on the 20212023 accomplishments for each NEO as described above, the Committee did not exercise its discretion to make upward or downward payout adjustments based on individual performance for any NEO, and approved a 160%115% total annual incentive payout for each of the NEOs other than Mr. Foote. For Mr. Foote, the Committee recommended, and the Board approved, a 200% annual incentive payout, which included a 25% upward adjustment based on individual performance.the 115% resulted Company payout. These payouts are reflected in the “Non-Equity Incentive Plan Compensation” column of the Summary“Summary Compensation Table.2022 Proxy Statement 49
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2022 MICP2024 Management Incentive Compensation Plan Design The 2022 MICP2024 Management Incentive Compensation Plan (MICP) design continues to emphasize financial, safety, operating income and operating ratio, as well as operational and ESG-focusedenvironmental performance measures including trip plan compliance (a customer service measure), fuel efficiency and initiative-based revenue growth. These measures are designed to enhance focus on items that employees have the ability to directly influence, align to shareholder expectations and support the One-CSXONE CSX strategy. The goalOperating margin replaced operating ratio to support the Company’s continued focus on profitable growth while emphasizing the importance of cost control and asset utilization. In addition, in furtherance of the One-CSX strategy isCommittee’s commitment to promote a culture that positionsenhance the Company torigor around its MICP review process, the 2024 MICP includes pre-established individual performance goals against which adjustments for exceptional performance and outstanding accomplishments will be an employer of choice to attractdetermined.
Compensation Discussion and retain the best talent and assure that every employee understands and delivers on strategic priorities.Analysis | Long-Term Incentive Compensation Long-Term Incentive Compensation The Company’s long-term incentive compensation program is intended to: ■ | Engage and reward employees for extraordinary results that will maximize shareholder value; | ■ | Reinforce a pay-for-performance culture with a significant portion of total compensation at risk; and | ■ | Align NEO interests with those of shareholders with a focus on generating sustainable performance over a multi-year period. |
nengage and reward employees for extraordinary results that will maximize shareholder value; nreinforce a pay-for-performance culture with a significant portion of total compensation at-risk; and nalign 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”) and 2019 Stock and Incentive Award Plan (the “2019 Stock“Stock Plan” and together with the 2010). The Stock Plan the “Stock Plans”).The Stock Plans allowallows for different types of equity-based awards and provideprovides flexibility in compensation designdesigned to attract, retain and engage high-performing executives. The Committee determines the mix of equity vehicles annually to ensure alignment with market practice, motivate appropriate long-term, results-driven behaviors, and align Company and NEO performance with shareholder interests and drive value creation.
Elements of Long-Term Incentive Compensation A significant portion of the NEOs’ target compensation is comprised of the Long-Term Incentive Plan (“LTIP”)(LTIP) awards. Each year, the Committee, as part of its annual review process, determines a market competitive long-term incentive target grant value for each NEO, which is then converted into the corresponding value of equity-based awards. For 2021,2023, the LTIP grants for the NEOs were comprised of performance units, restricted stock units and non-qualified stock options awards,and restricted stock units, which were designed to drive long-term value and growth through the achievement of Company performance goals and increased stock prices. The number of performance units and restricted stock units is determined based on the award value divided by the average closing value of CSX common stock for the full three-month period prior to the grant. The number of non-qualified stock options is determined based on the award value divided by the Black-Scholes value for that same period. The grants associated with each three-year cycle are reviewed and approved by the Committee each year for the NEOs and other eligible participants, and by the Board for the CEO. These grants are made and the performance targets are set following the annual Board review of the Company’s business plan for the applicable upcoming three-year period. Since the three-year performance cycles run concurrently, the Company may have up to three active LTIP cycles during a given year. For example, the 2019-20212021-2023 performance cycle closed on December 31, 2021,2023, and was paid out in January 2022.2024. The 2020 – 2022, 2021 – 20232022-2024, 2023-2025 and 2022 – 20242024-2026 cycles remain in progress, which helphelps ensure that our employees remain focused on sustainable long-term performance. Performance Units. Performance units are granted at the beginning of the applicable performance cycle, as described below. Awards are paid in the form of CSX common stock at the end of the performance period based on the level of achievement on Company performance goals. Performance units are generally subject to forfeiture if a participant’s employment terminates before the end of the performance cycle for any reason other than death, disability, retirement or other limited circumstances, as approved by the Committee. For the 2019 – 2021 LTIP cycle, upon death, disability or retirement, participants or their estates received a prorated portion of their award based on the number of months completed in the cycle. Beginning in 2020, upon death or disability, participants are eligible to earn the performance units that they would otherwise have earned at the end of the performance period had there been no death or disability. Upon retirement, participants receive a prorated portion of their award based on the number of months completed in the LTIP cycle. Mr. Foote is currently eligible for retirement for purposes
| | | | | | | | | Long-Term Compensation Element | Description | Features | | | | Performance Units | nPerformance units are granted at the beginning of the applicable performance cycle, as described below. nAwards are paid in the form of CSX common stock at the end of the performance period based on the level of achievement on Company performance goals. nParticipants also receive dividend equivalents at the end of the restricted period paid in the form of CSX common stock, assuming performance goals are met. | nPerformance units (and related dividend equivalents) 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. nFor the 2021-2023 and 2022-2024 LTIP cycles, upon retirement—defined as (i) age 65 or (ii) age 55 plus 10 years of service—participants received a prorated portion of their award based on the number of months completed in the cycle. For the 2023-2025 and 2024-2026 LTIP cycles, upon retirement—defined as (i) age 65, (ii) age 60 plus five years of service or (iii) age 55 plus 12 years of service—all outstanding performance units will remain outstanding and eligible to vest based on Company performance through the end of the applicable LTIP cycle. To receive full vesting, NEOs must work through December 31st of the first year of the LTIP cycle and receive consent from the Committee. nThe employment letter for Mr. Hinrichs provides that, in connection with his retirement, all outstanding performance units will remain outstanding and eligible to vest based on Company performance through the end of the applicable LTIP cycle. Mr. Hinrichs will only receive the full vesting of his performance units in connection with retirement if he retires after reaching age 60 with five years of service. nUpon death or disability for all LTIP cycles, participants or their estates earn the performance units that they would otherwise have earned at the end of the performance period had there been no death or disability. nPerformance unit payouts for each LTIP cycle, if any, do not occur until approved by the Committee in January of the year following the conclusion of the three-year performance cycle. These payouts can vary from the target grants in terms of: (i) the number of shares paid out due to financial performance; and (ii) the market value of CSX common stock at the time of payout. nBased on actual performance, as discussed below, the performance unit payouts for the NEOs can range from 0% to 250% of the target levels, and can be of lesser or greater value than the original grant value based on the level of achievement on the performance goals and the price of CSX common stock. | | | |
Compensation Discussion and his employment agreement provides that, in connection with his retirement, his outstanding performance units will remain outstanding and eligible to vest based on Company performance through the end of the applicable LTIP cycle.Performance unit payouts for each LTIP cycle, if any, do not occur until approved by the Committee in January of the year following the conclusion of the three-year performance cycle. These payouts can vary from the target grants in terms of: (i) the number of shares paid out due to financial performance; and (ii) the market value of CSX common stock at the time of payout. Based on actual performance, as discussed below, the performance unit payouts for the NEOs can range from 0% to 250% of the target levels, and can be of lesser or greater value than the original grant value based on the level of achievement on the performance goals and the price of CSX common stock. Analysis | Long-Term Incentive Compensation | 50 | | | | | | | | Long-Term Compensation Element | Description | Features | | | | Non-qualified Stock Options | nNon-qualified stock options vest ratably over three years and require stock price appreciation to provide any value to the NEOs. nAs a result, they reinforce leadership’s focus on the importance of value creation for shareholders. Non-qualified stock options generally provide participants with the right to buy CSX stock at a pre-set price for a period of 10 years. nThe exercise price of the non-qualified stock options is established as the closing stock price on the date of grant. The Stock Plan prohibits the repricing of outstanding non-qualified stock options without the approval of shareholders. | nFor 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. nFor the 2021-2023 and 2022-2024 LTIP cycles, upon retirement—defined as (i) age 65 or (ii) age 55 plus 10 years of service—participants received a prorated portion of their award based on the number of months completed in the cycle. For the 2023-2025 and 2024-2026 LTIP cycles, upon retirement—defined as (i) age 65, (ii) age 60 plus five years of service or (iii) age 55 plus 12 years of service—all outstanding non-qualified stock options will remain outstanding and eligible to vest based on Company performance through the end of the applicable LTIP cycle. To receive full vesting, NEOs must work through December 31st of the first year of the LTIP cycle and receive consent from the Committee. nThe employment letter for Mr. Hinrichs provides that, in connection with his retirement, the full awards will continue to vest in accordance with their terms. Mr. Hinrichs will only receive the full vesting of his award in connection with retirement if he retires after reaching age 60 with five years of service. nUpon death or disability for all LTIP cycles, participants or their estates receive all options per the original vesting schedule as if there was no death or disability. | | | | | | | Restricted Stock Units | nRestricted stock units are time-based awards that vest three years from the grant date (“the restricted period”) for the 2021-2023 and 2022-2024 LTIP cycles. nRestricted stock units for the 2023-2025 and 2024-2026 LTIP cycles are time-based awards that vest ratably over the three year period from the grant date. nAwards are paid in the form of CSX common stock at the end of the restricted period. Participants also receive dividend equivalents at the end of the restricted period paid in the form of CSX common stock. | nRestricted stock units are generally subject to forfeiture if a participant’s employment terminates before the end of the restricted period for any reason other than death, disability, retirement or other limited circumstances, as approved by the Committee. nFor the 2021-2023 and 2022-2024 LTIP cycles, upon retirement—defined as (i) age 65 or (ii) age 55 plus 10 years of service—participants received a prorated portion of their award based on the number of months completed in the cycle. For the 2023-2025 and 2024-2026 LTIP cycles, upon retirement—defined as (i) age 65, (ii) age 60 plus five years of service or (iii) age 55 plus 12 years of service—all outstanding restricted stock units will remain outstanding and eligible to vest based on Company performance through the end of the applicable LTIP cycle. To receive full vesting, NEOs must work through December 31st of the first year of the LTIP cycle and receive consent from the Committee. nThe employment letter for Mr. Hinrichs provides that, in connection with his retirement, the full awards will continue to vest in accordance with their terms. Mr. Hinrichs will only receive the full vesting of his award in connection with retirement if he retires after reaching age 60 with five years of service. nUpon death or disability for all LTIP cycles, participants or their estates receive all restricted stock units per the original vesting schedule as if there was no death or disability. | | | |
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Non-qualified Stock Options. Non-qualified stock options vest ratably over three years and require stock price appreciation to provide any value to the NEOs. As a result, they reinforce leadership’s focus on the importance of value creation for shareholders. Non-qualified stock options generally provide participants with the right to buy CSX stock at a pre-set price for a period of 10 years. The exercise price of the non-qualified stock options is established as 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. For 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. For the 2019 – 2021 LTIP cycle, upon death, disability or retirement, participants or their estates received a prorated portion of their award based on the number of months completed in the cycle. Beginning in 2020, all options will vest per the original vesting schedule in the case of death or disability. Upon retirement, participants will receive a prorated portion of the award based on the number of months completed in the cycle. The employment agreement for Mr. Foote provides that, in connection with his retirement, the full awards will continue to vest in accordance with their terms.
Restricted Stock Units. Restricted stock units are time-based awards that vest three years from the grant date (“the restricted period”). Awards are paid in the form of CSX common stock at the end of the restricted period. Restricted stock units are generally subject to forfeiture if a participant’s employment terminates before the end of the restricted period for any reason other than death, disability, retirement or other limited circumstances, as approved by the Committee. For the 2019 – 2021 LTIP cycle, upon death, disability or retirement, participants or their estates received a prorated portion of their award based on the number of months completed in the cycle. Beginning in 2020, all restricted stock units will vest per the original vesting schedule in the case of death or disability. Upon retirement, participants will receive a prorated portion of their award based on the number of months completed in the LTIP cycle. Mr. Foote is currently eligible for retirement for purposes of the LTIP and his employment agreement provides that, in connection with his retirement, his outstanding restricted stock units will remain outstanding and eligible to vest at the end of the restricted period for any outstanding LTIP cycles.
Further information regarding the LTIP grants made to our NEOs in 20212023 can be found under the “2021“2023 Grants of Plan-Based Awards Table” below. Table.”
Compensation Discussion and Analysis | Long-Term Incentive Compensation Performance Measures and Financial Goals for the 2019 - 20212021-2023 LTIP For performance units granted under the 2019 – 20212021-2023 LTIP cycle, cumulativeaverage annual operating ratioincome growth rate and cumulative free cash flow were selected to measure the Company’s performance. Operating ratio hasAverage annual operating income growth rate measures the average increase in operating income over the three-year period and was chosen to replace operating income as a historically high correlationmeasure to align with the Company’s stock price and serves asobjective of profitable growth while also providing the ability to recover in the event of a key financial performance measure for CSX and the railroad industry. As such, the use of operating ratio has strengthened participants’ understanding of how they can impact Company performance and drive operating efficiency. Long-term improvements in operating ratio have increased operating income and earnings, creating value for shareholders.prolonged economic downturn. Free cash flow was chosen as a performance measure as it is a key measure of the financial health of the business, has a high correlation to shareholder returns and aligns with CSX’s financial business plan. Operating ratioAverage annual operating income growth rate and free cash flow were each weighted 50% of the total payout opportunity and were measured independently of the other.
| | | | | | | | | | | | | | | Average Annual Operating Income Growth Rate | = | Straight Average of Year-over-Year Change in [Operating Revenues – Operating Expenses] | | | Free Cash Flow* | = | Net Operating Profit – Net Investment in Operating Capital | | |
* Free cash flow is a non-GAAP measure calculated by using net cash provided by operating activities and adjusting for property additions and proceeds and advances from property dispositions. Free cash flow represents cash available for both equity and bond investors to be used for dividends, share repurchases or principal reduction on outstanding debt. The threshold, target and maximum payouts for each measure are 10%25%, 50% and 100% of the performance units subject to the award respectively, generating a total target payout of 100% of the performance units and a maximum possible payout of 200% of the performance units for the 2019 – 20212021-2023 LTIP. The 2019 – 20212021-2023 LTIP measured average annual operating ratioincome growth rate and free cash flow over a 12-quarter period from January 20192021 through December 2021.2023. In addition to average annual operating ratioincome growth rate and free cash flow, the performance units for thisthe 2021-2023 LTIP cycle for the President and Chief Executive Officer and all Executive Vice Presidents had a formulaic linear upward or downward relative total shareholder return (“Relative TSR”) modifier of up to 25% (subject to the 250% overall cap) based on CSX’s stock price performance compared to the peer group (weighted 80% core peers and 20% additional correlated companies)(S&P 500 Industrials Index) for the 12-quarter period from January 20192021 through December 2021. This2023. In June 2021, Mr. Pelkey assumed the role of Vice President and Acting Chief Financial Officer. As such, the modifier only applied to the performance units he received on June 4, 2021 in relation to his new role and responsibilities. The modifier did not apply to the LTIP performance units granted to Mr. Pelkey for this LTIP cycleon February 9, 2021 as he was not promoted to Executive Vice President until January 2022.The Committee recognizes that operating ratio is a measure in the short– Finance and long-term plans, but believes inclusion in both plans reflects the criticality of the alignment between operating ratio and the Company’s focus on operating efficiency. The Committee does not believe this overlap will create inappropriate risk-taking since the measurement periods are different (one vs. three years), and operational measures and reviews are in place to monitor risk. The Committee annually reviews the measures used for each long-term incentive cycle, and makes changes as appropriate. This overlap was eliminated starting with the 2020 – 2022 LTIP consistent with CSX’s strategic initiatives focused on growth.
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Financial Goals for the 2019 - 2021 LTIP
The LTIP targets for the performance units granted under the 2019 – 20212021-2023 LTIP were set in February 2019,2021, based on the three-yearthree-year business plan at the time of its adoption. The targets under the 2019-2021 LTIP were as follows: Cumulative Operating Ratio (100% maximum payout) | | Cumulative Free Cash Flow (100% maximum payout) | Threshold (10% payout) | | Target (50% payout) | | Maximum (100% payout) | | Threshold (10% payout) | | Target (50% payout) | | Maximum (100% payout) | 60.0% | | 59.0% | | 58.0% | | $9.0B | | $9.725B | | $10.325B |
At the time the 2019 – 2021 LTIP was approved by the Committee, a provision was made for the adjustment of the operating ratio performance goals by a pre-determined amount if the average cost of highway diesel fuel was outside the range of $2.85 - $3.35 per gallon. This potential adjustment is designed to mitigate the positive
Compensation Discussion and negative impact volatile fuel prices may have on expenses and operating ratio. There was no adjustment to the cumulative operating ratio targets as the average price per gallon of highway diesel fuel of $2.96 was within the range of $2.85 – $3.35 per gallon, which was the collar set at the time of adoption of the plan.Analysis | Long-Term Incentive Compensation Payout for the 2019 - 20212021-2023 LTIP Performance Units Based on a cumulativean average annual operating ratioincome growth of 57.4%9.4% and a cumulative free cash flow of $9.96$10.745 billion for the cycle, the payoutachievement for the performance units, which comprised 60%50% of the 2019 – 20212021-2023 LTIP, was 169%200% of the target. TheAs shown in the table below, the Company’s Relative TSR performance against the peer group was below median for the cycle, resulting in a downward modifier of 15%19% against target performance and an aggregate downward modifier of 38%, and asuch that the total payout of 144%achievement was 162% for each of the NEOs other than Mr. Pelkey. Since Mr. Pelkey who was not an Executive Vice President at the time of the grant on February 9, 2021, the modifier did not apply and he received a total payout of 200%. Mr. Pelkey was also granted performance units on June 4, 2021 in connection with his promotion to his role as Vice President and Acting Chief Financial Officer. He received a total payout inclusive of December 31, 2021.
the modifier of 162% for this award. * Free cash flow is a non-GAAP measure calculated by using net cash provided by operating activities and adjusting for property additions and proceeds and advances from property dispositions. Free cash flow represents cash available for both equity and bond investors to be used for dividends, share repurchases or principal reduction on outstanding debt. | | | | | | | | | | | | | | | | | | | Threshold (25% payout) | Target (50% payout) | Maximum (100% payout) | | Payout | Average Annual Operating Income Growth Rate (50% weighting) | | 200% of Target | Cumulative Free Cash Flow* (50% weighting) | | Relative TSR (Modifier) | | -19% | Total Payout: | | | | | 162% of Target |
* Free cash flow is a non-GAAP measure calculated by using net cash provided by operating activities and adjusting for property additions and proceeds and advances from property dispositions. Free cash flow represents cash available for both equity and bond investors to be used for dividends, share repurchases or principal reduction on outstanding debt.
