Compensation Committee Charter
The primary purpose of the Compensation Committee (“Committee”) is to develop and oversee the compensation philosophy, strategy and design for CSX Corporation (“Corporation”) on behalf of the Board of Directors (“Board”). The Committee is responsible for regularly reviewing, approving and monitoring compensation policies, practices and plans and the associated financial impact and risks to the Corporation.
Membership and OperationsThe Committee shall consist of not fewer than three members, each of whom shall qualify as an “outside director” within the meaning of regulations established pursuant to Section 162(m) of the Internal Revenue Code and a “non-employee director” for purposes of Rule 16b-3 under the Securities Exchange Act of 1934. Each member of the Committee shall meet the independence requirements of the NASDAQ Stock Market’s listing standards (the “Independence Requirements”). The determination regarding each member’s independence shall only be made after considering: (i) the sources of compensation of such member, including any consulting, advisory or other compensatory fee paid by the Corporation to such member and (ii) whether such member is affiliated with the Corporation, a subsidiary of the Corporation or an affiliate of a subsidiary of the Corporation.
Members of the Committee and the Committee Chair shall be recommended by the Governance Committee and elected by the Board annually and as vacancies occur and shall serve until their successors have been duly elected and qualified. Any member of the Committee may resign at any time by giving written notice of his or her intention to do so to the Chairman of the Board or the Corporate Secretary, or may be removed, with or without cause, at any time by the Board.
The Committee shall meet: (i) at least three times each year as it determines to be appropriate or at the call of the Committee Chair, and (ii) periodically in executive session without management in attendance. The Committee Chair shall prepare or approve an agenda in advance of each meeting. Each member is free to suggest the inclusion of items not on the agenda.
A majority of the members of the Committee shall constitute a quorum for the transaction of business and the affirmative vote of the majority of those present shall be necessary for any action by the Committee. The Committee shall keep minutes, report its activities to the full Board on a regular basis and make recommendations with respect to matters covered by this Charter and other matters as the Committee may deem necessary or appropriate.
Duties and ResponsibilitiesThe Committee shall, in its judgment:
Compensation Programs and Policies1. Consider, approve and, where necessary, recommend to the Board for approval, the adoption, amendment or termination of compensation practices, policies, programs and plans maintained by the Corporation or its affiliates for executives and, as deemed appropriate, other eligible employees, including but not limited to cash and stock-based incentive plans, deferred compensation plans, retirement plans, health and welfare benefit plans and perquisites.
2. Review reports from management regarding compliance matters and any significant issues pertaining to the implementation or administration of any such plan, policy or program.
3. Establish and annually review a comparison group of companies to provide current, competitive, fact-based data to support executive pay decisions.
4. Review and consider the results of the Corporation’s most recent Say on Pay vote, if any, as well as any other feedback garnered through shareholder outreach initiatives.
5. Review and approve the implementation or revision of any clawback policy allowing the Corporation to recoup compensation paid to executive officers and other employees under certain circumstances.
6. Determine the Corporation’s policy with respect to the application of Section 162(m) of the Internal Revenue Code of 1996, as amended, and when compensation may be paid by the Corporation that is not deductible for federal income tax purposes.
Delegation of Authority7. Delegate to the Chief Executive Officer (“CEO”) or other members of executive management from time to time, as appropriate, the authority to adopt, amend or terminate any such plan, policy or program as the Committee may deem appropriate, subject to the limitations as set forth in the applicable plan, policy or program and consistent with the duties and responsibilities set forth herein.
Risk Management8. Review compensation practices, policies and programs to ensure that they do not encourage unnecessary or excessive risk taking and assess whether any risks arising from such practices, policies and programs are reasonably likely to have a material adverse effect on the Corporation.
Incentive and Equity-based Compensation9. Review and approve performance targets under the performance-based incentive compensation plans, and approve incentive plan payouts including certification of the achievement of performance goals under Section 162(m) of the Internal Revenue Code, where applicable.
10. Review and approve grants of stock options, stock appreciation rights, restricted stock, performance shares and other stock-related incentives for the CEO and all other Section 16 Officers and delegate to the CEO or the senior human resource officer, acting in consultation with the CEO, the authority to take such actions with respect to stock-related awards provided to other employees, as deemed appropriate.
Evaluation and Compensation of the CEO11. Conduct an annual review of the performance of the CEO. The Committee, in consultation with the Board, shall review and approve goals and objectives for the CEO and evaluate his or her performance in light of these goals and objectives. The Committee shall discuss the results of the evaluation and determine or, as it deems appropriate, recommend for Board determination the compensation of the CEO based on this evaluation. The Committee shall discuss the results of the evaluation with the CEO. The CEO may not be present during voting or deliberations on his or her compensation.
Evaluation and Compensation of Other Executive Officers12. Periodically discuss the performance and approve the compensation of all other Section 16 Officers in consultation with the CEO, whose evaluations and recommendations shall be considered in determining the compensation of such Section 16 Officers. The Committee may review any human resources and business unit records, if necessary, for this purpose. In addition, the Committee may discuss with the Audit Committee the compliance of the Section 16 Officers with the Corporation’s Code of Business Conduct and Ethics.
13. For all Section 16 Officers, review and determine: (i) changes to compensation, including base pay adjustments, promotions and title changes that impact compensation and stock or stockbased awards; (ii) any adjustments to incentive opportunity levels under the annual or long-term incentive programs; (iii) discretionary compensation awards, including any awards under applicable nonqualified plans; and (iv) special cash compensation awards.
14. Review the total compensation of certain key executives (other than Section 16 Officers) whom the Committee determines in its sole discretion to review.
15. Review off-cycle equity awards for non-Section 16 officers on an annual basis.
Disclosure16. Provide over the names of the Committee members the required Compensation Committee Report for inclusion in the Corporation’s Proxy Statement for the Corporation’s Annual Meeting of Shareholders (the “Proxy Statement”).
17. Review the Compensation Discussion and Analysis section (“CD&A”) of the Corporation’s Annual Report on Form 10-K or Proxy Statement with management and provide a recommendation to the Board regarding the inclusion of the CD&A in the Corporation’s Annual Report on Form 10-K or Proxy Statement.
Employment and Severance Agreements18. Review, approve and, where appropriate, make recommendations to the Board regarding employment, severance and change-in-control agreements, plans or provisions and any other special agreements or supplemental benefits applicable to the CEO or other Section 16 Officers, including all amendments thereto.
Employee Benefit Plans19. Review and approve, or recommend to the Board for approval, any substantial or material changes to the Company’s employee benefit plans, including but not limited to the Company’s pension, 401(k) plans and applicable health and welfare plans.
Administration and Governance20. Review and assess the adequacy of this Charter on an annual basis with the advice of the Governance Committee.
21. Report periodically to the Board regarding the foregoing activities.
22. In addition to the foregoing, the Committee shall perform such other functions as may be committed to it under the resolutions and other directives of the Board.
EvaluationAt least annually, the Committee shall conduct an evaluation of its performance in such manner as the Committee deems appropriate.
Delegation to SubcommitteeThe Committee may, as appropriate and consistent with applicable regulations, laws and listing standards, delegate all or a portion of its duties and responsibilities to the Committee