Compensation Discussion and Analysis | Long-Term Incentive Compensation Performance Measures and Equity Award Mix for the Outstanding LTIPs Performance Measures. In determining the performance measures for the performance units for each LTIP cycle, the Committee: (i) considers information on various growth and return-based measures; and (ii) actively monitors the effectiveness of existing measures in driving the Company’s strategic business objectives and delivering shareholder returns. For performance units, the 2020 – 2022 LTIP uses operating income | | | | | | | | | LTIP Cycle | Performance Measures | Rationale | | | | | | | 2022-2024, 2023-2025 and 2024-2026 LTIP cycles | nAverage Annual Operating Income Growth Rate (50%) nEconomic Profit (CCE) (50%) | nContinued the Company’s focus on driving profitable growth. nEconomic Profit (CCE) is a non-GAAP financial measure designed to measure whether returns on new investments exceed an expected rate of return and to encourage investments in profitable growth projects. Improvement in Economic Profit (CCE) has historically had a strong relationship to stock price appreciation. nAs shown below, Economic Profit (CCE) is calculated as gross cash earnings minus the capital charge on gross operating assets, and Economic Profit (CCE) performance is measured as an improvement versus the prior year’s actual Economic Profit (CCE). nAn Economic Profit (CCE) payout percentage is calculated for each fiscal year during the LTIP cycle, with the final payout percentage determined using an average of the three annual payout percentages. nThis measure was incorporated to drive earnings growth, and to better align compensation to the ONE CSX strategy and to the value created for our shareholders and other stakeholders. nForward-looking LTIP targets are not disclosed for proprietary and competitive harm reasons. | | | | | | | | | | | | | |
Compensation Discussion and free cash flow on an equally weighted basis to measure the Company’s performance. The 2021 – 2023 LTIP uses average annual operating income growth rate percentage and free cash flow on an equally weighted basis, as the performance measures for the performance units. The average annual operating income growth rate percentage measure aligns with the Company’s objective of profitable growth and provides the ability to recover and potentially receive a payout in the event of an economic downturn in one year of the program. For the 2022 – 2024 LTIP, the Committee approved the use of average annual operating income growth rate percentage and CSX cash earnings (“CCE”) on an equally weighted basis, as the performance measures for the performance units. CCE is designed to measure whether returns on new investments exceed an expected rate of return and to encourage investments in growth projects. This measure was incorporated to drive earnings growth and better align compensation to the One-CSX strategy. Historically, CCE has had a high correlation to stock price appreciation. The changes in performance measures for the performance units have been designed to reward long-term performance during a period of transformation and change, and to focus on the Company’s strategic initiatives to drive growth.52 | |
Analysis | Long-Term Incentive Compensation Table of Contents
COMPENSATION DISCUSSION AND ANALYSIS
The 2020 – 2022 LTIP is comprised of performance units and non-qualified stock options for the NEOs, and the 2021 – 2023 and 2022 –2024Equity Mix. All three outstanding LTIPs are 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.NEOs. For the 2020 – 20222022-2024 LTIP, the Committee approved a market competitive LTIP grant value for the NEOs (the Board approved for the CEO) allocating 50% of the value to performance units, and 50%25% for non-qualified stock options. The allocation for the 2021 – 2023 and 2022 – 2024 LTIPs was 50% performance units, 25% restricted stock units and 25% for non-qualified stock options. The allocation for the 2023-2025 and 2024-2026 LTIPs was 60% performance units, 20% restricted stock units and 20% non-qualified stock options, to address shareholder concerns of additional performance orientation in the Company’s long-term incentive plan.
| | | | | | | | | | | | | | | | | | n | | n | | n | | Performance Units | Restricted Stock Units | Non-qualified Stock Options |
| | | 2023-2025 and 2024-2026 LTIPs |
| | | | | | | | | | | | | | | | | | n | | n | | n | | Performance Units | Restricted Stock Units | Non-qualified Stock Options |
The performance units for these threethe 2022-2024 and 2023-2025 LTIP cycles have a formulaic linear upward or downward Relative TSR modifier of up to 25% with a maximum payout of 250%, which applies only to the CEO and Executive Vice Presidents. The performance units for the 2024-2026 LTIP cycle have a Relative TSR modifier that recognizes over performance above the 60th percentile and under performance below the 40th percentile with a maximum payout of 250%. Performance between the 61st and 75th percentiles and above would result in an increased payout by up to 25%, and performance between the 25th and 39th percentiles and below would result in a decreased payout by up to 25%. Performance between the 40th and 60th percentiles would result in no modification to payouts. This modifier is designed to appropriately align NEO payouts with share price performance relative to a transportation-relatedpredetermined peer group. This modifier does not applygroup, as approved by the Committee at the time of grant. For the 2022-2024 LTIP, the number of performance units and restricted stock units awarded to Mr. Pelkeyeach NEO was calculated based on a specific grant value divided by the average closing price of CSX common stock for the 2020 – 2022full three-month period prior to the month of grant, and 2021 – 2023the number of options awarded was calculated based on the Black-Scholes value for the same period. For the 2023-2025 LTIP, cycles, as hethe number of performance units and restricted stock units awarded to each NEO was not promotedcalculated based on a specific grant value divided by the average closing price of CSX common stock for the 30-trading-day period preceding the date of the grant. The number of options awarded was calculated based on the Black-Scholes value for the same period. The number of performance units and restricted stock units awarded to Executive Vice President until January 2022.each NEO for the 2024-2026 LTIP was calculated based on a specific grant value divided by the grant date closing price of CSX common stock. The number of options awarded was calculated based on the Black-Scholes value for the same period. Clawback ProvisionProvisions and Policy Payouts made under the MICP and LTIP programs are subject to recovery or clawback in certain circumstances. Under the applicable clawback provisions, an employee who has received a payout will be required to promptly return the monies (or any portion of the monies requested by the Company) in each of the following circumstances: (i) if it is determined that the employee engaged in misconduct, including, but not limited to, dishonesty, fraud (including reporting inaccurate financial information), theft or other serious misconduct as determined by the Company; (ii) if the Company is required to file an accounting restatement due to the Company’s material noncompliance with any financial reporting requirements under the federal securities laws; or (iii) if the payout is otherwise required to be recovered by law or court order (i.e. , garnishment).
In accordance with (ii) above, the Company adopted a separate, stand-alone financial statement compensation recoupment policy pursuant to which incentive-based compensation received by current and former executives is subject to recoupment if the Company is required to restate financial statements due to: (i) an error in previously issued financial statements that is material to the previously issued financial statements; or (ii) an error that would result in a material misstatement if the error were corrected in the current period or left uncorrected in the current period. Under this new policy, when an event that triggers a clawback occurs, recovery is mandatory and no misconduct is required.
Compensation Discussion and Analysis | Employment Agreements Employment Agreements Mr. FooteHinrichs entered into an employment agreementletter upon his hiringappointment as Executive Vice President and Chief OperatingExecutive Officer in October 2017, whichSeptember 2022 when he was superseded by anhired. This employment letter agreement entered into upon his promotion to President and CEO in December 2017. This agreement incorporatedincludes 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, as furthercontrol. No other NEOs have individual employment letters or agreements. The described below.individual employment letter has been filed and can be viewed on the SEC website at www.sec.gov. Non-Compete and Non-Solicitation Agreements The PresidentCEO and CEO, executive vice presidents, senior vice presidents, vice presidents, heads of department, as well as certain other key employees,Executive Vice Presidents 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 agreement precludesprovisions preclude an executive from working for a competitor of the Company. The non-compete conditionsCompany and 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. Mr. FooteHinrichs is eligible for the following severance benefits under his employment letter agreement with the Company, dated December 22, 2017:■ | Lump sum cash payment equal to two times his base salary plus two times his target MICP; | ■ | Pro-rata payment of MICP award; and | ■ | Unless he is terminated for cause, his unvested equity awards will remain outstanding and vest per the original vesting schedules, with any performance-based awards remaining subject to satisfaction of pre-established performance goals. |
September 26, 2022, in the event of a termination of employment by the Company without “cause” or by Mr. Hinrichs for “good reason” prior to reaching “retirement age”: nlump-sum cash-severance payment equal to two times his current base salary plus two times his target MICP award; npro-rata payment of his MICP award if Company goals are attained; and nunvested equity awards will vest on a pro-rata basis per the original vesting schedules, with any performance-based awards remaining subject to satisfaction of pre-established performance goals. In the event that Mr. Hinrichs’ employment terminates after he reaches “retirement age” (defined to mean his attainment of age 60 plus at least five years of continued service) either (i) by the Company without cause or by him for good reason or (ii) by him due to his voluntary retirement by providing the Company with at least 180 days’ notice of his plans to retire, Mr. Hinrichs will receive, in lieu of any of the severance benefits described above, continued vesting of his unvested equity awards, subject to any relevant performance criteria. As of December 31, 2021,2023, Messrs. Pelkey, Boone, Boychuk, andFortune, Goldman and Ms. SorfleetPelkey were eligible for benefits under the Company’s generalexecutive severance policy availableplan that was implemented in September 2022 and amended in July 2023. The executive severance plan was amended, in part, with the intention to all management employees.further clarify certain terms regarding the treatment of a participant’s outstanding equity awards in the event of a qualifying termination of employment with the Company. Under the generalexecutive severance policy,plan, the NEOs are eligible to receive: (i) severance based on tenure (certain weekspay equal to the sum of one times the current base salary based on CSX yearsand one times the current target bonus under the MICP; (ii) a pro-rata bonus under the MICP in the plan year of service); (ii)the termination; (iii) continuation of medical and dental coverage for up to one year if periodic separation payments are selected; (iii)12 months; (iv) financial planning for up to one year; and (iv)year following termination; (v) prorated vesting of certain outstanding equity incentive awards.awards; and (vi) outplacement services for one year after termination. Notwithstanding the foregoing, if an NEO is entitled to severance benefits under histheir respective Change-of-Control Agreement, he or she shallchange-of-control agreement, they will not be entitled to the severance benefits outlined above. Severance Mr. Boychuk was involuntarily separated without cause from the Company on August 4, 2023, and received severance benefits under the executive severance plan outlined above. Mr. Boychuk’s actual severance payment and the severance amounts that would have been payable had the NEOs, other than Mr. Boychuk, terminated employment with the Company as of December 31, 20212023 are described further in the section Post-Employment Compensation “Post-Employment Compensation” table. 2022 Proxy Statement 53
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Change-of-Control Agreements The Company provides “double-trigger” change-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:change of control: (i) requires a “double-trigger”“double trigger” (i.e., payments are conditioned upon a change-of-controlchange 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 all NEOs other than Mr. Pelkey.Hinrichs. As of December 31, 2021,September 26, 2022, Mr. Pelkey’s Change-of-Control AgreementHinrichs’ change-of-control agreement provided a potential benefit of 2.03.0 times his annual base salary and bonus, as he was not promoted to Executive Vice President until January 2022.plus bonus. Our NEOs are subject to the terms of the change-of-control agreements described above and as further detailed under the section entitled Potential“Potential Payouts Under Change-of-Control Agreements.Agreements.” In July 2023, the change-of-control agreements were amended, in part, to include a three-year term that will extend automatically for consecutive three-year periods unless either party provides notice of non-renewal at least 90 days prior to the end of the then-current term.
Compensation Discussion and Analysis | Benefits Benefits CSX’s retirement programs currently consist of two components: (i) a defined contribution 401(k) planplan; and (ii) a now closednow-closed defined benefit pension plan. The retirement programs described below are provided to the NEOs under the following plans: ■ | The CSX Corporation 401(k) Plan (“CSXtra Plan”); | ■ | CSX Pension Plan (the “Pension Plan”); and | ■ | Special Retirement Plan for CSX Corporation and Affiliated Corporations (the “Special Retirement Plan”). |
nthe CSX Corporation 401(k) Plan (the “CSXtra Plan”); nthe Executive Deferred Compensation Plan (the “EDCP”); nthe CSX Pension Plan (the “Pension Plan”); and nthe Special Retirement Plan for CSX Corporation and Affiliated Corporations (the “Special Retirement Plan”). The NEOs may contribute to the CSXtra Plan, a defined contribution 401(k) plan. Participants may contribute on a pre-tax or after-tax basis and receive Company matching contributions. The Company’s matching contribution is equal to 100% on the employee’s first 1% of eligible compensation contributed, and 50% on the employee’s additional contributions up to 6% of base salary, for a Company match up to 3.5% of eligible compensation. Participants may invest contributions in various investment funds. In lieu of participation in the Qualified CSX Pension Plan The Pension Plan, which has been closed to new employees since described below, any NEO and CSX non-union employee hired, rehired or promoted from union positions on or after January 1, 2020 is qualified under the Internal Revenue Code (the “Code”) and covers the NEOs and CSX’s non-union employees who were employed with the Company prior to January 1, 2020. For the NEOs, pension benefits accrue based on a “cash balance” formula. Under the cash balance formula, benefitsreceives an additional employer contribution of 3% of base salary plus 3% of their actual short-term incentive plan payout. These contributions are expressedmade regardless of participation in the formCSXtra Plan and vest upon the earlier of a hypothetical account balance. For each monththe completion of three years of service the NEO’s account is credited with a percentageor attainment of the participant’s pay for that month. The percentage of pay credited is determined based on the participant’s age 65. Messrs. Hinrichs and years of service.
The hypothetical account earns interest credits on a monthly basis based on the annual 10-year Treasury bond rate and the participant’s account balance as of the end of the prior month. The average annual interest crediting rate used for 2021 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 2021 was $230,000 (for a life annuity at age 65) and is subject to adjustment for future cost of living changes. Further, under the Code, the maximum amount of pay that may be taken into account for any year is limited. This limit (the “Compensation Limit”) is $290,000 for 2021 and is also subject to adjustment for future cost of living changes.
■ | Vesting — Benefits under this formula vest upon the earlier of the completion of three years of service or attainment of age 65. | ■ | Form of Payment of Benefits — Benefits under this formula may be paid upon termination of employment or retirement as a lump sum or in various annuity forms. The valuation method and actuarial factors used to determine the present value of accumulated benefits shown in the table are described in the 2021 Annual Report. |
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Special Retirement Plan of CSX and Affiliated Corporations
The Special Retirement Plan is a non-qualified plan that covers CSX employees, including the NEOs, whoFortune were hired beforeafter January 1, 2020 and is now closed to new employees. The Special Retirement Plan provides forare currently receiving the payment of benefits that would otherwise not be available under the Pension Plan due to the 415 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 $290,000 compensation limit under the Code and the $230,000 benefit cap under Section 415 of the Code. These benefits are calculated using the cash balance formula described above for all of the NEOs, without regard to the 415 Limit or the Compensation Limit.
Non-qualified pension benefits can be paid in the same form as under the Pension Plan. 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 2021 Pension Benefits Table for the Special Retirement Plan are described in the 2021 Annual Report.
Health and Group Benefits
CSX provides the same health and group benefits to the NEOs as those available to all non-union employees. The Company also provides basic life insurance and accidental death and dismemberment insurance coverage to all management employees, each of which is equal to two times their respective annual salaries, up to $1 million. The Company also provides NEOs, on 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.
additional employer contribution. Executive Deferred Compensation Plan CSX offers a voluntary, non-qualified Executive Deferred Compensation Plan (“EDCP”)EDCP for the benefit of its executives and other eligible employees. Under the EDCP, the NEOs may defer compensation in excess of qualified plan limits until retirement or another specified date or event. Participating employees with base salary above the qualified plan limits may defer compensation to allow them to receive the full Company matching contribution of up to 3.5% of base salary not otherwise available to them under the CSXtra Plan. In addition, any NEOs hired on or after January 1, 2020 are eligible to receive an additional contribution of 3% of base salary and short-term incentive pay that exceeds the compensation limit under the Internal Revenue Code (the “Code”). These contributions are made regardless of participation in the EDCP and vest upon the earlier of the completion of three years of service or attainment of age 65. Under the EDCP, participating 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.stock only for cycles prior to 2023. Beginning with the 2023-2025 LTIP, performance units payable under the Company’s LTIP cannot be deferred. Any NEO hired on or after January 1, 2020 receives a Company matching contribution of up to 3.5% for short-term incentive plan deferrals made, with immediate vesting. NEOs 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. Messrs. Hinrichs and Fortune were hired after January 1, 2020 and are currently receiving the additional matching contribution. In accordance with a participant’s individual elections, deferred amounts, amounts—other than stock awards, 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. 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, prior to 2021). A participant may apply for accelerated payment of deferred amounts in the event of certain hardships and unforeseeable emergencies. Under the EDCP, cash deferrals are distributed in the form of cash and deferred stock awards (prior to 2023) are paid in the form of CSX common stock. Messrs. Hinrichs, Boone, Goldman and Pelkey voluntarily participate in the EDCP.
Compensation Discussion and Analysis | Benefits Qualified CSX Pension Plan The Pension Plan, which has been closed to new employees hired, rehired or those promoted from union positions since January 1, 2020, is qualified under the Code and covers the NEOs and CSX’s non-union employees who were employed with the Company prior to January 1, 2020. For the NEOs, pension benefits accrue based on a “cash balance” formula. Under the cash balance formula, 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. The hypothetical account earns interest credits on a monthly basis applied to the participant’s account balance as of the end of the prior month. The interest credit rate is equal to one-twelfth of the average percentage yield on the monthly 10-year U.S. Treasury bond rate for the five months preceding the applicable plan year, but no less than an annual rate of 3.66%. The annual interest crediting rate used for 2023 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 2023 was $265,000 (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”) was $330,000 for 2023 and is also subject to adjustment for future cost of living changes. nVesting — Benefits under this formula vest upon the earlier of the completion of three years of service or attainment of age 65. nForm 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 respective table below are described in the 2023 Annual Report. Messrs. Boone, Goldman and Pelkey were hired prior to January 1, 2020 and participate in the qualified pension plan. Special Retirement Plan for CSX and Affiliated Corporations The Special Retirement Plan is a non-qualified plan that covers CSX employees, including the NEOs, who were hired, rehired or promoted from a union position before January 1, 2020, and is now closed to all new employees or those promoted from union positions. The Special Retirement Plan provides for the payment of benefits that would otherwise not be available under the Pension Plan due to the 415 Limit and the Compensation Limit, both as 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 $330,000 compensation limit under the Code and the $265,000 benefit cap under Section 415 of the Code. These benefits are calculated using the cash balance formula described above for all of the NEOs, without regard to the 415 Limit or the Compensation Limit. Non-qualified pension benefits can be paid in the same form as under the Pension Plan. 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 “2023 Pension Benefits Table” for the Special Retirement Plan are described in the 2023 Annual Report. Health and Group Benefits CSX provides the same health and group benefits to the NEOs as those available to all full-time, non-union employees. The Company also provides basic life insurance and accidental death and dismemberment insurance coverage to all non-union employees, each of which is equal to two times their respective annual salaries, up to $1 million. Additionally, the Company provides NEOs, on the same basis as other non-union employees, salary continuance in the event of short-term (up to 100% of their base pay based on tenure) or long-term disability (up to $25,000 per month), travel accident insurance and vacation based on length of service.
Compensation Discussion and Analysis | Benefits Employee Stock Purchase Plan The CSX Employee Stock Purchase Plan (“ESPP”(the “ESPP”) 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 first day of an offering; or (ii) 85% of the fair market value of a share of CSX common stock on the last day of an offering. There are two offering periods each year. The ESPP limits the number of shares of CSX common stock that an employee may purchase in a calendar year to a number of shares that have a fair market value (as of the applicable grant date) equal to $25,000. 2022 Proxy Statement 55
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Other Benefits The perquisites provided to NEOs in 20212023 included: (i) financial planning services of up to $12,000;either $9,000 if the executive selects their own company or $12,000 if the executive uses the company that CSX has selected; and (ii) an annual health and well-being examination. The aggregate cost to the Company of these perquisites was approximately $15,000$17,000 for each NEO. Additionally, pursuant to Company policy, Mr. Foote,Hinrichs, as CEO, is required to travel by Company aircraft at all times for security purposes and to ensure efficient use of his time. Mr. Hinrichs’ personal use of the corporate aircraft was capped at $175,000 for 2023, as agreed to in his employment letter. Other senior-level executives have access to the Company aircraft and may use it on a very limited basis for personal reasons. The amounts related to the NEO’sNEOs’ use of the Company aircraft are disclosed in the Summary“Summary Compensation Table.Table.” In December 2022, the Committee approved a CSX Executive Charitable Match Program, to better reflect CSX’s strong commitment to philanthropy and community involvement. Under this program, which was effective January 1, 2023, CSX matches executive contributions to organizations that qualify for support under Company guidelines, up to a maximum annual CSX contribution of $50,000 for the President and Chief Executive Officer, $15,000 for Executive Vice Presidents and $5,000 for Senior Vice Presidents/Vice Presidents—an increase from the Company’s preexisting matching gifts program, which provided an annual $1,000 match for all employees for qualifying charitable contributions. Stock Ownership Guidelines CSX believes that, in order to align the interests of management with those of its shareholders, it is important that NEOs and other senior leaders hold a significant ownership position in CSX common stock relative to their base salary. To achieve this, CSX has established the following formal stock ownership guidelines. Each of the individuals covered by these guidelines must retain 100% of their net shares issued until the guidelines are achieved and has five years in which to do so. The types of equity that apply towards these ownership guidelines are vested and unvested restricted stock units, vested performance units and any other CSX common stock owned. | | | | | | Position | | Minimum Value | Chief Executive Officer | | 6 times base salary | Executive Vice Presidents | | 4 times base salary | Senior Vice Presidents | | 3 times base salary | Vice Presidents | | 1 times base salary |
Policy Prohibiting Hedging / Hedging/Pledging of CSX Stock CSX’s insider trading policy prohibits officers and directors from entering into transactions to hedge their ownership positions in CSX securities. In addition, the policy prohibits officers and directors from pledging CSX securities. | 56 | | | | | 2024 Proxy Statement | 88 |
2023 Summary Compensation Table The Summary Compensation Table and the accompanying footnotes describe the amount and type of compensation for the NEOs for 20212023 and, if applicable, 20202022 and 2019.Name | | Year | | Salary ($) | | Bonus ($) | | Stock Awards ($)(2) | | Option Awards ($)(3) | | Non-Equity Incentive Plan Compensation ($)(4) | | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(5) | | All Other Compensation ($)(6) | | Total ($) | James M. Foote | | 2021 | | 1,500,000 | | — | | 9,150,899 | | 3,041,960 | | 5,250,000 | | 798,423 | | 265,524 | | 20,006,806 | | | 2020 | | 1,250,000 | | 1,300,000 | | 5,989,727 | | 6,006,842 | | 200,000 | | 338,576 | | 221,570 | | 15,306,715 | | | 2019 | | 1,250,000 | | — | | 6,096,711 | | 3,993,136 | | 3,425,391 | | 534,271 | | 228,024 | | 15,527,533 | Kevin S. Boone | | 2021 | | 700,000 | | — | | 2,203,699 | | 734,236 | | 1,120,000 | | 168,881 | | 40,085 | | 4,966,901 | | | 2020 | | 475,000 | | 277,875 | | 1,361,291 | | 1,365,194 | | 42,750 | | 70,665 | | 31,007 | | 3,623,782 | | | 2019 | | 399,928 | | — | | 995,402 | | 1,481,381 | | 599,756 | | 78,450 | | 27,956 | | 3,582,873 | Sean R. Pelkey(1) | | 2021 | | 427,826 | | — | | 774,847 | | 258,359 | | 479,165 | | 95,725 | | 16,270 | | 2,052,192 | Jamie J. Boychuk | | 2021 | | 700,000 | | — | | 2,203,699 | | 734,236 | | 1,120,000 | | 169,530 | | 35,137 | | 4,962,602 | | | 2020 | | 500,000 | | 292,500 | | 1,361,291 | | 1,365,194 | | 45,000 | | 74,190 | | 26,121 | | 3,664,296 | | | 2019 | | 392,696 | | — | | 1,007,915 | | 1,686,335 | | 645,054 | | 81,938 | | 23,885 | | 3,837,823 | Nathan D. Goldman | | 2021 | | 550,000 | | — | | 1,616,082 | | 538,440 | | 792,000 | | 226,459 | | 57,577 | | 3,780,558 | | | 2020 | | 500,000 | | 292,500 | | 1,089,048 | | 1,092,151 | | 45,000 | | 136,918 | | 47,674 | | 3,203,291 | | | 2019 | | 500,000 | | — | | 1,219,356 | | 2,001,314 | | 711,000 | | 172,086 | | 33,600 | | 4,637,356 | Diana B. Sorfleet(1) | | 2021 | | 550,000 | | — | | 1,616,082 | | 538,440 | | 792,000 | | 167,636 | | 35,112 | | 3,699,270 | Mark K. Wallace(1) | | 2021 | | 655,417 | | — | | 2,203,699 | | 734,236 | | 1,048,667 | | 182,076 | | 175,254 | | 4,999,349 | | | 2020 | | 550,000 | | 321,750 | | 1,361,291 | | 1,365,194 | | 49,500 | | 92,798 | | 113,188 | | 3,853,721 | | | 2019 | | 550,000 | | — | | 1,219,356 | | 798,634 | | 860,310 | | 132,808 | | 42,602 | | 3,603,710 |
2021. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name | Year | Salary ($) | Bonus ($) | Stock Awards ($)(2) | Option Awards ($)(3) | Non-Equity Incentive Plan Compensation ($)(4) | Change in Pension Value and Non-qualified Deferred Compensation Earnings ($)(5) | All Other Compensation ($)(6) | Total ($) | Joseph R. Hinrichs(1) President and Chief Executive Officer | 2023 | 1,400,000 | | — | | 8,000,032 | | 2,000,003 | | 2,415,000 | | — | | 259,200 | | 14,074,235 | | 2022 | 376,515 | | — | | 7,000,026 | | — | | 852,806 | | — | | 119,170 | | 8,348,517 | | Sean R. Pelkey Executive Vice President and Chief Financial Officer | 2023 | 660,000 | | — | | 1,860,011 | | 465,008 | | 759,000 | | 156,340 | | 59,965 | | 3,960,324 | | 2022 | 600,000 | | — | | 2,292,067 | | 1,169,878 | | 815,400 | | 150,903 | | 34,127 | | 5,062,375 | | 2021 | 427,826 | | — | | 774,847 | | 258,359 | | 479,165 | | 95,725 | | 16,270 | | 2,052,192 | | Kevin S. Boone Executive Vice President and Chief Commercial Officer | 2023 | 725,000 | | — | | 2,520,013 | | 630,001 | | 833,750 | | 157,053 | | 68,285 | | 4,934,102 | | 2022 | 725,000 | | — | | 2,313,201 | | 781,173 | | 1,094,750 | | 174,971 | | 60,938 | | 5,150,033 | | 2021 | 700,000 | | — | | 2,203,699 | | 734,236 | | 1,120,000 | | 168,881 | | 40,085 | | 4,966,901 | | Stephen Fortune(1) Executive Vice President and Chief Digital & Technology Officer | 2023 | 650,000 | | — | | 1,860,011 | | 465,008 | | 747,500 | | — | | 83,469 | | 3,805,988 | | 2022 | 487,500 | | — | | 2,833,335 | | — | | 736,125 | | — | | 25,899 | | 4,082,859 | | Nathan D. Goldman(1) Executive Vice President and Chief Legal Officer | 2023 | 570,000 | | — | | 1,860,011 | | 465,008 | | 589,950 | | 217,004 | | 57,585 | | 3,759,558 | | 2022 | 570,000 | | — | | 1,707,363 | | 576,587 | | 774,630 | | 235,088 | | 35,571 | | 3,899,239 | | 2021 | 550,000 | | — | | 1,616,082 | | 538,440 | | 792,000 | | 226,459 | | 57,577 | | 3,780,558 | | Jamie J. Boychuk(1) Former Executive Vice President — Operations | 2023 | 433,424 | | — | | 2,520,013 | | 630,001 | | 498,438 | | 100,942 | | 1,726,158 | | 5,908,976 | | 2022 | 725,000 | | — | | 2,313,201 | | 781,173 | | 1,094,750 | | 175,643 | | 41,217 | | 5,130,984 | | 2021 | 700,000 | | — | | 2,203,699 | | 734,236 | | 1,120,000 | | 169,530 | | 35,137 | | 4,962,602 | |
(1)Mr. Boychuk was involuntarily separated without cause under circumstances that made him eligible for severance benefits under the Company’s executive severance plan on August 4, 2023. In accordance with SEC rules, no amounts are included for any NEO prior to the year in which he became an NEO, other than Mr. Goldman who was an NEO in 2021 and therefore his 2022 amounts are also included. | (1) | Mr. Boone is an NEO by virtue of having served as our principal financial officer during a portion of 2021. No amounts are included for Mr. Pelkey or Ms. Sorfleet as they were not NEOs for 2019 or 2020. Mr. Wallace tragically passed away in November 2021, but is included as an NEO for SEC disclosure purposes since he would have been one of the next three most highly compensated executives had he remained employed through year end. | | | | (2)89 | Stock Awards – Amounts disclosed in this column are related to LTIP performance units, restricted stock units and restricted stock granted in 2019, 2020 and 2021, as applicable, and reflect the aggregate grant date fair value of such stock awards computed in accordance with FASB ASC Topic 718. For performance units, the grant date fair value is based on the probable outcome of performance conditions at the time of grant. For more information and assumptions used in valuing these awards, see Note 4, Stock Plans and Share-Based Compensation in the Notes to the Consolidated Financial Statements in the 2021 Annual Report, which was filed with the SEC on February 16, 2022. If the highest level of performance under each LTIP cycle is achieved, the maximum grant date fair value of the performance units (which does not include stock options, restricted stock units or restricted stock) for each NEO by year of grant would be: 2021: Mr. Foote - $15,251,441, Mr. Pelkey - $1,230,538, Messrs. Boone, Boychuk and Wallace - $3,672,832, Mr. Goldman and Ms. Sorfleet - $2,693,469; 2020: Mr. Foote - $14,974,317, Messrs. Boone, Wallace and Boychuk - $3,403,227, and Mr. Goldman - $2,722,621; 2019: Mr. Foote - $15,241,776 Mr. Boone - $2,403,222, Messrs. Goldman and Wallace - $3,048,389, and Mr. Boychuk - $2,416,972. |
Compensation Tables | 2023 Summary Compensation Table (2)Stock Awards – Amounts disclosed in this column are related to LTIP performance units and restricted stock units granted in 2021, 2022 and 2023, as applicable, and reflect the aggregate grant date fair value of such stock awards computed in accordance with FASB ASC Topic 718. For performance units, the grant date fair value is based on the probable outcome of performance conditions at the time of grant. For more information and assumptions used in valuing these awards, see Note 4, Stock Plans and Share-Based Compensation in the Notes to the Consolidated Financial Statements in the 2023 Annual Report, which was filed with the SEC on February 14, 2024. If the highest level of performance under each LTIP cycle is achieved, the maximum grant date fair value of the performance units (which does not include stock options, restricted stock units or restricted stock) for each NEO by year of grant would be: (i) 2023, Mr. Hinrichs - $15,000,020, Messrs. Pelkey, Fortune and Goldman - $3,487,500 and Messrs. Boone and Boychuk - $4,725,006; (ii) 2022, Mr. Hinrichs - $8,750,033, Messrs. Pelkey and Goldman - $2,845,605, Messrs. Boone and Boychuk - $3,084,268 and Mr. Fortune - $2,546,929; and (iii) 2021, Mr. Pelkey - $1,230,538, Messrs. Boone and Boychuk - $3,672,832 and Mr. Goldman - $2,693,469. Stock awards related to the LTIP granted in 2023 for Mr. Boychuk will vest on a pro-rata basis in connection with his involuntary separation without cause under circumstances that made him eligible for severance benefits under the Company’s executive severance plan on August 4, 2023, as described in the “Post-Employment Compensation” table below. (3)Option Awards – The values included in this column represent the aggregate grant date fair value of non-qualified stock options granted to each NEO computed in accordance with FASB ASC Topic 718. For more information and assumptions used in valuing these awards, see Note 4, Stock Plans and Share-Based Compensation in the Notes to the Consolidated Financial Statements in the 2023 Annual Report, which was filed with the SEC on February 14, 2024. (4)Non-Equity Incentive Plan Compensation – The 2023 short-term incentive compensation (MICP) was paid on February 16, 2024 based on a 115% Company payout of the Target Incentive Opportunities for each NEO under the 2023 MICP. (5)Change in Pension Value and Non-qualified Deferred Compensation Earnings – The values in this column reflect aggregate changes in the actuarial present value of pension benefits. The changes in values result from increases in each individual’s years of service, total cash compensation and revised mortality assumptions, as well as from a decrease in the pension discount rate from 5.02% to 4.82%. CSX measured its pension values as of December 31, 2023. Messrs. Hinrichs and Fortune do not participate in the CSX Pension Plan. (6)All Other Compensation – The components of “All Other Compensation” for 2023 are as follows: | | | | | | | | | | | | | | | | | | | | | Name | CSXtra Plan Contributions ($)(a) | NQDC Plan Contributions ($)(b) | Health Savings Account Contributions ($)(c) | Severance ($)(d) | Perquisites ($)(e) | Total ($) | Joseph R. Hinrichs | 59,512 | | 39,668 | | 2,400 | | — | | 157,620 | | 259,200 | | Sean R. Pelkey | 11,795 | | 11,273 | | 2,400 | | — | | 34,497 | | 59,965 | | Kevin S. Boone | 11,300 | | 13,898 | | 2,400 | | — | | 40,687 | | 68,285 | | Stephen Fortune | 50,155 | | 5,475 | | 2,400 | | — | | 25,440 | | 83,469 | | Nathan D. Goldman | 12,767 | | 8,473 | | 2,400 | | — | | 33,946 | | 57,585 | | Jamie J. Boychuk | 10,177 | | 10,442 | | 2,400 | | 1,678,219 | | 24,921 | | 1,726,158 | |
(a)CSXtra plan contributions include: (i) employer matching contributions that were made based on NEO plan participation; and (ii) other non-elective employer contributions that were made to Messrs. Hinrichs and Fortune. (b)Non-qualified Deferred Compensation Plan contributions include: (i) employer matching contributions that were made based on NEO plan participation; and (ii) other non-elective employer contributions that were made to Messrs. Hinrichs and Fortune. (c)Health Savings Account contributions include employer matching contributions associated with NEO participation in the medical plan. (d)The amount shown for Mr. Boychuk includes $583,152 in severance payments he received in connection with his involuntary separation without cause in August 2023, and $1,095,067, which represents the aggregate number of prorated shares of restricted stock units and stock options outstanding for Mr. Boychuk pursuant to the 2021-2023 and 2022-2024 LTIP cycles multiplied by $31.52, the closing price of the Company’s common stock on August 4, 2023 (his last day of employment) (and in the case of stock options, less the applicable exercise price). (e)The values in this column reflect the aggregate incremental cost to the Company for financial planning/tax preparation services, personal usage of Company aircraft, relocation expenses and the Company’s match for charitable contributions, as applicable. The amount shown for Mr. Hinrichs includes Company-mandated personal aircraft use of $103,253, as described in the CD&A section, and a charitable contribution match of $50,000. The aggregate incremental cost to the Company for use of the Company aircraft is calculated by multiplying the hourly variable cost rate for the aircraft by the hours the executive used the aircraft for personal travel, and adding other costs associated with personal travel on the Company aircraft not included in the hourly variable cost rate, as applicable. | | | | | | (3)2024 Proxy Statement | Option Awards – The values included in this column represent the aggregate grant date fair value of non-qualified stock options granted to each NEO computed in accordance with FASB ASC Topic 718. For more information and assumptions used in valuing these awards, see Note 4, Stock Plans and Share-Based Compensation in the Notes to the Consolidated Financial Statements in the 2021 Annual Report, which was filed with the SEC on February 16, 2022. | (4) | Non-Equity Incentive Plan Compensation – The 2021 short-term incentive compensation (MICP) was paid on February 18, 2022 based on a 160% Company payout of the Target Incentive Opportunities for each NEO under the 2021 MICP. | (5) | Change in Pension Value and Non-qualified Deferred Compensation Earnings – The values in this column reflect aggregate changes in the actuarial present value of pension benefits. The changes in values result from increases in each individual’s years of service, total cash compensation and revised mortality assumptions, as well as from an increase in the pension discount rate from 2.43% to 2.78%. CSX measured its pension values as of December 31, 2021. | (6) | All Other Compensation – The values in this column for 2021 include amounts for personal usage of Company aircraft, financial planning/tax preparation services, annual health savings account contribution associated with participation in the medical plan and the Company’s match under the 401(k) and non-qualified deferred compensation plans. For Mr. Foote, the values in this column for 2021 include, along with the other items discussed above, $201,739 for Company-mandated aircraft usage, as described in the CD&A, and a $41,635 nonqualified deferred contribution Company match. For Mr. Wallace, the values in this column for 2021 include, along with the other items discussed above, $136,296 for personal usage of Company aircraft, as well as a tax gross-up in the amount of $7,025 for use of Company aircraft for two flights to and from Houston, Texas for the purposes of medical treatment.90 |
Table of Contents
COMPENSATION DISCUSSION AND ANALYSIS
2021Compensation Tables | 2023 Grants of Plan-Based Awards Table
2023 Grants of Plan-Based Awards Table In 2021,2023, the NEOs received grants of the plan-based awards as shown in the table below. | | | | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards(1) | | Estimated Future Payouts Under Equity Incentive Awards (# units)(2) | | All Other Stock | | All Other Option | | Exercise Price of Option | | Grant Date Fair Value of Stock and Option | | Name | | Grant Date | | Threshold ($) | | Target ($) | | Maximum ($) | | Threshold (units) | | Target (units) | | Maximum (units) | | Awards (units)(3) | | Awards (#)(4) | | Awards ($) | | Awards ($)(5) | | James M. Foote | | Feb. 10, 2021 | | | | | | | | 38,920 | | 207,573 | | 518,933 | | 103,788 | | | | | | 9,150,899 | | | Feb. 10, 2021 | | | | | | | | | | | | | | | | 388,119 | | 29.39 | | 3,041,960 | | | | | | 65,625 | | 2,625,000 | | 5,250,000 | | | | | | | | | | | | | | | | Sean R. Pelkey | | Feb. 9, 2021 | | | | | | | | 772 | | 4,119 | | 8,238 | | 2,061 | | | | | | 182,248 | | | | Feb. 9, 2021 | | | | | | | | | | | | | | | | 7,701 | | 29.49 | | 60,702 | | | | June 4, 2021 | | | | | | | | 2,230 | | 11,895 | | 23,790 | | 5,949 | | | | | | 592,599 | | | | June 4, 2021 | | | | | | | | | | | | | | | | 22,173 | | 33.21 | | 197,657 | | | | | | 7,487 | | 299,478 | | 598,956 | | | | | | | | | | | | | | | | Kevin S. Boone | | Feb. 9, 2021 | | | | | | | | 9,341 | | 49,818 | | 124,545 | | 24,909 | | | | | | 2,203,699 | | | | Feb. 9, 2021 | | | | | | | | | | | | | | | | 93,150 | | 29.49 | | 734,236 | | | | | | 17,500 | | 700,000 | | 1,400,000 | | | | | | | | | | | | | | | | Jamie J. Boychuk | | Feb. 9, 2021 | | | | | | | | 9,341 | | 49,818 | | 124,545 | | 24,909 | | | | | | 2,203,699 | | | Feb. 9, 2021 | | | | | | | | | | | | | | | | 93,150 | | 29.49 | | 734,236 | | | | | | 17,500 | | 700,000 | | 1,400,000 | | | | | | | | | | | | | | | | Nathan D. Goldman | | Feb. 9, 2021 | | | | | | | | 6,850 | | 36,534 | | 91,335 | | 18,267 | | | | | | 1,616,082 | | | Feb. 9, 2021 | | | | | | | | | | | | | | | | 68,310 | | 29.49 | | 538,440 | | | | | | 12,375 | | 495,000 | | 990,000 | | | | | | | | | | | | | | | | Diana B. Sorfleet | | Feb. 9, 2021 | | | | | | | | 6,850 | | 36,534 | | 91,335 | | 18,267 | | | | | | 1,616,082 | | | | Feb. 9, 2021 | | | | | | | | | | | | | | | | 68,310 | | 29.49 | | 538,440 | | | | | | 12,375 | | 495,000 | | 990,000 | | | | | | | | | | | | | | | | Mark K. Wallace | | Feb. 9, 2021 | | | | | | | | 9,341 | | 49,818 | | 124,545 | | 24,909 | | | | | | 2,203,699 | | | | Feb. 9, 2021 | | | | | | | | | | | | | | | | 93,150 | | 29.49 | | 734,236 | | | | | | 16,385 | | 655,417 | | 1,310,833 | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name | Grant Date | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards(1) | | Estimated Future Payouts Under Equity Incentive Awards (# of 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) | Threshold ($) | Target ($) | Maximum ($) | | Threshold (units) | Target (units) | Maximum (units) | Joseph R. Hinrichs | Feb. 15, 2023 | | | | | 0 | 189,454 | | 473,635 | | 63,152 | | | | 8,000,032 | | Feb. 15, 2023 | | | | | | | | | 202,943 | | 31.67 | | 2,000,003 | | | 52,500 | | 2,100,000 | | 4,200,000 | | | | | | | | | | Sean R. Pelkey | Feb. 15, 2023 | | | | | 0 | 44,048 | | 110,120 | | 14,683 | | | | 1,860,011 | | Feb. 15, 2023 | | | | | | | | | 47,185 | | 31.67 | | 465,008 | | | 16,500 | | 660,000 | | 1,320,000 | | | | | | | | | | Kevin S. Boone | Feb. 15, 2023 | | | | | 0 | 59,678 | | 149,195 | | 19,893 | | | | 2,520,013 | | Feb. 15, 2023 | | | | | | | | | 63,927 | | 31.67 | | 630,001 | | | 18,125 | | 725,000 | | 1,450,000 | | | | | | | | | | Stephen Fortune | Feb. 15, 2023 | | | | | 0 | 44,048 | | 110,120 | | 14,683 | | | | 1,860,011 | | Feb. 15, 2023 | | | | | | | | | 47,185 | | 31.67 | | 465,008 | | | 16,250 | | 650,000 | | 1,300,000 | | | | | | | | | | Nathan D. Goldman | Feb. 15, 2023 | | | | | 0 | 44,048 | | 110,120 | | 14,683 | | | | 1,860,011 | | Feb. 15, 2023 | | | | | | | | | 47,185 | | 31.67 | | 465,008 | | | 12,825 | | 513,000 | | 1,026,000 | | | | | | | | | | Jamie J. Boychuk | Feb. 15, 2023 | | | | | 0 | 59,678 | | 149,195 | | 19,893 | | | | 2,520,013 | | Feb. 15, 2023 | | | | | | | | | 63,927 | | 31.67 | | 630,001 | | | 18,125 | | 725,000 | | 1,450,000 | | | | | | | | | |
(1)Estimated Possible Payouts Under Non-Equity Incentive Plan Awards – The amounts in these columns reflect the threshold, target and maximum payout opportunities for 2023 under the MICP based on the Target Incentive Opportunities for each NEO. The values reflect a threshold payout of 2.5% of each NEO’s Target Incentive Opportunity, a target payout of 100% of each NEO’s Target Incentive Opportunity and a maximum payout of 200% of each NEO’s Target Incentive Opportunity. The amounts actually paid for 2023 under the MICP are included in the “Summary Compensation Table.” (2)Estimated Future Payouts Under Equity Incentive Plan Program – The amounts in these columns reflect the number of shares subject to performance units granted for the 2023-2025 LTIP cycle that are eligible to be earned and vest based on threshold, target and maximum achievement of pre-established financial performance goals. The Company’s performance over the 2023-2025 performance period will determine the number of shares that are paid out in respect of such performance units, which can range from 0% to 250% of the performance units subject to the grants. The 2023-2025 LTIP is designed to payout 0% at threshold, 100% at target and 200% at maximum. The number listed in the threshold column (0% of the total performance units subject to the grant) is the number of performance units that would be earned if the threshold performance level were achieved for only one of the financial performance measures. The NEOs also have a Relative TSR payout modifier applicable to the performance units based on a linear formula, which can increase or decrease the payout by as much as 25%, giving them a threshold payout of 0% and a maximum payout of 250%. The number listed in the threshold column (0% of the total performance units subject to the grant) is the number of performance units that would be earned if the threshold performance level were achieved for only one of the financial performance measures and the modifier is -25%. If both financial performance measures reach threshold performance level and the modifier is -25%, the resulting threshold payout would be 12.5% for the NEOs. The number listed in the maximum column (250% of the total performance units subject to the grant) is the number of performance units that would be earned if each metric pays out at a maximum of 200% and the modifier is +25%. | (1) | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards – The amounts in these columns reflect the threshold, target and maximum payout opportunities for 2021 under the MICP based on the Target Incentive Opportunities for each NEO. The values reflect a threshold payout of 2.5% of each NEO’s Target Incentive Opportunity, a target payout of 100% of each NEO’s Target Incentive Opportunity and a maximum payout of 200% of each NEO’s Target Incentive Opportunity. The amounts actually paid for 2021 under the MICP are included in the Summary Compensation Table above. | | | | (2)91 | Estimated Future Payout Under Equity Incentive Plan Programs – The amounts in these columns reflect the number of shares subject to performance units granted for the 2021-2023 LTIP cycle that are eligible to be earned and vest based on threshold, target and maximum achievement of pre-established financial performance goals. The Company’s performance over the 2021-2023 performance period will determine the number of shares that are paid out in respect of such performance units, which can range from 0% to 250% of the performance units subject to the grants. The 2021-2023 LTIP is designed to payout 25% at threshold, 100% at target and 200% at maximum. The number listed in the threshold column (25% of the total performance units subject to the grant) is the number of performance units that would be earned if the threshold performance level were achieved for only one of the financial performance measures. The NEOs also have a relative Total Shareholder Return payout modifier applicable to the performance units based on a linear formula, which can increase or decrease the payout by as much as 25%, giving them a threshold payout of 18.75% and a maximum payout of 250%. The number listed in the threshold column (18.75% of the total performance units subject to the grant) is the number of performance units that would be earned if the threshold performance level were achieved for only one of the financial performance measures and the modifier is -25%. If both financial performance measures reach threshold performance level and the modifier is -25%, the resulting threshold payout would be 37.50% for the NEOs. The number listed in the maximum column (250% of the total performance units subject to the grant) is the number of performance units that would be earned if each metric pays out at maximum and the modifier is +25%. |
Compensation Tables | 2023 Grants of Plan-Based Awards Table (3)All Other Stock Awards – The amounts in this column represent the number of restricted stock units granted to Messrs. Hinrichs, Pelkey, Boone, Goldman, Fortune and Boychuk on February 15, 2023. One third of these units vested on February 15, 2024, and the remaining units will vest ratably on February 15, 2025 and February15,2026, subject to the NEO’s continued employment through the applicable vesting date. (4)All Other Option Awards – The amounts in this column represent the number of non-qualified stock options granted to Messrs.Hinrichs, Pelkey, Boone, Goldman, Fortune and Boychuk on February 15, 2023, which vest and become exercisable on a three-year graded vesting schedule. One third of these options became exercisable on February 15, 2024, and the remaining options will become exercisable ratably on February 15, 2025 and February15,2026. These options were granted with an exercise price equal to the closing stock price on the date of grant of $31.67. (5)Grant Date Fair Value of Stock and Option Awards – The values in this column reflect the grant date fair value of performance units and non-qualified stock options granted in 2023, calculated in accordance with FASB ASC Topic 718, and, for performance units, based on the probable outcome of the performance conditions (which is the target). For more information and assumptions used in valuing these awards, see Note 4, Stock Plans and Share-Based Compensation in the Notes to the Consolidated Financial Statements in the 2023 Annual Report, which was filed with the SEC on February 14, 2024, and, for the grant date value of the performance units if maximum levels of performance are achieved, see footnote 2 to the “Summary Compensation Table.” | | | | | | (3)2024 Proxy Statement | All Other Stock Awards – The amount in this column represents the number of restricted stock units granted to Messrs. Boone, Boychuk, Goldman, Pelkey and Wallace and Ms. Sorfleet on February 9, 2021. Restricted stock units were granted to Mr. Foote on February 10, 2021. These units will vest on February 9, 2024 and February 10, 2024, respectively, subject to the NEO’s continued employment through the applicable vesting date. The amount for Mr. Pelkey includes additional restricted stock units granted on June 4, 2021 in connection with his promotion to the position of Vice President and Acting Chief Financial Officer.92 |
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(4) | All Other Option Awards – The amount in this column represents the number of non-qualified stock options granted to Messrs. Boone, Boychuk, Goldman, Pelkey and Wallace and Ms. Sorfleet on February 9, 2021, which vest and become exercisable on a three-year graded vesting schedule. One third of these options will become exercisable on February 9, 2022, February 9,Compensation Tables | 2023 and February 9, 2024. These options were granted with an exercise price equal to the closing stock price on the date of grant of $29.49. Nonqualified stock units were granted to Mr. Foote on February 10, 2021. One third of these options will become exercisable on February 10, 2022, February 10, 2023 and February 10, 2024. These options were granted with an exercise price equal to the closing stock price on the date of grant of $29.39. The amount for Mr. Pelkey includes additional non-qualified stock options granted on June 4, 2021 as a result of being named Vice President and Acting Chief Financial Officer. These options were granted with an exercise price equal to the closing stock price on the date of grant of $33.21. | (5) | Grant Date Fair Value of Stock and Option Awards – The values in this column reflect the grant date fair value of performance units and non-qualified stock options granted in 2021, calculated in accordance with FASB ASC Topic 718 and, for performance units, based on the probable outcome of the performance conditions (which is the target). For more information and assumptions used in valuing these awards, see Note 4, Stock Plans and Share-Based Compensation in the Notes to the Consolidated Financial Statements in the 2021 Annual Report, which was filed with the SEC on February 16, 2022, and, for the grant date value of the performance units if maximum levels of performance are achieved, see footnote 3 to the Summary Compensation Table above. |
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COMPENSATION DISCUSSION AND ANALYSIS
2021 Outstanding Equity Awards at Fiscal Year End
Year-End 2023 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, 2021.2023. Stock awards are comprised of outstanding performance units, non-qualified stock options, restricted stock units and restricted stock units. | | Option Awards | | Stock Awards | Name | | Options Exercisable | | Options Unexercisable(1) | | Option Price | | Option Expiration Date | | Shares Not Vested(2) | | Market Value(3) | | Equity Incentive Awards Not Vested(4) | | Market Value(5) | | James M. Foote | | 228,120 | | — | | $17.64 | | 10/25/27 | | 103,788 | | $3,902,429 | | 690,447 | | $25,960,807 | | | | 726,687 | | — | | 17.94 | | 2/6/28 | | | | | | | | | | | | 453,090 | | 233,409 | | 22.70 | | 2/6/29 | | | | | | | | | | | | 318,159 | | 636,318 | | 26.50 | | 2/18/30 | | | | | | | | | | | | — | | 388,119 | | 29.39 | | 2/10/31 | | | | | | | | | | Sean R. Pelkey | | 2,223 | | — | | 16.13 | | 2/22/27 | | 9,063 | | 340,769 | | 34,850 | | 1,310,360 | | | | 10,632 | | — | | 17.94 | | 2/6/28 | | | | | | | | | | | | 6,222 | | 3,207 | | 22.70 | | 2/6/29 | | | | | | | | | | | | 6,615 | | 13,233 | | 26.50 | | 2/18/30 | | | | | | | | | | | | — | | 7,701 | | 29.49 | | 2/9/31 | | | | | | | | | | | | — | | 22,173 | | 33.21 | | 6/4/31 | | | | | | | | | | Kevin S. Boone | | 15,969 | | — | | 17.59 | | 10/1/27 | | 26,412 | | 993,091 | | 161,483 | | 6,071,761 | | | | 15,084 | | — | | 17.94 | | 2/6/28 | | | | | | | | | | | | 8,880 | | 4,575 | | 22.70 | | 2/6/29 | | | | | | | | | | | | — | | 246,507 | | 23.48 | | 12/4/29 | | | | | | | | | | | | 72,309 | | 144,618 | | 26.50 | | 2/18/30 | | | | | | | | | | | | — | | 93,150 | | 29.49 | | 2/9/31 | | | | | | | | | | Jamie J. Boychuk | | 12,261 | | — | | 17.99 | | 5/26/27 | | 26,721 | | 1,004,710 | | 161,483 | | 6,071,761 | | | | 12,858 | | — | | 17.94 | | 2/6/28 | | | | | | | | | | | | 10,704 | | 5,514 | | 22.70 | | 2/6/29 | | | | | | | | | | | | — | | 240,000 | | 26.31 | | 4/17/29 | | | | | | | | | | | | 72,309 | | 144,618 | | 26.50 | | 2/18/30 | | | | | | | | | | | | — | | 93,150 | | 29.49 | | 2/9/31 | | | | | | | | | | Nathan D. Goldman | | 161,487 | | — | | 17.94 | | 2/6/28 | | 18,267 | | 686,839 | | 123,452 | | 4,641,795 | | | | 90,618 | | 46,683 | | 22.70 | | 2/6/29 | | | | | | | | | | | | — | | 211,293 | | 23.48 | | 12/4/29 | | | | | | | | | | | | 57,846 | | 115,695 | | 26.50 | | 2/18/30 | | | | | | | | | | | | — | | 68,310 | | 29.49 | | 2/9/31 | | | | | | | | | | Diana B. Sorfleet | | 13,344 | | — | | 16.13 | | 2/22/27 | | 18,267 | | 686,839 | | 123,452 | | 4,641,795 | | | | 25,434 | | — | | 17.94 | | 2/6/28 | | | | | | | | | | | | 90,618 | | 46,683 | | 22.70 | | 2/6/29 | | | | | | | | | | | | 57,846 | | 115,695 | | 26.50 | | 2/18/30 | | | | | | | | | | | | — | | 68,310 | | 29.49 | | 2/9/31 | | | | | | | | | | Mark K. Wallace | | 90,618 | | 44,089 | | 22.70 | | 2/6/29 | | 24,909 | | 936,578 | | 161,483 | | 6,071,761 | | | | 72,309 | | 144,618 | | 26.50 | | 2/18/30 | | | | | | | | | | | | — | | 93,150 | | 29.49 | | 2/9/31 | | | | | | | | | |
stock. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Option Awards | | Stock Awards | Name | Options Exercisable | Options Unexercisable(1) | Option Price ($) | Option Expiration Date | | Shares Not Vested(2) | Market Value ($)(3) | Equity Incentive Awards Not Vested(4) | Market Value ($)(5) | Joseph R. Hinrichs | — | | 202,943 | | | 31.67 | | 2/15/33 | | 190,750 | | | 6,613,303 | | 280,705 | | | 9,732,042 | | Sean R. Pelkey | 2,223 | | — | | | 16.13 | | 2/22/27 | | 55,892 | | | 1,937,776 | | 67,692 | | | 2,346,882 | | 10,632 | | — | | | 17.94 | | 2/6/28 | | | | | | | | 9,429 | | — | | | 22.70 | | 2/6/29 | | | | | | | | 19,848 | | — | | | 26.50 | | 2/18/30 | | | | | | | | 5,133 | | 2,568 | | | 29.49 | | 2/9/31 | | | | | | | | 14,781 | | 7,392 | | | 33.21 | | 6/4/31 | | | | | | | | — | | 59,989 | | | 34.36 | | 1/24/32 | | | | | | | | 18,991 | | 37,984 | | | 35.17 | | 2/16/32 | | | | | | | | — | | 47,185 | | | 31.67 | | 2/15/33 | | | | | | | | Kevin S. Boone | 15,969 | | — | | | 17.59 | | 10/1/27 | | 66,726 | | | 2,313,390 | | 91,711 | | | 3,179,620 | | 15,084 | | — | | | 17.94 | | 2/6/28 | | | | | | | | 13,455 | | — | | | 22.70 | | 2/6/29 | | | | | | | | 246,507 | | — | | | 23.48 | | 12/4/29 | | | | | | | | 216,927 | | — | | | 26.50 | | 2/18/30 | | | | | | | | 62,100 | | 31,050 | | | 29.49 | | 2/9/31 | | | | | | | | 25,730 | | 51,461 | | | 35.17 | | 2/16/32 | | | | | | | | — | | 63,927 | | | 31.67 | | 2/15/33 | | | | | | | | Stephen Fortune | — | | 47,185 | | | 31.67 | | 2/15/33 | | 54,020 | | | 1,872,873 | | 65,264 | | | 2,262,703 | | Nathan D. Goldman | 161,487 | | — | | | 17.94 | | 2/6/28 | | 49,132 | | | 1,703,406 | | 67,692 | | | 2,346,882 | | 137,301 | | — | | | 22.70 | | 2/6/29 | | | | | | | | 211,293 | | — | | | 23.48 | | 12/4/29 | | | | | | | | 173,541 | | — | | | 26.50 | | 2/18/30 | | | | | | | | 45,540 | | 22,770 | | | 29.49 | | 2/9/31 | | | | | | | | 18,991 | | 37,984 | | | 35.17 | | 2/16/32 | | | | | | | | — | | 47,185 | | | 31.67 | | 2/15/33 | | | | | | | | Jamie J. Boychuk | — | | 26,737 | | | 29.49 | | 2/9/31 | | — | | | — | | 33,535 | | | 1,162,658 | | 25,730 | | 27,160 | | | 35.17 | | 2/16/32 | | | | | | | | — | | 12,429 | | | 31.67 | | 2/15/33 | | | | | | | |
| (1) | Number of Securities Underlying Unexercised Options (Unexercisable) – All stock options were granted 10 years prior to the Option Expiration Date listed in the table above. The stock options granted to all NEOs prior to 2019, to Mr. Boychuk on April 17, 2019, and to Messrs. Boone and Goldman on December 4, 2019, in each case, vest and become exercisable on the third anniversary of the date of grant, generally subject to the NEO’s continued service through the applicable vesting date. The other stock options granted to the NEOs in 2020, and the stock options granted to the NEOs in 2021, vest and become exercisable on a three-year graded vesting schedule on each of the first three anniversaries of the grant date, generally subject to the NEO’s continued service through the applicable vesting date. | | | | (2)93 | Number of Shares or Units of Stock That Have Not Vested – The units reflected in this column represent restricted stock units granted in February 2019 to Messrs. Boone, Boychuk and Pelkey that will vest in 2022, generally subject to the NEO’s continued service through the applicable vesting date. This column also includes restricted stock units granted in February 2021 pursuant to the 2021-2023 LTIP cycle. |
Compensation Tables | 2023 Outstanding Equity Awards at Fiscal Year-End (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 Mr.Pelkey on January 24, 2022 vest and become exercisable on a graded vesting schedule, with 50% vesting on the second anniversary of the grant date and 50% vesting on the third anniversary of the grant date. The other stock options granted to the NEOs in 2020, 2021, 2022 and 2023 vest and become exercisable on a three-year graded vesting schedule on each of the first three anniversaries of the grant date, generally subject to the NEO’s continued service through the applicable vesting date. (2)Number of Shares or Units of Stock That Have Not Vested – The units reflected in this column represent restricted stock units granted: on January 24, 2022 to Mr. Pelkey that vest 50% on January 24, 2024 and 50% on January 24, 2025; on April 1, 2022 to Mr.Fortune that vest one-third on April 1, 2023, one-third on April 1, 2024 and one-third on April 1, 2025; and on September 26, 2022 to Mr. Hinrichs that vest on September 26, 2025. This column also includes restricted stock units granted under the 2021-2023 LTIP cycle, the 2022-2024 LTIP cycle and the 2023-2025 LTIP cycle. The outstanding restricted stock units granted to Mr. Boychuk under each of the aforementioned cycles are considered vested, since there are no further conditions on his receiving the shares, though they will not actually vest until the applicable vesting date under each of these cycles. Vesting of all outstanding awards are generally subject to the NEO’s continued service through the applicable vesting date. (3)Market Value of Shares or Units of Stock That Have Not Vested – The market values are based on the closing price of the Company’s common stock as of December 29, 2023 (the last trading day of 2023) of $34.67. (4)Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested – The amounts reflected in this column represent performance units granted under the 2022-2024 and 2023-2025 LTIPs. The number of performance units shown is equal to the target number of performance units granted under the 2022-2024 LTIP cycle and the 2023-2025 LTIP cycle (and in the case of Mr. Boychuk, prorated to reflect his partial year of service). These performance units are eligible to be earned and vest based on achievement of Company performance measures over the applicable performance period. Performance units granted under the 2021-2023 LTIP cycle are considered earned as of December 31, 2023 and are included in the “2023 Option Exercises and Stock Vested” table below. (5)Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested – The market values are based on the closing price of the Company’s common stock as of December 29, 2023 (the last trading day of 2023) of $34.67 per share. | | | | | | (3)2024 Proxy Statement | Market value of Shares or Units of Stock That Have Not Vested – The market values are based on the closing price of the Company’s common stock as of December 31, 2021, the last trading day of 2021, of $37.60.94 |
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(4) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested – The amounts reflected in this column represent performance units granted under the 2020-2022 and 2021-2023 LTIPs. The number of performance units shown is equal to the target number of performance units granted under the 2020-2022 LTIP cycle and the threshold number of performance units granted under the 2021-2023 LTIP cycle. These performance units are eligible to be earned and vest based on achievement of Company performance measures over the applicable performance period. | (5) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested – The market values are based on the closing price of the Company’s common stock as of December 31, 2021, the last trading day of 2021, of $37.60 per share. |
2021Compensation Tables | 2023 Option Exercises and Stock Vested Table
2023 Option Exercises and Stock Vested Table The table below presents the value of performance units, non-qualified stock options, restricted stock units and restricted stock that vested in 2021. | | Option Awards | | Stock Awards | Name | | Shares Acquired on Exercise(1) | | Value Realized on Exercise(2) | | Shares Acquired on Vesting(3) | | Value Realized on Vesting(4) | | James M. Foote | | — | | — | | 368,808 | | 12,576,353 | | Kevin S. Boone | | — | | — | | 72,725 | | 2,444,386 | | Sean R. Pelkey | | 4,131 | | 106,842 | | 15,902 | | 518,260 | | Jamie J. Boychuk | | — | | — | | 79,428 | | 2,660,394 | | Nathan D. Goldman | | 90,555 | | 2,248,500 | | 77,362 | | 2,638,044 | | Diana B. Sorfleet | | 24,780 | | 647,031 | | 80,323 | | 2,725,443 | | Mark K. Wallace | | 305,385 | | 4,944,867 | | 167,509 | | 5,526,544 | |
2023, and the non-qualified stock options that were exercised in 2023. | | | | | | | | | | | | | | | | | | | Option Awards | | Stock Awards | Name | Shares Acquired on Exercise(1) | Value Realized on Exercise ($) | | Shares Acquired on Vesting(2) | Value Realized on Vesting ($)(3) | Joseph R. Hinrichs | — | | — | | | — | | — | | Sean R. Pelkey | — | | — | | | 28,439 | | 1,006,456 | | Kevin S. Boone | — | | — | | | 83,775 | | 2,964,797 | | Stephen Fortune | — | | — | | | 12,419 | | 371,825 | | Nathan D. Goldman | — | | — | | | 61,436 | | 2,174,220 | | Jamie J. Boychuk | 560,364 | | 4,697,318 | | | 111,354 | | 3,798,065 | |
(1)Shares Acquired on Exercise – Shares acquired on exercise include non-qualified stock options exercised and sold on December 27, 2023 by Mr. Boychuk. (2)Shares Acquired on Vesting – Shares acquired through stock awards include: (i) performance units that were paid out pursuant to the 2021-2023 LTIP; (ii) restricted stock units granted to Mr. Fortune that vested on April 1, 2023; and (iii) outstanding restricted stock units granted to Mr. Boychuk pursuant to the 2021-2023, 2022-2024 and 2023-2025 LTIP cycles, since there are no further conditions on his receiving the shares. (3)Value Realized on Vesting – The values in this column reflect: (i) the number of performance units paid out pursuant to the 2021-2023 LTIP cycle multiplied by $35.39, the closing price of the Company’s common stock on January 26, 2024, which is the date the performance units were paid out; (ii) the number of shares of restricted stock units granted to Mr. Fortune pursuant to his sign-on stock award multiplied by $29.94, the closing price of the Company’s common stock on April 1, 2023, which is the date the restricted stock units vested; and (iii) the aggregate number of prorated shares of restricted stock units outstanding for Mr. Boychuk pursuant to the 2021-2023, 2022-2024 and 2023-2025 LTIP cycles multiplied by $31.52, the closing price of the Company’s common stock on August 4, 2023 (his last day of employment). | (1) | Shares Acquired on Exercise – Reflects the number of shares acquired on the exercise of non-qualified stock options that were exercised by Mr. Pelkey on April 22, 2021, Mr. Goldman on April 22, 2021 and October 22, 2021, Ms. Sorfleet on April 26, 2021, and Mr. Wallace on May 10, 2021 and September 8, 2021. | | | | (2)95 | Value Realized on Exercise – The value in this column reflects the number of non-qualified stock options exercised by Messrs. Pelkey, Goldman, Wallace and Ms. Sorfleet multiplied by the difference between the grant’s exercise price and the Company’s common stock price at the time of exercise. | (3) | Shares Acquired on Vesting – Shares acquired through stock awards include: (i) performance units that were paid out pursuant to the 2019-2021 LTIP; (ii) restricted stock units that vested in February 2021 pursuant to the 2018-2020 LTIP; and (iii) restricted stock that vested for Messrs. Pelkey, Boone and Boychuk on September 4, 2021, and for Mr. Wallace on August 2, 2021. | (4) | Value Realized on Vesting – The values in this column reflect: (i) the number of performance units paid out pursuant to the 2019-2021 LTIP cycle multiplied by $34.10, the closing price of the Company’s common stock on January 21, 2022, the date the performance units were paid out; (ii) the aggregate number of shares of restricted stock and restricted stock units that vested in 2021 multiplied by the closing price of CSX common stock on the applicable vesting date. |
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COMPENSATION DISCUSSION AND ANALYSIS
2021Compensation Tables | 2023 Pension Benefits Table
2023 Pension Benefits Table As described below, CSX maintains closed defined benefit pension plans (qualified and non-qualified) under which the NEOs are eligible for benefits. Name | | Plan Name | | Years Credited Service | | Present Value Accumulated Benefits(1) | | Payments During Last FY | | James M. Foote | | Qualified CSX Pension Plan | | 4.250 | | $ 131,189 | | | | | | Nonqualified Special Retirement Plan | | 4.250 | | 1,990,358 | | | | Kevin S. Boone | | Qualified CSX Pension Plan | | 4.333 | | 100,098 | | | | | | Nonqualified Special Retirement Plan | | 4.333 | | 289,417 | | | | Sean R. Pelkey | | Qualified CSX Pension Plan | | 16.500 | | 232,697 | | | | | | Nonqualified Special Retirement Plan | | 16.500 | | 117,670 | | | | Jamie J. Boychuk | | Qualified CSX Pension Plan | | 4.667 | | 107,444 | | | | | | Nonqualified Special Retirement Plan | | 4.667 | | 300,135 | | | | Nathan D. Goldman | | Qualified CSX Pension Plan | | 18.583 | | 503,522 | | | | | | Nonqualified Special Retirement Plan | | 18.583 | | 832,478 | | | | Diana B. Sorfleet | | Qualified CSX Pension Plan | | 10.583 | | 297,422 | | | | | | Nonqualified Special Retirement Plan | | 10.583 | | 499,359 | | | | Mark K. Wallace | | Qualified CSX Pension Plan | | 4.833 | | 125,096 | | | | | | Nonqualified Special Retirement Plan | | 4.833 | | 530,438 | | | |
(1) | For each of the NEOs, pension benefits accrue based on a “cash balance” formula. Under the cash balance formula, benefits are expressed in the form of a hypothetical account balance. For each month of service, the NEO’s account is credited with a percentage of the participant’s pay for that month. The percentage of pay credited is determined based on the participant’s age and years of service. |
| | | | | | | | | | | | | | | Name | Plan Name | Years Credited Service | Present Value Accumulated Benefits ($)(2) | Payments During Last FY ($) | Joseph R. Hinrichs(1) | Qualified Pension Plan | — | | — | | — | | | Non-qualified Special Retirement Plan | — | | — | | — | | Sean R. Pelkey | Qualified Pension Plan | 18.500 | | 311,623 | | — | | | Non-qualified Special Retirement Plan | 18.500 | | 345,987 | | — | | Kevin S. Boone | Qualified Pension Plan | 6.333 | | 163,484 | | — | | | Non-qualified Special Retirement Plan | 6.333 | | 558,055 | | — | | Stephen Fortune(1) | Qualified Pension Plan | — | | — | | — | | | Non-qualified Special Retirement Plan | — | | — | | — | | Nathan D. Goldman | Qualified Pension Plan | 20.583 | | 629,276 | | — | | | Non-qualified Special Retirement Plan | 20.583 | | 1,158,816 | | — | | Jamie J. Boychuk | Qualified Pension Plan | 6.333 | | 161,441 | | — | | | Non-qualified Special Retirement Plan | 6.333 | | 522,723 | | — | |
(1)Messrs. Hinrichs and Fortune do not participate in the pension plans, based on their hire date; more information on the qualified Pension Plan can be found under the “Benefits” subsection of the CD&A section beginning on page 862021 of this Proxy Statement. They instead receive a non-elective contribution of 3% of base pay and actual bonus into their CSXtra 401(k) Plan accounts and Executive Deferred Compensation Plan (EDCP) accounts. (2)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. More information on the qualified Pension Plan can be found under the “Benefits” subsection of the CD&A beginning on page 86 of this Proxy Statement. 2023 Non-qualified Deferred Compensation Table The following table presents a summary of 20212023 contributions made under the Executives’ Deferred Compensation Plan,EDCP, as well as associated 20212023 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 Last Fiscal Year(1) | | Registrant Contributions Last Fiscal Year(2) | | Aggregate Earnings Last Fiscal Year(3) | | Aggregate Distributions Last Fiscal Year | | Aggregate Balance Last Fiscal Year End | | James M. Foote | | 87,500 | | 41,635 | | 138,356 | | — | | 686,605 | | Sean R. Pelkey | | — | | — | | — | | — | | — | | Kevin S. Boone | | 23,500 | | 13,708 | | 8,971 | | — | | 81,907 | | Jamie J. Boychuk | | 22,550 | | 13,154 | | 6,023 | | — | | 41,727 | | Nathan D. Goldman | | 15,375 | | 8,969 | | 4,004 | | — | | 124,099 | | Diana B. Sorfleet | | 15,250 | | 8,896 | | 29,460 | | — | | 187,949 | | Mark K. Wallace | | 24,700 | | 14,408 | | 17,337 | | — | | 3,557 | |
| | | | | | | | | | | | | | | | | | Name | Executive Contributions Last Fiscal Year(1) | Registrant Contributions Last Fiscal Year(2) | Aggregate Earnings Last Fiscal Year(3) | Aggregate Distributions Last Fiscal Year | Aggregate Balance Last Fiscal Year-End | Joseph R. Hinrichs | 64,325 | | 39,668 | | 11,959 | | — | | 133,189 | | Sean R. Pelkey | 363,948 | | 11,273 | | 66,760 | | — | | 479,484 | | Kevin S. Boone | 23,825 | | 13,898 | | 28,323 | | — | | 168,558 | | Stephen Fortune | — | | 5,475 | | 105 | | — | | 5,580 | | Nathan D. Goldman | 14,525 | | 8,473 | | 11,156 | | — | | 172,235 | | Jamie J. Boychuk | 17,900 | | 10,442 | | 12,992 | | — | | 114,672 | | | | | | | |
(1)Executive Contributions in the Last Fiscal Year – The values in this column reflect salary deferred by the NEOs in 2023, under the EDCP. These amounts are also included in the “Salary” column of the “Summary Compensation Table.” (2)Company Contributions in the Last Fiscal Year – Company contributions in 2023 are also reported in the “All Other Compensation” column of the “Summary Compensation Table.” See footnote 6 to that table for more details. (3)Aggregate Earnings in the Last Fiscal Year – Earnings on cash deferrals include the total gains and losses credited in 2023 based on participant investment elections. | (1) | Executive Contributions in Last Fiscal Year – The values in this column reflect salary deferred by the NEOs in 2021 under the EDCP. These amounts are also included in the Salary column of the Summary Compensation Table. | | | | (2)2024 Proxy Statement | Company Contributions in Last Fiscal Year – Company contributions in 2021 are also reported in the All Other Compensation column of the Summary Compensation Table. | (3) | Aggregate Earnings in Last Fiscal Year – Earnings on cash deferrals include the total gains and losses credited in 2021 based on participant investment elections.96 |
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COMPENSATION DISCUSSION AND ANALYSIS
Compensation Tables | Potential Payouts Under Change-of-Control AgreementsThe following table presents the severance benefits to which each of the NEOs would be entitled as of December 31, 2021, under his or her
Potential Payouts Under Change-of-Control Agreement upon the hypothetical termination of employment following a change-of-control: (i) by CSX other than for cause or disability; (ii) by the NEO for good reason; or (iii) upon a constructive termination. The definitions of “change of control”, “cause”, “disability”, “good reason” and “constructive termination” are set forth in the Change-of-Control Agreements. No payments have been made to any NEO pursuant to the Change-of-Control Agreements. Mr. Wallace is not included in the table below due to his untimely passing on November 28, 2021. He received a prorated bonus payment and all outstanding equity, which will vest per the original vesting schedules.Name | | Severance ($)(1) | | Pro-Rata Bonus Payment ($)(2) | | Equity ($)(3) | | Welfare Benefit Values ($)(4) | | Outplacements ($) | | Aggregate Payments ($) | | James M. Foote | | 12,333,750 | | 5,250,000 | | 73,152,498 | | 22,752 | | 40,000 | | 90,799,000 | | Sean R. Pelkey | | 1,754,400 | | 479,165 | | 2,029,133 | | 54,648 | | 20,000 | | 4,337,346 | | Kevin S. Boone | | 4,186,000 | | 1,120,000 | | 13,767,839 | | 81,972 | | 40,000 | | 19,195,811 | | Jamie J. Boychuk | | 4,186,000 | | 1,120,000 | | 12,937,635 | | 80,942 | | 40,000 | | 18,364,577 | | Nathan D. Goldman | | 3,124,550 | | 792,000 | | 16,309,120 | | 58,392 | | 40,000 | | 20,324,062 | | Diana B. Sorfleet | | 3,124,550 | | 792,000 | | 10,938,054 | | 81,972 | | 40,000 | | 14,976,576 | |
(1) | Severance – Represents a cash severance payment equal to 2.99 times the sum of the NEO’s (except Mr. Pelkey) annual base salary and “target bonus”. The cash severance payment for Mr. Pelkey is equal to 2 times the sum of his annual base salary and “target bonus”. | (2) | Pro-rata Bonus Payment – Represents the annual bonus that would have been payable based upon the NEO’s Target Incentive Opportunity and the plan’s payout percentage (160% of target for 2021, as described above). Because the hypothetical termination is occurring on the last day of the year, the amount in the table is not prorated. | (3) | Equity – Represents the value of outstanding equity awards that would vest in connection with the transaction, including LTIP performance units based on 100% attainment of target levels under the 2019-2021, 2020-2022 and 2021-2023 LTIPs and the closing price of the Company’s common stock on December 31, 2021 of $37.60 per share. | (4) | Welfare Benefit Values – Estimated values associated with the continuation of medical, prescription, dental, disability, employee life, group life, accidental death and travel insurance for three years post-termination following a change-of-control. |
Benefits Provided Following a Change-of-Control
Agreements Each Change-of-Control Agreement provides that for a period of three years after a change-of-control (or, if later, 12 months following the final decision by an agency of a regulated business combination) (the “Employment Period”), CSX is required to:■ | Pay the executive an annual base salary that is at least equal to the highest base salary payable to the executive in the 12-month period immediately preceding the Employment Period (although certain reductions in salary that are also applicable to similarly-situated Company executives may be permitted); | ■ | 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 similarly-situated Company executives may be permitted); and | ■ | Ensure the executive is eligible to participate in incentive, retirement, health and group benefits and other retirement–related benefit plans and to benefit from paid vacation and other policies of CSX and its affiliates, on a basis not less favorable than the benefits generally available to the executive before the Employment Period (or the benefits generally available to other executives at any time after the beginning of the Employment Period, whichever is more favorable). |
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COMPENSATION DISCUSSION AND ANALYSIS
Benefits Provided if the NEO’s Employment is Terminated Following a Change-of-Control
Each Change-of-Control Agreementagreement provides that CSX will pay to the NEO the severance benefits described below if, during the Employment Period, CSX terminates the NEO’s employment other than for cause or disability, if the NEO resigns for good reason or upon a constructive termination (as such terms are defined in the Change-of-Control Agreements)change-of-control agreements). An NEO whose employment is terminated without cause in anticipationor resigns for good reason within three months prior to a change of a change-of-controlcontrol 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 NEO’s target incentive opportunity and the plan’s achievement percentage prorated for the number of days in the calendar year prior to a termination of employment; and | ■ | 2.99 times (2 times for Mr. Pelkey) the sum of the NEO’s annual base salary and the NEO’s “target annual bonus.” |
nthe NEO’s “annual bonus” based upon the NEO’s target incentive opportunity and the plan’s achievement percentage prorated for the number of days in the calendar year prior to a termination of employment; and n3 times the sum of the annual base salary and “target bonus” for Mr. Hinrichs, and 2.99 times the sum of the annual base salary and “target bonus” for all other NEOs. 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 other executives, whichever is more favorable).
Outplacement — Outplacement services at a cost to CSX of $40,000. The following table presents the severance benefits to which each of the NEOs would be entitled as of December 31, 2023, under his change-of-control agreement upon the hypothetical termination of employment following a change of control. The definitions of “change of control”, “cause”, “disability”, “good reason” and “constructive termination” are set forth in the change-of-control agreements. No actual payments have been made to any NEO pursuant to the change-of-control agreements. In addition, no hypothetical amounts are included for Mr. Boychuk, whose actual termination payments are described below. | | | | | | | | | | | | | | | | | | | | | Name | Severance ($)(1) | Pro-Rata Bonus Payment ($)(2) | Equity ($)(3) | Welfare Benefit Values ($)(4) | Outplacements ($)(5) | Aggregate Payments ($) | Joseph R. Hinrichs | 10,500,000 | | 2,415,000 | | 18,214,324 | | 65,949 | | 40,000 | | 31,235,273 | | Sean R. Pelkey | 3,946,800 | | 759,000 | | 5,727,195 | | 91,584 | | 40,000 | | 10,564,579 | | Kevin S. Boone | 4,335,500 | | 833,750 | | 13,519,456 | | 91,584 | | 40,000 | | 18,820,290 | | Stephen Fortune | 3,887,000 | | 747,500 | | 4,570,127 | | 91,584 | | 40,000 | | 9,336,211 | | Nathan D. Goldman | 3,238,170 | | 589,950 | | 14,241,197 | | 64,656 | | 40,000 | | 18,173,973 | |
(1)Severance – Represents a cash severance payment equal to 3 times the sum of the annual base salary and “target bonus” for Mr. Hinrichs, and 2.99 times the sum of annual base salary and “target bonus” for all other NEOs. (2)Pro-rata Bonus Payment – Represents the annual bonus that would have been payable based upon the NEO’s Target Incentive Opportunity and the plan’s payout percentage (115% of target for 2023). Because the hypothetical termination is occurring on the last day of the year, the amount in the table is not prorated. (3)Equity – Represents the value of outstanding equity awards that would vest in connection with the transaction, including LTIP performance units based on 100% attainment of target levels under the 2021-2023, 2022-2024 and 2023-2025 LTIPs and the closing price of the Company’s common stock on December 29, 2023 (the last trading day of 2023) of $34.67 per share. (4)Welfare Benefit Values – Estimated values associated with the continuation of medical, prescription, dental, disability, employee life, group life, accidental death and travel insurance for three years post-termination following a change of control. (5)Outplacements – Values associated with outplacement services at a cost to exceed $40,000.CSX of $40,000 for each NEO.
Compensation Tables| Potential Payouts Under Change-of-Control Agreements Benefits Provided Following a Change of Control Each change-of-control agreement provides that, for a period of three years after a change of control (or, if later, 12 months following the final decision by an agency of a regulated business combination) (the “Employment Period”), CSX is required to: npay the executive an annual base salary that is at least equal to the highest base salary payable to the executive in the 12-month period immediately preceding the Employment Period (although certain reductions in salary that are also applicable to similarly-situated Company executives may be permitted); nprovide 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 similarly-situated Company executives may be permitted); and nensure the executive is eligible to participate in incentive, retirement, health and group benefits and other retirement–related benefit plans and to benefit from paid vacation and other policies of CSX and its affiliates, on a basis not less favorable than the benefits generally available to the executive before the Employment Period (or the benefits generally available to other executives at any time after the beginning of the Employment Period, whichever is more favorable). Other Change-of-Control Benefits Pursuant to the terms of the Stock Plans,Plan, in the event of a termination of employment: (i)employment, by CSX without cause;cause or (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 for a cash payment equal to the fair market value of a share multiplied by the shares subject to the awards at target levels; | ■ | Restricted stock units and unvested stock options are cancelled in exchange for a cash payment equal to the fair market value of a share, minus the exercise price, if applicable, multiplied by the number of shares subject to the award; and | ■ | Restricted stock vests in full. |
nperformance-based equity awards are deemed earned at target levels and cancelled in exchange for a cash payment equal to the fair market value of a share multiplied by the shares subject to the awards at target levels; nrestricted stock units and unvested stock options are cancelled in exchange for a cash payment equal to the fair market value of a share, minus the exercise price, if applicable, multiplied by the number of shares subject to the award; and nrestricted stock vests in full. Impact of a Change-of-ControlChange of Control on Deferred Compensation (EDCP) and 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-controlchange of control (as defined in the EDCP). The Special Retirement Plan also contains certain change-of-control provisions. No Tax Gross-Ups for Excess Parachute Payments The Company does not provide gross-up payments for excess parachute excise taxes. Rather, the Change-of-Control Agreementschange-of-control agreements provide that the Company will providegive the best-net-benefit, best-net-benefit—meaning that, to the extent an NEO would have a higher net after-tax benefit if his or her payments were reduced so as to avoid excise taxes due to an excess parachute payment, the payments will be automatically adjusted downward to prevent an excess parachute payment. No amounts are reduced in any of the tables to give effect to any such reduction. | 64 | | | | | 2024 Proxy Statement | 98 |
Compensation Tables | Potential Payouts Under Change-of-Control Agreements Table of Contents
COMPENSATION DISCUSSION AND ANALYSIS
Post-Employment Compensation -– Termination without Cause by the Company or by the Executive for Good Reason (Other than in connection with a Change-of-Control)Change of Control) The following table presents the severance benefits to which each of the NEOs would be entitled as of December 31, 2021,2023, under the applicable severance arrangement assuming the NEO was terminated “without cause” by the Company or by the executive for “good reason.”reason”. For Mr. Wallace is not includedBoychuk, the amounts in the table below duerepresent the total amounts which have been paid or will be paid in connection with his involuntary separation without cause from the Company. | | | | | | | | | | | | | | | | | | | | | Name | Severance ($)(2) | Stock Awards ($)(3) | Option Awards ($)(3) | Non-Equity Incentive Plan Compensation ($)(4) | Other Compensation ($)(5) | Total Compensation Payable ($) | Joseph R. Hinrichs | 7,000,000 | | 8,429,737 | | 608,829 | | 2,415,000 | | 71,152 | | 18,524,718 | | Sean R. Pelkey | 1,320,000 | | 3,348,833 | | 585,010 | | 759,000 | | 80,128 | | 6,092,971 | | Kevin S. Boone | 1,450,000 | | 5,338,822 | | 5,889,629 | | 833,750 | | 80,128 | | 13,592,329 | | Stephen Fortune | 1,300,000 | | 3,391,313 | | 141,555 | | 747,500 | | 80,128 | | 5,660,496 | | Nathan D. Goldman | 1,083,000 | | 3,928,446 | | 8,621,953 | | 589,950 | | 71,152 | | 14,294,501 | | Jamie J. Boychuk(1) | 1,450,000 | | 3,744,324 | | 54,276 | | 498,438 | | 80,128 | | 5,827,166 | |
(1)Mr. Boychuk was involuntarily separated without cause under circumstances that made him eligible for severance benefits under the Company’s executive severance plan on August 4, 2023. (2)Severance – Per his employment letter, Mr. Hinrichs would receive two times his annual salary plus two times his target annual bonus. All other NEOs would receive one times their base salary plus one times their target annual bonus, as determined by the executive severance plan established in September 2022 and amended and restated in July 2023. All severance payments made under the executive severance plan are paid out in installments over 12 months. (3)Stock and Option Awards – This includes a prorated amount of all outstanding equity awards as of December 31, 2023. However, all equity would be settled according to each grant’s original vesting schedule. All performance unit calculations in the table assume a target performance; however, actual vesting would be based on Company performance. All equity awards have been valued using the closing stock price on December 29, 2023 (the last trading day of 2023) of $34.67. The option awards have been calculated using the difference between the respective grant’s exercise price and the closing stock price on December 29, 2023, multiplied by the prorated number of options held by the NEO. For Mr. Boychuk, his untimely passingprorated awards are valued using the closing stock price on November 28, 2021.Name | | Severance ($)(1) | | Stock Awards ($)(2) | | Option Awards ($)(2) | | Non-Equity Incentive Plan Compensation ($)(3) | | Other Compensation ($)(4) | | Total Compensation Payable ($) | | James M. Foote | | 8,250,000 | | 30,304,735 | | 42,847,763 | | 5,250,000 | | 57,832 | | 86,710,330 | | Sean R. Pelkey | | 387,000 | | 510,660 | | 777,391 | | 479,165 | | 55,172 | | 2,209,388 | | Kevin S. Boone | | 175,000 | | 3,755,751 | | 7,459,048 | | 1,120,000 | | 75,172 | | 12,584,971 | | Jamie J. Boychuk | | 175,000 | | 3,777,822 | | 6,606,397 | | 1,120,000 | | 74,829 | | 11,754,048 | | Nathan D. Goldman | | 412,500 | | 3,711,797 | | 10,683,559 | | 792,000 | | 67,312 | | 15,667,168 | | Diana B. Sorfleet | | 412,500 | | 3,711,797 | | 5,312,493 | | 792,000 | | 75,172 | | 10,303,962 | |
August 4, 2023 (his last day of employment) of $31.52. The prorated options would remain outstanding until the end of their originally scheduled term. (4)Non-Equity Incentive Plan Compensation – Represents the annual bonus that would have been payable based upon the NEO’s Target Incentive Opportunity and the plan’s payout percentage (115% of target for 2023, as described above). Because the hypothetical termination is occurring on the last day of the year, the amount in the table is not prorated (other than for Mr. Boychuk, whose amount is prorated based on his actual termination date). (5)Other Compensation – Each NEO would be eligible to receive outplacement and financial planning services of $40,000 and $12,000, respectively. In addition, each would also have the option to continue their medical and dental benefits if they elected to receive their severance as monthly installments over the period their monthly severance payments are made. | (1) | Severance – Per his employment agreement, Mr. Foote would receive two times his annual salary plus two times his target annual bonus. All other NEOs have their severance payment determined by the management employee severance pay schedule based on tenure. Under the management severance policy, Messrs. Goldman and Pelkey and Ms. Sorfleet would receive nine months’ salary and Messrs. Boone and Boychuk would receive three months’ salary. | | | | (2)99 | Stock and Option Awards – This includes a prorated amount of all outstanding equity awards as of December 31, 2021, except for Mr. Foote, who would receive his full award (not prorated) per his respective employment agreement. However, all equity would be settled according to each grant’s original vesting schedule. All performance unit calculations in the table assume a target performance; however, actual vesting would be based on Company performance. All equity awards have been valued using the closing stock price on December 31, 2021 (the last trading day of 2021) of $37.60. The Option Awards have been calculated using the difference between the respective grant’s exercise price and the closing stock price on December 31, 2021, multiplied by the prorated number of Options held by the NEO. The prorated Options would remain outstanding until the end of their originally scheduled term. | (3) | Non-Equity Incentive Plan Compensation - Represents the annual bonus that would have been payable based upon the NEO’s Target Incentive Opportunity and the plan’s payout percentage (160% of target for 2021, as described above). Because the hypothetical termination is occurring on the last day of the year, the amount in the table is not prorated. | (4) | Other Compensation – Each NEO would be eligible to receive outplacement and financial planning services not to exceed $40,000 and $12,000, respectively. In addition, each would also have the option to continue their medical and dental benefits if they elected to receive their severance as monthly installments over the period their monthly severance payments are made. |
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CEO Pay Ratio
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.Hinrichs. The pay ratio included in this information is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K. For 2021,2023, the last completed fiscal year: | | | | ■ nThe annual total compensation of the individual identified as the Company’s median employee, other than the CEO, was $107,772. | ■ | $121,000. This represents an increase of $2,952 or 2% compared to 2023. nThe annual total compensation of the CEO was $20,014,390. | ■ | $14,095,787. nBased on this information, the ratio for 20212023 of the annual total compensation of Mr. FooteHinrichs to the annual total compensation of the median employee was 186116 to 1. | |
The Company identified a new median employee as of year-end 2021.2023. To identify the median employee, as well as to determine the annual total compensation of Mr. Foote,Hinrichs, the following analysis occurred: | 1. | As of December 31, 2021, the Company’s employee population consisted of approximately 20,100 employees. | | 2. | The median employee was identified by using 2021 Medicare Wages for all individuals, excluding Mr. Foote, that were reflected in the Company’s payroll records as reported to the Internal Revenue Service on Forms W-2 for 2021. | | 3. | 1.As of December 31, 2023, the Company’s employee population consisted of more than 24,000 employees. 2.The median employee was identified by using 2023 Medicare Wages for all individuals, excluding Mr. Hinrichs, that were reflected in the Company’s payroll records as reported to the Internal Revenue Service on Forms W-2 for 2023. 3.All employees who were full-time, part-time or seasonal, including management and union, as well as furloughed employees who received any wages within the calendar year, were included in the analysis. Employees from the Company’s consolidated subsidiaries were also included. In accordance with SEC rules, all non-U.S. employees were excluded from the analysis. As of December 31, 2021, we employed 39 non-U.S. employees, all in Canada, which represented less than 1% of our overall employee population. | | 4. | Annualized compensation was determined for any full or part-time employees who were employed at year-end but did not work for the Company the entire fiscal year, including those who were furloughed for part of the year. No cost of living or other adjustments were made to compensation. | | 5. | The use of Medicare Wages is a consistently applied measure that includes all forms of taxable compensation, which we believe is most representative of the Company’s employee base since there are union and management workforces. | | 6. | Once the median employee was identified, the Company determined the sum of all elements of such employee’s compensation for 2021, in accordance with Item 402(c)(2)(x) of Regulation S-K, which resulted in annual total compensation of $107,772. The difference between such employee’s base salary, wages, and overtime pay ($84,652) and the employee’s total annual compensation was the value of the health care benefits for the employee and eligible dependents, which was $23,120. | | 7. | The annual total compensation for Mr. Foote includes the amount reported in the “Total” column of the Summary Compensation Table included in this Proxy Statement, which was determined in accordance with Item 402(c)(2)(x) of Regulation S-K, plus the added value of his health care benefits, which was $7,584. | | | |
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Item 3:
Advisory (Non-Binding) Vote to Approve
the Compensation of CSX’s Named
Executive Officers
In accordance with SEC rules, all non-U.S. employees were excluded from the Dodd-Frank Act and Section 14Aanalysis. As of December 31, 2023, we employed 45 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 Securities Exchange Actyear. No cost of 1934, CSXliving or other adjustments were made to compensation. 5.The use of Medicare Wages is providing shareholders with the opportunity to vote on a non-binding, advisory resolution to approve theconsistently applied measure that includes all forms of taxable compensation, which we believe is most representative of the Company’s NEOs, which is disclosed pursuant toemployee base since there are union and management workforces. 6.Once the median employee was identified, the Company determined the sum of all elements of such employee’s compensation for 2023, in accordance with Item 402402(c)(2)(x) of Regulation S-K, which resulted in annual total compensation of $121,000. The difference between such employee’s base salary, wages and describedovertime pay ($94,704) and the employee’s total annual compensation ($121,000) was the value of the health care benefits for the employee and eligible dependents, which was $26,296. 7.The annual total compensation of $14,095,787 for Mr. Hinrichs includes the amount reported in the “Total” column of the “Summary Compensation Table” included in this Proxy Statement, which was determined in accordance with Item 402(c)(2)(x) of Regulation S-K.
The following table sets forth the compensation for our Principal Executive Officer (the “PEO”) and the average compensation for our other NEOs, both as reported in the “Summary Compensation Table” and with certain adjustments to reflect the “compensation actually paid” to such individuals, as defined under SEC rules, for each of 2023, 2022, 2021 and 2020. The table also provides information on our cumulative total shareholder return (“TSR”), TSR for our peer group, Net Income and Economic Profit (CSX Cash Earnings or CCE). | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year (a) | Summary Compensation Table Total for Current PEO(1) (b) | Compensation Actually Paid to Current PEO(2) (c) | Summary Compensation Table Total for Former PEO(1) (b1) | Compensation Actually Paid to Former PEO(2) (c1) | Average Summary Compensation Table Total for Non-PEO NEOs(1) (d) | Average Compensation Actually Paid to Non-PEO NEOs(2) (e) | Value of Initial Fixed $100 Investment Based On: | Net Income(4) (in Millions) (h) | Economic Profit(5) (in Millions) (i) | Total Shareholder Return (f) | Peer Group Total Shareholder Return(3) (g) | 2023 | $14,074,235 | $15,733,686 | N/A | N/A | $4,114,993 | $4,663,286 | $151 | $150 | $3,715 | $2,658 | 2022 | $8,348,517 | $9,301,674 | $19,536,434 | $9,694,786 | $4,856,562 | $3,422,243 | $133 | $127 | $4,166 | $2,962 | 2021 | N/A | N/A | $20,006,806 | $32,556,244 | $4,076,812 | $6,737,795 | $160 | $134 | $3,781 | $2,472 | 2020 | N/A | N/A | $15,306,715 | $28,736,814 | $3,586,272 | $6,163,283 | $127 | $111 | $2,765 | $1,761 |
(1)This table reflects the amounts reported in the “Summary Compensation Table” for Joseph R. Hinrichs, our current PEO, and James M. Foote, our former PEO, for each of the years listed. The non-PEO NEOs for whom the average compensation is presented in this table are: (i) for fiscal 2023, Messrs. Pelkey, Boone, Fortune and Goldman; (ii) for fiscal 2022, Messrs. Pelkey, Boone, Boychuk and Fortune; (iii) for fiscal 2021, Messrs. Pelkey, Boone, Boychuk, Goldman and Wallace and Ms. Sorfleet; and (iv) for fiscal 2020, Messrs. Boone, Boychuk, Goldman and Wallace.
(2)Compensation “actually paid” for the PEO and average compensation “actually paid” for the non-PEO NEOs in 2023 reflect the respective amounts set forth in columns (b), (b1) and (d), adjusted as follows in the table below, as determined in accordance with SEC rules. These dollar amounts do not reflect the actual amount of compensation earned by or paid to the PEO and our other NEOs during the applicable year. | | | | | | | | | | | | | Calculation for Current PEO | Calculation for Former PEO | Calculation for Average of Non-PEO NEOs | Calculation of Compensation “Actually Paid” | Year 2023 ($) | Year 2023 ($) | Year 2023 ($) | Summary Compensation Table Total | 14,074,235 | | N/A | 4,114,993 | | Less Stock Award Value Reported in Summary Compensation Table for the Covered Year | (10,000,035) | | N/A | (2,531,268) | | Plus Fair Value for Awards Granted in the Covered Year | 11,189,926 | | N/A | 2,813,371 | | Change in Fair Value of Awards from Prior Years that Vested in the Covered Year | — | | N/A | 97,001 | | Change in Fair Value of Outstanding Unvested Awards from Prior Years | 469,561 | | N/A | 238,928 | | Less Fair Value of Awards Forfeited during the Covered Year | — | | N/A | — | | Plus Fair Value of Incremental Dividends of Earnings Paid on Stock Awards | — | | N/A | — | | Less Aggregate Change in Actuarial Present Value of Accumulated Benefit Under Pension Plans | — | | N/A | (132,599) | | Plus Aggregate Service Cost and Prior Service Cost for Pension Plans | — | | N/A | 62,860 | | Compensation “Actually Paid” | 15,733,686 | | N/A | 4,663,286 | |
Fair values set forth in the table above are computed in accordance with ASC 718 as of the end of the respective fiscal year, other than fair values of awards that vest in the covered year, which are valued as of the applicable vesting date. (3)Peer Group Total Shareholder Return is based on the S&P 500 Industrials Index, which is a peer group disclosed in the CD&A section of this Proxy Statement used by CSX to help determine executive pay. (4)Reflects “Net Income” in the accompanying compensation tablesCompany’s Consolidated Statements of Income included in the Company’s Annual Reports on Form 10-K for each of the years ended December 31, 2023, 2022, 2021 and 2020. (5)We determined Economic Profit (CSX Cash Earnings or CCE) to be the “most important” financial performance measure used to link performance to “Compensation Actually Paid” to our PEO and other NEOs in fiscal 2023, in accordance with Item 402(v) of Regulation S-K. Economic Profit is a non-GAAP financial measure designed to measure whether returns on new investments exceed an expected rate of return and to encourage investments in profitable growth projects. As we previously explained, Economic Profit is calculated as gross cash earnings minus the capital charge on gross operating assets. See the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 for reconciliation to the corresponding GAAP amounts.
Pay Versus Performance | CEO Pay-for-Performance Alignment CEO Pay-for-Performance Alignment The following chart sets forth the relationship between “Compensation Actually Paid” to our PEO, the average of “Compensation Actually Paid” to our other NEOs, the Company’s cumulative TSR and the related narrative disclosurespeer group’s cumulative TSR over the three-year period from 2020 through 2023. The peer group TSR is based on the S&P 500 Industrials Index.
Pay Versus Performance | CEO Pay-for-Performance Alignment The following chart sets forth the relationship between “Compensation Actually Paid” to our PEO, the average of “Compensation Actually Paid” to our other NEOs and our net income during fiscal years 2020 through 2023. The following chart sets forth the relationship between “Compensation Actually Paid” to our PEO, the average of “Compensation Actually Paid” to our other NEOs and Economic Profit (CSX Cash Earnings or CCE) during fiscal years 2020 through 2023.
Pay Versus Performance | CEO Pay-for-Performance Alignment Fiscal 2023 Tabular List of Most Important Financial PerformanceMeasures While Economic Profit (CSX Cash Earnings or CCE) is shown in this Proxy Statement. Accordingly,the pay-versus-performance table above, the following resolution will be submitted for a shareholder vote at the Annual Meeting:“RESOLVED, that the shareholders of CSX Corporation (the “Company”) approve, on an advisory (non-binding) basis, the compensation ofseven (plus two supplemental, as noted below) performance measures are all important and key to the Company’s named executive officers, as disclosedsuccess. These measures are included 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 orderincentive plans to align executive pay withensure alignment between 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 assessmentgoals of the Company’s performance, as well asNEOs to the performance of each NEO 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 disclosurebusiness strategies. The measures 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 procedurestable 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 2023 Annual Meeting, 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. not ranked. | | | | | | Most Important Performance Measures | The Board unanimously recommendsImportance to the Company | Average Annual Operating Income Growth Rate Percentage | nMeasures the average increase in operating income for each year of the LTIPcycle nAligns with the Company’s objective of profitable growth | Economic Profit (CSX Cash Earnings or CCE) | nMeasures the Company’s ability to grow operating income while remaining focused on cost control and asset utilization nEncourages investments in growth projects that earn more than an expected rate of return | Relative Total Shareholder Return (Relative TSR) | nDesigned to appropriately align NEO payouts with share price performance relative to a transportation-related peer group | Operating Income | nUsed to gauge the shareholders voteFORthis proposal.general health of the Company and to quantify operating profitmargin nAligns with the Company’s objective of profitable growth | Operating Ratio | nKey indicator of the Company’s efficiency nEncourages the Company to deliver results that grow the business while optimizing assets | Initiative-based Revenue Growth | nMeasures the Company’s ability to gain additional business on the CSX network through growth with new and existing customers nDirectly supports profitable growth by driving operating income | Safety | nReinforces the critical importance on ensuring employees’ personal safety and the safety of fellow railroaders and upholding our commitment to protect customers’ freight and the communities in which we operate | Trip Plan Compliance (supplemental) | nEnsures the Company successfully executes the service plan for customers’ shipments based on our commitments nFocuses on reliable and accurate service for customers | Fuel Efficiency (supplemental) | nIndicates the Company’s fuel productivity over the distance traveled nSupports environmental stewardship by reducing carbon emissions |
2022 Proxy Statement 67
Table of Contents
Equity Compensation
Plan Information
The following table sets forth information about the Company’s equity compensation plans as of December 31, 2021.Plan category | | Number of securities to be issued upon exercise of outstanding options, warrants and rights (in thousands) | | Weighted-average exercise price of outstanding options, warrants and rights | | Number of securities remaining available for future issuance under equity compensation plans (in thousands)(1) | Equity compensation plans approved by security holders | | 12,512 | | $22.42 | | 33,737 | Equity compensation plans not approved by security holders | | 0 | | 0 | | 0 | TOTAL | | 12,512 | | $22.42 | | 33,737 |
2023. | | | | | | | | | | | | Plan category | Number of securities to be issued upon exercise of outstanding options, warrants and rights (in thousands) | Weighted-average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans (in thousands)(1) | Equity compensation plans approved by security holders | 12,094 | | $25.04 | | 29,549 | | Equity compensation plans not approved by security holders | 0 | | 0 | | 0 | | TOTAL | 12,094 | | $25.04 | | 29,549 | |
(1)The number of shares remaining available for future issuance under plans approved by shareholders includes 29,549,316 shares available for grant in the form of stock options, performance units, restricted stock, restricted stock units, stock appreciation rights and stock awards pursuant to the Stock Plan. | (1) | | | | | 2024 Proxy Statement | The number of shares remaining available for future issuance under plans approved by shareholders includes 33,737,114 shares available for grant in the form of stock options, performance units, restricted stock, restricted stock units, stock appreciation rights and stock awards pursuant to the 2019 Stock Plan.106 |
68 | |
Table of Contents
Ownership of
Our Stock
Security Ownership of Management and Certain Beneficial Owners The following table sets forth, as of March 1, 2022,2024, the beneficial ownership of CSX common stock by each director, director nominee and NEO, and the directors, director nominee and current 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 | | Total Beneficial Ownership | | Percent of Class(2) | Donna M. Alvarado | | 368,733 | | - | | 368,733 | | * | Thomas P. Bostick | | 10,533 | | - | | 10,533 | | * | James M. Foote | | 879,716 | | 2,349,149 | | 3,228,865 | | * | Steven T. Halverson | | 297,598 | | - | | 297,598 | | * | Paul C. Hilal(3) | | 1,594,893 | | - | | 1,594,893 | | * | David M. Moffett | | 46,619 | | - | | 46,619 | | * | Linda H. Riefler | | 60,012 | | - | | 60,012 | | * | Suzanne M. Vautrinot | | 17,451 | | - | | 17,451 | | * | James L. Wainscott | | 10,533 | | - | | 10,533 | | * | J. Steven Whisler | | 177,475 | | - | | 177,475 | | * | John J. Zillmer | | 336,763 | | - | | 336,763 | | * | Kevin. S. Boone | | 109,653 | | 220,176 | | 329,829 | | * | Jamie J. Boychuk | | 114,847 | | 221,005 | | 335,852 | | * | Nathan D. Goldman | | 237,816 | | 437,252 | | 675,068 | | * | Sean R. Pelkey | | 67,318 | | 44,699 | | 112,017 | | * | Diana B. Sorfleet | | 157,319 | | 314,543 | | 471,862 | | * | All current executive officers and directors as a group (a total of 17) | | 4,517,718 | | 3,608,352 | | 8,126,070 | | * |
| | | | | | | | | | | | | | | Name of Beneficial Owner(1) | Amount of Beneficial Ownership | Shares for which Beneficial Ownership can be Acquired within 60 Days | Total Beneficial Ownership | Percent of Class(2) | Donna M. Alvarado | 386,582 | 0 | 386,582 | * | Thomas P. Bostick | 21,331 | 0 | 21,331 | * | Anne H. Chow | 20 | 0 | 20 | * | Steven T. Halverson | 316,291 | 0 | 316,291 | * | Paul C. Hilal(3) | 1,506,688 | 0 | 1,506,688 | * | Joseph R. Hinrichs | 245,545 | 67,648 | 312,863 | * | David M. Moffett | 58,545 | 0 | 58,545 | * | Linda H. Riefler | 71,173 | 0 | 71,173 | * | Suzanne M. Vautrinot | 28,591 | 0 | 28,591 | * | James L. Wainscott | 31,123 | 0 | 31,123 | * | J. Steven Whisler | 199,075 | 0 | 199,075 | * | John J. Zillmer | 346,061 | 0 | 346,061 | * | Kevin S. Boone(4) | 178,297 | 673,862 | 852,159 | * | Stephen Fortune | 73,958 | 15,728 | 89,686 | * | Nathan D. Goldman | 251,579 | 644,157 | 895,736 | * | Sean R. Pelkey | 119,142 | 165,710 | 284,852 | * | Jamie J. Boychuk | 878 | 70,190 | 71,068 | * | All directors, director nominees and current executive officers as a group (a total of 19) | 4,161,483 | 2,072,303 | 6,233,786 | * |
(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)Based on 1,957,828,555 outstanding shares on March 1, 2024. An asterisk (*) indicates that ownership is less than 1% of class. (3)By virtue of ultimately controlling various entities that hold shares of common stock in the Company, Mr. Hilal may be deemed to have the power to vote or direct the vote of the shares held by those entities. (4)Includes 1,500 shares held in an IRA account as to which Mr. Boone’s spouse has sole voting power. | (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)107 | Based on 2,182,474,121 shares outstanding on March 1, 2022. An asterisk (*) indicates that ownership is less than 1% of class. | (3) | By virtue of ultimately controlling various entities that hold shares of common stock in the Company, Mr. Hilal may be deemed to have the power to vote or direct the vote of the shares held by those entities. |
2022 Proxy Statement 69
TableOwnership of ContentsOWNERSHIP OF OUR STOCK
Our Stock | Security Ownership of Management and Certain Beneficial Owners The following table sets forth information regarding the beneficial ownership of CSX common stock as of March 1, 20222024 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 | Capital World Investors(1) 333 South Hope Street Los Angeles, CA 90071 | | 184,488,460 | | 8.3% | The Vanguard Group(2) 100 Vanguard Blvd. Malvern, PA 19355 | | 183,589,803 | | 8.28% | BlackRock, Inc.(3) 55 East 52nd Street New York, NY 10055 | | 151,615,861 | | 6.8% | Capital Research Global Investors(1) 333 South Hope Street Los Angeles, CA 90071 | | 111,241,858 | | 5.0% |
| | | | | | | | | Name and Address of Beneficial Owner | Amount of Beneficial Ownership | Percent of Class | The Vanguard Group(1) 100 Vanguard Blvd. Malvern, PA 19355 | 174,948,647 | | 8.85 | % | BlackRock, Inc.(2) 55 East 52nd Street New York, NY 10055 | 142,632,196 | | 7.2 | % |
(1)As disclosed in its Schedule 13G/A filed on February 13, 2024. (2)As disclosed in its Schedule 13G/A filed on January 26, 2024. | (1) | As disclosed in its Schedule 13G/A filed on February 11 2022. | | | | (2)2024 Proxy Statement | As disclosed in its Schedule 13G/A filed on February 9, 2022.108 |
Section 16(a) of the Securities Exchange Act of 1934 requires the Company’s directors and executive officers, and 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 our review of the copies of Forms 3, 4 and 5, and amendments thereto received by us, 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 year 2023. | | | | | | (3)109 | As disclosed in its Schedule 13G/A filed on February 1, 2022. |
| 70 | | | | | | | | | | | | | | | | | | | | | | | | ITEM 4 | Shareholder Proposal Requesting a Railroad Safety Committee | | | | | |
This proposal was submitted by Segal Marco Advisors on behalf of AFL-CIO Equity Index Funds. The address and shareholdings of AFL-CIO Equity Index Funds will be provided promptly upon receipt of a written or oral request. Shareholder Proposal and Supporting Statement RESOLVED, that shareholders of CSX Corporation (the “Company”) urge the Board of Directors (the “Board”) to take the steps necessary to form a Railroad Safety Committee of independent directors with the power and duty to review staffing levels and their impact on safety at our Company’s railroad operations, and to meet and confer on safety issues with relevant stakeholders such as customers, communities, employees, and labor unions. SUPPORTING STATEMENT Ensuring the safety of our Company’s railroad operations is not only a collective legal and ethical responsibility, but also a vital component of maintaining the financial health and reputation of our Company. Recent derailments in the railroad industry, including those involving our Company, have drawn attention to the potential risks associated with these operations, necessitating a proactive approach to enhance safety measures.1 There are over 1,000 known train derailments a year in the United States -- averaging three a day.2 As common carriers, railroads are required by federal law to transport hazardous materials that can result in the loss of life and environmental contamination in the event of a train derailment. In 2023, the Norfolk Southern (“NS”) train derailment in East Palestine, Ohio resulted in the release of vinyl chloride that captured national media attention and publicized the need for improved railroad safety.3 The 2023 East Palestine derailment has cost NS almost $1 billion and a similar derailment at our Company could pose a significant financial risk.4 The East Palestine train derailment has also increased scrutiny of the role of the Precision-Scheduled Railroading (“PSR”) operating model used by our Company and other Class I freight railroads to increase operating efficiency and reduce costs.5 In our view, PSR has resulted in greatly reduced staffing levels, less equipment, and longer trains, all of which have contributed to the safety issues. In 2022, Surface Transportation Board Chairman Martin Oberman stated that: “Over the last 6 years, the Class Is collectively have reduced their work force by 29% – that is about 45,000 employees cut from the payrolls. In my view, all of this has directly contributed to where we are today – rail users experiencing serious deteriorations in rail service because, on too many parts of their networks, the railroads simply do not have a sufficient number of employees.”6 While PSR may reduce staffing costs in the short-run, we believe that the long-term cost of increased derailments will outweigh any short-term financial gain. By establishing a Railroad Safety Committee, our Company can reduce the likelihood of derailments, protect its workforce, safeguard communities along its routes, provide better service to customers, demonstrate its commitment to ethical business practices, and enhance our Company’s long-term value. (1)https://www.propublica.org/article/railroad-safety-union-pacific-csx-bnsf-trains-freight; https://www.washingtonpost.com/transportation/2023/07/17/pennsylvania-train-derailment-evacuations/; https://www.timesunion.com/news/article/investigation-cleanup-continue-following-18280195.php (2)https://www.npr.org/2023/03/09/1161921856/there-are-about-3-u-s-train-derailments-per-day-they-arent-usually-major-disaste (3)https://www.nytimes.com/2023/02/15/us/ohio-train-derailment-anxiety.html; https://www.nytimes.com/2023/02/17/opinion/ohio-train-derailment-safety-regulation.html (4)https://www.cnn.com/2023/07/27/investing/norfolk-southern-east-palestine-derailment-costs/index.html (5)https://www.wsj.com/articles/norfolk-southern-derailment-spurs-questioning-of-turnaround-kings-strategy-5403464c (6)https://www.stb.gov/news-communications/latest-news/pr-22-21/
Item 4 Shareholder Proposal Requesting a Railroad Safety Committee Table
Opposition Statement of Contentsthe Board The Board carefully considered this proposal and recommends that you vote AGAINST it for the following reasons: Our current Board and committee structure already provides for a robust level of safety oversight The Board believes oversight of safety at CSX is a critical responsibility of the entire Board. The Board’s commitment is evidenced by the practice of reviewing and discussing safety as the first topic at all Board meetings. When major safety-related incidents occur, the full Board is informed immediately and engages in deep dives and after action reviews. As described in detail on page 46, examples of the recent safety-related topics reviewed by the Board include: nCSX’s policies and practices on safety; nEmployee training on our safety efforts and programs; nRetention of outside, independent consultants and other third parties to assess our safety programs; and nRegulatory oversight of CSX’s safety programs. Safety is a core component of CSX’s business and the Company’s commitment to safety is a key pillar of our strategic objectives. As a part of the annual strategy and business plan discussions, the Board reviews the initiatives and measures to make management accountable at the Company on improving safety processes through employee training and enhanced technology, focused on strengthening safety and overall compliance. Senior management’s compensation is expressly tied to safety metrics among other performance measures. In addition, the Audit Committee oversees CSX’s risk management strategy and ERM program, such as activities related to the prevention, monitoring, measurement, reporting and management of enterprise-level core risks. Operations risk, one of our core risk areas that management reviews, includes safety risks. Each core risk has a Risk Leader who reports to a member of the Executive Risk Committee, and the Committee ultimately reports and discusses those risks with the Audit Committee. We believe that oversight of safety should remain with the Board at this time, with the topic receiving the attention of all of the directors at every meeting, and that governance structure is optimal for maintaining the requisite priority that safety warrants for the Company. Delegating the review and discussion of a crucial area like safety to a committee instead would, in our view, fail to represent the crucial importance of safety to our operations. Safety is integral to everything we do at CSX At CSX, safety encompasses every aspect of our operations, for our employees and customers and the communities in which we operate. CSX has achieved record safety performance in recent years through a rigorous and comprehensive approach that includes investments in infrastructure and technology, a growing workforce, fluid network operations and a safety culture that emphasizes employee training and coaching. As described further on page 9, CSX’s rise as an industry leader on safety and service has been driven by multiple factors, including, for example: CSX will invest $1.8 billion out of a $2.5 billion capital budget in 2024 on core infrastructure, ensuring the safety and integrity of our operations; we leverage advanced safety technology like autonomous train inspection portals, autonomous track inspection cars and drones; we employ industry-leading best practices for monitoring the condition of hot bearings and are actively collaborating with other major carriers on standards for tracking and analyzing trends in bearing condition; and we use advanced risk assessment technology annually to determine the shortest and safest routes to transport goods categorized as hazardous. All CSX employees, regardless of job function or level, are part of the CSX safety team. By putting health and safety at the center of our day-to-day operations, we strive to foster a safety culture grounded in ownership and well-being. Safety briefings precede all of our daily activities, during which employees receive information on the sequence of a task or job, the potential hazards involved, the appropriate equipment to use and the personal protective equipment needed. CSX employees receive on-going safety training, including job-based training on safety and operating rules provided for all employees across the network annually, monthly training sessions led by local supervisors for employees, supported by updated video tutorials, and regularly scheduled train accident prevention and safety skills training and continuing education. As part of our ongoing efforts to grow our workforce to meet increasing demand for rail services and improve safety of our railroad operations, in 2023, we hired more than 1,600 rail conductors and more than 900 mechanical and engineering employees. The CSX commitment to safety also extends into the communities served by our rail network. For example, CSX works to improve highway-rail grade crossings equipped with passive warning signs, with a program to clear-cut trees and vegetation to give motorists a better view as they approach the tracks. We were the first railroad in the United States to adopt a system-wide highway-rail grade crossing emergency notification sign program. Moreover, we use highly visible safety campaigns to raise public awareness of the potential hazards of highway-rail grade crossings and of trespassing on railroad property. In addition, we strongly believe in public-safety outreach and work closely with Operation Lifesaver, an education and awareness organization dedicated to ending collisions, fatalities and injuries at highway-rail grade crossings and along railroad rights-of-way.
Additional Information
Item 4 Shareholder Proposal Requesting a Railroad Safety Committee Our CSX Responder Incident Training (RIT) program leverages a combination of effective virtual and hands-on training to successfully train first responders on how to safely respond to potential rail emergencies, including those involving hazardous materials. In 2023, CSX teams trained over 6,700 first responders. This includes classroom training and hands-on demonstrations on our Responder Incident Training train. As CSX continues to prioritize the safe transport of critical freight across the nation, we are committed to maintaining our focus on proactively taking measures to protect our employees, customers and communities. We measure safety across our operations CSX sets a high bar for operational safety. To verify that we are meeting our standards, we continually monitor our performance against internal and external requirements. This ensures that we are able to safeguard our employees, the communities in which we operate and our customers’ freight. Periodic certifications ensure operational safety compliance in our terminals and mechanical shops. CSX management also conducts continuous, federally-mandated operational testing of CSX employee compliance with operational and safety standards. We recently enhanced our railroad safety measures Despite overall safety improvement at CSX and over two years without an employee workplace fatality, we lost three railroaders in 2023. We have vowed that these tragic incidents and the lives lost will have a lasting impact at CSX. To accomplish our goal of zero incidents, where every CSX employee returns home safely every day, we implemented additional safety measures in 2023. Specifically, we have: nConducted a safety stand-down, where we returned all new trainees back to their home terminals to review recent safety incidents and applicable rules and provided field training on these rules; nIncreased the length of training classes for new conductors, with greater focus on outdoor, hands-on training; nAssigned additional new hire mentors and implemented mentoring programs that emphasize a ONE CSX approach to safety teamwork; and nIntroduced new tools for employees aimed at identifying and eliminating work environment risks. We are committed to addressing hazards to improve railroad safety, and have multiple, well-established Company initiatives to encourage anonymous reporting of safety issues through various means, without fear of reprisal. In addition, to complement our employee safety reporting programs, in 2023, we announced that CSX would join the FRA’s Confidential Close Call Reporting System. CSX’s entire Board takes seriously the Company’s commitment to safety, by reviewing and discussing safety—including many of the initiatives and topics mentioned above—at every Board meeting. In light of our well-documented commitment to railroad safety at all levels of CSX, including the full Board, the Board recommends that shareholders vote against this proposal. | | | | | | | | | | | | | | | | | | The Board unanimously recommends that the shareholders vote AGAINSTthis proposal. | | | | | |
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 4, 2022.8, 2024. This Proxy Statement and the 20212023 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 20212023 Annual Report, and how to vote online. If you received a Notice by mail, you will not receive a printed copy of the proxy materials in the mail. Instead, the Notice instructs you on how to access and review all of the important information contained in the Proxy Statement and the 20212023 Annual Report. The Notice also instructs you on how you may submit your voting instructions. If you received a Notice by mail and would like to receive a printed copy of our proxy materials, you should follow the instructions for requesting such materials included in the Notice. Annual Report on Form 10-K The 20212023 Annual Report (without exhibits) is available onwww.csx.com. The 20212023 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 20212023 Annual Report in one of the following manners:■ | Send your request by mail to CSX Corporation, Shareholder Relations, 500 Water Street, Jacksonville, Florida 32202; or | ■ | Call CSX Shareholder Relations at (904) 359-3256. |
nsend your request by mail to CSX Corporation, Shareholder Relations, 500 Water Street, Jacksonville, Florida 32202; or ncall CSX Shareholder Relations at (904) 359-3256. By Order of the Board of Directors
Executive Vice President-ChiefPresident – Chief Legal Officer
and Corporate Secretary 2022 Proxy Statement 71
Table of Contents
ADDITIONAL INFORMATION
Additional Information | Other Matters Other Matters Except as described below, Managementmanagement and the Board of Directors are not aware of any matters that may properly be brought before the Annual Meeting other than the matters referred to in the Notice of the Annual Meeting and this Proxy Statement. Management has received notice from a shareholder that he intends to present himself for nomination as a director at the Annual Meeting. If this shareholder does properly present himself as a nominee at the Annual Meeting, the number of nominees for director will exceed the number of directors to be elected, and directors will be elected by a plurality of the votes cast, rather than by majority vote. In this situation, the person voting the proxies solicited by the Board for the Annual Meeting will vote as directed by you with respect to the election of the 11 directors named in this Proxy Statement and will vote against or abstain from voting on the shareholder’s director nominee. If any other matters are properly brought before the Annual Meeting, or any adjournment thereof, the personpersons appointed in the accompanying proxy will vote the shares represented thereby in accordance with histheir best judgment.
Householding of Proxy Materials The SEC’s rules permit companies and intermediaries (e.g., brokers, banks and other nominees) to satisfy the delivery requirements for proxy statements with respect to two or more security holders sharing the same address by delivering a single proxy statement addressed to those security holders. This process, which is commonly referred to as householding, potentially means extra convenience for security holders and cost savings for companies. As in prior years, a number of brokers with account holders who are CSX shareholders will be householding our proxy materials. As indicated in the notice previously provided by these brokers to CSX shareholders, a single copy of the proxy materials will be delivered to multiple shareholders sharing an address unless contrary instructions have been received from an affected shareholder. Once you have received notice from your broker that it will be householding communications to your address, householding will continue until you are notified otherwise or until you revoke your consent. Shareholders who participate in householding continue to receive separate proxy cards, voting instructions or notices 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 20212023 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 20212023 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 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 proxy materials, please contact your broker, bank or other nominee. Note about the CSX Website, ESG Reports and Forward-Looking Statements Web addresses to the CSX website throughout this document are provided for convenience only. Please note that information on or accessible through the CSX website is not part of, or incorporated by reference into, this Proxy Statement. The ESG Reports mentioned in this Proxy Statement, or any other information from the CSX website, are not part of, or incorporated by reference into, this Proxy Statement. Some of the statements on our website and these reports contain cautionary statements regarding forward-looking information that should be carefully considered. Our statements and reports about our objectives may include statistics or metrics that are estimates, make assumptions based on developing standards that may change and provide aspirational goals that are not intended to be promises or guarantees. Inclusion of metrics or other information in such statements or reports is not intended to imply that such information is material to CSX. The statements and reports may also change at any time and we undertake no obligation to update them, except as required by law. This Proxy Statement contains forward-looking statements. Generally, any statement contained in this Proxy Statement not based upon historical fact is a forward-looking statement. The use of forward-looking or conditional words such as “believe,” “continue,” “estimate,” “intend,” “may,” “will,” “anticipate,” “expect,” “plan,” “remain,” “confident” and “commit” or similar expressions are intended to identify forward-looking statements. In particular, statements regarding our plans, strategies, objectives and expectations regarding our business and operating performance, as well as ESG initiatives and similar commitments, are forward-looking statements. They reflect expectations, are not guarantees of results and speak only as of the date of this Proxy Statement. Factors that could cause actual results to differ materially from those in the forward-looking statements include those that are described in our 2023 Annual Report on Form 10-K and elsewhere in our filings with the SEC. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. Caution should be taken not to place undue reliance on any such forward-looking statements. | 72 | | | | | 2024 Proxy Statement | 114 |
Q: What is the purpose of Contentsthe Annual Meeting?
A:At the Annual Meeting,
Questions & Answers shareholders will act upon the matters outlined in the “Notice of 2024 Virtual Annual Meeting of Shareholders” above, including the election of the 12 director nominees named in this Proxy Statement, the ratification of the appointment of EY as the Independent Registered Public Accounting Firm of CSX for 2024, the consideration of an advisory (non-binding) vote on compensation for our NEOs and the consideration of a shareholder proposal.Q: How can I participate in the Annual Meeting? A:This year, CSX will host our virtual Annual Meeting at 10:00 a.m. (EDT) on Wednesday, May 8, 2024. There will be no physical location for shareholders to attend. Shareholders may participate online at www.virtualshareholdermeeting.com/CSX2024. The Annual Meeting will begin promptly at 10:00 a.m. (EDT). We encourage you to access the Annual Meeting prior to the start time. Online access will be available beginning at 9:45 a.m. (EDT). To participate in the Annual Meeting, including voting your shares electronically and submitting questions during the Annual Meeting, you will need the 16-digit control number included on your proxy card or on your voting instruction form, or on your Notice. Even if you plan to participate in the Annual Meeting, we recommend that you vote by proxy prior to the Annual Meeting so that your vote will be counted if you later decide not to participate in the Annual Meeting. The virtual meeting platform is fully supported across browsers (Microsoft Edge, Firefox, Chrome and Safari) and devices (desktops, laptops, tablets and cell phones) running the most updated version of applicable software and plugins. Participants should ensure that they have a strong Internet connection wherever they intend to participate in the Annual Meeting. Q: How can I submit a question? A:If you would like to submit a question, you may do so before or during the Annual Meeting. | Q: What is the purpose of the Annual Meeting? | | | | | | A: At the Annual Meeting, shareholders will act upon the matters outlined in the Notice of Annual Meeting of Shareholders above, including the election of the 11 director nominees named in this Proxy Statement, the ratification of the appointment of EY as the Independent Registered Public Accounting Firm of CSX for 2022, and the consideration of an advisory (non-binding) vote on compensation for our Named Executive Officers. | | Q: How can I participate in the Annual Meeting? | A: This year, CSX will host its virtual Annual Meeting at 10:00 a.m. (EDT) on Wednesday, May 4, 2022. There will be no physical location for shareholders to attend. Shareholders may participate online at www.virtualshareholdermeeting.com/CSX2022. The Annual Meeting will begin promptly at 10:00 a.m. (EDT). We encourage you to access the Annual Meeting prior to the start time. Online access will be available beginning at 9:45 a.m. (EDT).
To participate in the Annual Meeting, including voting your shares electronically and submitting questions during the Annual Meeting, you will need the 16-digit control number included on your proxy card or on your Notice. Even if you plan to participate in the Annual Meeting, we recommend that you vote by proxy prior to the Annual Meeting so that your vote will be counted if you later decide not to participate in the Annual Meeting.
The virtual meeting platform is fully supported across browsers (Microsoft Edge, Firefox, Chrome and Safari) and devices (desktops, laptops, tablets and cell phones) running the most updated version of applicable software and plugins. Participants should ensure that they have a strong internet connection wherever they intend to participate in the Annual Meeting.
| | Q: How can I submit a question? | A: If you would like to submit a question, you may do so before or during the Annual Meeting.
If you would like to submit your question 48 hours before the start of the meeting: | If you would like to submit your question during the Annual Meeting: | 1.You may log in to www.proxyvote.com and enter your 16-digit control number. 2.Once past the login screen, click on “Question for Management,Management.” type 3.Type in your question, and clickquestion. 4.Click “Submit.” Alternatively, if you would like to submit your question during the Annual Meeting, you | 1.You may log in to the virtual meeting website at www.virtualshareholdermeeting.com/ CSX2022 CSX2024 using your 16-digit control number, typenumber. 2.Type your question into the “Ask a Question” field, and clickfield. 3.Click “Submit.”We do not place restrictions on the type or form of questions that may be asked; however, we reserve the right to edit or reject redundant questions or questions that we deem profane or otherwise inappropriate. During the live Q&A session of the Annual Meeting, we will answer questions as they come in and address those asked in advance, as time permits. Shareholders will be limited to one question each unless time otherwise permits.
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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. We also refrain from providing material non-public information in our responses. 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.
Annual Meeting Questions & Answers Q: What is the benefit of a virtual meeting? A:The Board of Directors 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. In order to encourage shareholder participation and transparency, CSX will: nprovide shareholders with the ability to submit appropriate questions in advance of the Annual Meeting to ensure thoughtful responses from management and the Board; nprovide shareholders with the ability to submit appropriate questions in real time during the Annual Meeting through the virtual meeting website; nprovide management with the ability to answer as many questions as possible in accordance with the meeting rules of conduct in the time allotted without discrimination; and npublish all appropriate questions submitted in accordance with the Annual Meeting rules of conduct with answers following the Annual Meeting, including those not addressed directly during the Annual Meeting. CSX has considered concerns raised by investor advisory groups and other shareholder rights advocates that virtual meetings may diminish shareholder voice or reduce accountability. Accordingly, we have designed our virtual meeting format to enhance, rather than constrain, shareholder access, participation and communication. CSX believes that our virtual meeting will afford a greater number of our shareholders the opportunity to participate in the Annual Meeting while still affording participants the same rights they would have had at an in-person meeting and substantially reducing the time and expense associated with holding an in-person meeting. 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 login page or at www.proxyvote.com. Technical support will be available starting at 9:00 a.m. EDT on May 8, 2024. Q: Why did I receive a notice in the mail regarding the Internet availability of proxy materials instead of a full set of proxy materials? A:In accordance with rules adopted by the SEC, we may furnish proxy materials, including this Proxy Statement 73 and our 2023 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: nview CSX’s proxy materials for the Annual Meeting on the Internet; and ninstruct 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. Q: Who is soliciting my vote? A:Our 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. The Company has retained D.F. King & Co., Inc. to aid in the solicitation of proxies for a fee of approximately $15,000, plus reimbursement expenses. Q: Who is entitled to vote? A:Only shareholders of record at the close of business on March 11, 2024 (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 11, 2024, there were issued and outstanding 1,957,593,312 shares of CSX common stock, the only outstanding class of voting securities of the Company. | Q: What is the benefit of a virtual meeting? | | | | | 2024 Proxy Statement | 116 |
Annual Meeting Questions & Answers 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. 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. The Governance and Sustainability Committee shall consider the resignation offer and recommend to the Board whether to accept or reject it. The Board will act on the Governance and Sustainability Committee’s recommendation within 90 days following certification of the shareholder vote. Thereafter, the Board will promptly disclose its decision whether to accept or reject the director’s resignation offer (and the reasons for rejecting the resignation offer, if applicable) in a press release to be disseminated in the manner that the Company’s press releases typically are distributed. Other Proposals. The proposal to ratify the appointment of EY as the Company’s Independent Registered Public Accounting Firm for 2024 (Item 2), the proposal to approve, on an advisory (non-binding) basis, the compensation of the Company’s NEOs (Item 3) and the shareholder proposal requesting a railroad safety committee (Item 4) 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 3 or 4. Shares held by a broker, bank or other nominee for which the beneficial owner has not provided voting instructions cannot be voted by such bank, broker or other nominee on non-routine matters (“broker non-votes”), as described in greater detail below under “Will my shares be voted if I do not provide voting instructions to my broker?” As a result, “broker non-votes” are not considered votes cast on Items 1, 3 or 4 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. Q: How do I vote? A:To vote by proxy, you must do one of the following: | | | | | | | | | | | | | | | | | | | | | | | | | Internet | | Telephone | | Mail | | A: The Board believes that a virtual meeting format will provide the opportunity for full and equal participation by all shareholders, from any location around the world, while substantially reducing the costs associated with hosting an in-person meeting. Additionally, a virtual meeting format reduces health and safety risks associated with the ongoing COVID-19 pandemic to our officers, directors, employees and shareholders.
In order to encourage shareholder participation and transparency, CSX will:
■ provide shareholders with the ability to submit appropriate questions in advance of the Annual Meeting to ensure thoughtful responses from management and the Board;
■ provide shareholders with the ability to submit appropriate questions in real-time during the Annual Meeting through the virtual meeting website;
■ provide management with the ability to answer as many questions as possible in accordance with the meeting rules of conduct in the time allotted without discrimination; and
■ publish all appropriate questions submitted in accordance with the Annual Meeting rules of conduct with answers following the Annual Meeting, including those not addressed directly during the Annual Meeting.
CSX has considered concerns raised by investor advisory groups and other shareholder rights advocates that virtual meetings may diminish shareholder voice or reduce accountability. Accordingly, we have designed our virtual meeting format to enhance, rather than constrain, shareholder access, participation and communication. CSX believes its virtual meeting will afford a greater number of our shareholders the opportunity to participate in the Annual Meeting while (i) still affording participants the same rights they would have had at an in-person meeting; (ii) substantially reducing the time and expense associated with holding an in-person meeting; and (iii) substantially reducing the health and safety risks in connection with the ongoing COVID-19 pandemic.
| | | Q: What if I have technical difficulties or trouble accessing the virtual meeting? | A: We will have technicians ready to assist you with any technical difficulties you may have accessing the virtual meeting. If you encounter any difficulties accessing the virtual meeting during the check-in or meeting time, please call the technical support number that will be posted on the Virtual Shareholder Meeting log-in page or at www.proxyvote.com. Technical support will be available starting at 9:00 a.m. EDT on May 4, 2022. | | Q: Why did I receive a notice in the mail regarding the Internet availability of proxy materials instead of a full set of proxy materials? | A: In accordance with rules adopted by the SEC, we may furnish proxy materials, including this Proxy Statement and our 2021 Annual Report, to our shareholders by providing access to such documents on the Internet instead of mailing printed copies (the “Notice”). Most shareholders will not receive printed copies of the proxy materials unless requested. Instead, the Notice, which was mailed to most of our shareholders, instructs you as to how you may access and review all of the proxy materials on the Internet. The Notice also instructs you as to how you may submit your proxy on the Internet. If you would like to receive a paper or email copy of our proxy materials, you should follow the instructions for requesting such materials in the Notice. | | Q: How do I get electronic access to the proxy materials? | A: The Notice provides you with instructions on how to:
■ view CSX’s proxy materials for the Annual Meeting on the Internet; and
■ instruct CSX to send future proxy materials to you electronically by email.
Choosing to receive your future proxy materials by email will save us the cost of printing and mailing documents to you and will reduce the impact of the printing and mailing of these materials on the environment. If you choose to receive future proxy materials by email, you will receive an email next year with instructions containing a link to those materials and a link to the proxy voting site. Your election to receive proxy materials by email will remain in effect until terminated.
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ANNUAL MEETING QUESTIONS & ANSWERS
Q: Who is soliciting my vote? | A: The Board of Directors is soliciting your vote on the matters being submitted for shareholder approval at the Annual Meeting. The Company will pay the costs of preparing proxy materials and soliciting proxies, including the reimbursement, upon request, of trustees, brokerage firms, banks and other nominee record holders for the reasonable expenses they incur to forward proxy materials to beneficial owners. In addition to using mail, proxies may be solicited in person, by telephone or by electronic communication by officers and employees of the Company acting without special compensation. | | Q: Who is entitled to vote? | A: Only shareholders of record at the close of business on March 8, 2022 (the “Record Date”) are entitled to notice of, and to vote at, the Annual Meeting or any adjournments or postponements thereof, unless a new record date is set in connection with any such adjournments or postponements. On March 8, 2022, there were issued and outstanding 2,178,580,270 shares of CSX common stock, the only outstanding class of voting securities of the Company. | | Q: How many votes do I have? | A: You will have one vote for every share of CSX common stock you owned at the close of business on the Record Date. | | Q: How many shares must be present to hold the Annual Meeting? | A: The Company’s bylaws provide that a majority of the outstanding shares of stock entitled to vote constitutes a quorum at any meeting of shareholders. If a share is represented for any purpose at the Annual Meeting, it is deemed to be present for the transaction of all business. Abstentions and shares held of record by a broker, bank or other nominee that are voted on any matter are included in determining the number of shares present.
Shares held by a broker, bank or other nominee that are not voted on any matter at the Annual Meeting (“broker non-vote”) will not be included in determining whether a quorum is present.
Your vote is important and we urge you to vote by proxy even if you plan to participate in the Annual Meeting.
| | Q: What are the vote requirements for each proposal? | A: Election of Directors. In an uncontested election, a director is elected by a majority of votes cast for his or her election by the shares entitled to vote at a meeting at which a quorum is present. In accordance with the Company’s Corporate Governance Guidelines, in an uncontested election, any incumbent director nominated for re-election as a director who is not re-elected in accordance with the Company’s bylaws is required to promptly tender his or her resignation for consideration following certification of the shareholder vote. For more information on the procedures in these circumstances, see Principles of Corporate Governance. In a contested election, where the number of nominees for director election exceeds the number of directors to be elected, directors are elected by a plurality of the votes cast. Because there are 11 seats on our Board of Directors, this means that if there are more than 11 persons properly nominated for election, the 11 nominees receiving the most “for” votes will be elected, even if the number of votes cast “for” the director do not exceed those cast “against” him or her. As described in Other Matters above, management has received notice from a shareholder that he intends to present himself for nomination as a director at the Annual Meeting. If this shareholder does properly present himself as a nominee at the Annual Meeting, the number of nominees for director will exceed the number of directors to be elected, and directors will be elected by a plurality of the votes cast, rather than by majority vote.
Other Proposals.The proposal to ratify the appointment of EY as the Company’s Independent Registered Public Accounting Firm for 2022 (Item 2) and the proposal to approve, on an advisory (non-binding) basis, the compensation of the Company’s NEOs (Item 3) will be approved if the votes cast in favor of the proposal exceed the votes cast against the proposal.
Abstentions are not considered votes cast on any proposal and will have no effect on the outcome of the vote for Items 1, 2 or 3. “Broker non-votes” are not considered votes cast on Items 1 or 3 and will have no effect on the outcome of the vote. Brokers will have discretionary voting power regarding Item 2 in the event that beneficial owners, who own their shares in “street name,” do not provide voting instructions regarding Item 2.
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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 on your proxy card or in the Notice. The website address for Internet voting is indicated on your proxy card or 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 cardform 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. recorded If you are a beneficial owner, or you hold your shares in “street name,”name”, please check your voting instruction cardform 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 cardform if you hold your shares in “street name.” name”. Please promptly mail your proxy card or voting instruction cardform to ensure that it is received prior to the Annual Meeting. | | | | | | | To vote during the Annual Meeting, you must visit www.virtualshareholdermeeting.com/CSX2022 CSX2024 at the time of the Annual Meeting and enter the 16-digit control number included on your proxy card, voting instruction form or on your Notice. Even if you plan to participate in the Annual Meeting, we recommend that you vote by proxy as described above prior to the Annual Meeting so that your vote will be counted if you later decide not to participate in the Annual Meeting. | | | | | | | | Q: Can I change my vote? | | | | |
| | | | | | A: Yes. If you are a shareholder of record, you may change your vote or revoke your proxy any time before it is voted (i) by delivering written notice to CSX Corporation, Office of the Corporate Secretary, 500 Water Street, C160, Jacksonville, Florida 32202, (ii) by timely delivering a later-dated signed proxy card or written revocation, or (iii) by a later vote via the Internet, by telephone or by voting at the Annual Meeting using the 16-digit control number included on your proxy card or on your Notice. If you hold your shares in “street name,” you should follow the instructions provided by your bank, broker or other nominee if you wish to change your vote.117 | | | Q: Will my shares be voted if I do not provide voting instructions to my broker? | A: If you hold your shares in “street name” through a bank, broker or other nominee, the bank, broker or other nominee is required to vote those shares in accordance with your instructions. If you do not give instructions to the banker, broker or other nominee, the bank, broker or other nominee will be entitled to vote your shares with respect to “discretionary” items but will not be permitted to vote your shares with respect to “non-discretionary” items (those shares are treated as “broker non-votes”).
The proposal to ratify the appointment of EY as CSX’s Independent Registered Public Accounting Firm for 2022 is considered a routine matter for which a bank, broker or other nominee will have discretionary voting power if you do not give instructions with respect to this proposal. The proposals to: (i) elect directors; and (ii) vote on an advisory (non-binding) resolution on executive compensation are non-routine matters for which a bank, broker or other nominee will not have discretionary voting power and for which specific instructions from owners who hold their shares in “street name” are required in order for a broker to vote your shares.
| | Q: What happens if I return my proxy card but do not give voting instructions? | A:
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Annual Meeting Questions & Answers 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 by: ndelivering written notice to CSX Corporation, Office of the Corporate Secretary, 500 Water Street, C160, Jacksonville, Florida 32202; ntimely delivering a later-dated signed proxy card or written revocation; or na later vote via the Internet, by telephone or by voting at the Annual Meeting using the 16-digit control number included on your proxy card or on your Notice. If you hold your shares in “street name”, you should follow the instructions provided by your bank, broker or other nominee if you wish to change or revoke your vote. Q: Will my shares be voted if I do not provide voting instructions to my broker? A:If you hold your shares in “street name” through a bank, broker or other nominee, the bank, broker or other nominee is required to vote those shares in accordance with your instructions. If you do not give instructions to the banker, broker or other nominee, the bank, broker or other nominee will be entitled to vote your shares with respect to “discretionary” items but will not be permitted to vote your shares with respect to “non-discretionary” items (those shares are treated as “broker non-votes”). The proposal to ratify the appointment of EY as CSX’s Independent Registered Public Accounting Firm for 2024 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 (ii) vote on an advisory (non-binding) resolution on executive compensation and (iii) vote on the shareholder proposal are non-routine matters for which a bank, broker or other nominee will not have discretionary voting power and for which specific instructions from owners who hold their shares in “street name” are required in order for a broker to vote your shares. Q: What happens if I return my proxy card but do not give voting instructions? A:If you are a shareholder of record and sign, date and return the proxy card but do not give voting instructions, the shares represented by that proxy will be voted as recommended by the Board.The Board unanimously recommends a vote:
1. FORthe election of the 11 director nominees named in this Proxy Statement;
2. FORthe ratification of the appointment of EY as CSX’s Independent Registered Public Accounting Firm for 2022; and
3. FORthe approval, on an advisory (non-binding) basis, of the compensation of the Named Executive Officers as disclosed in these materials.
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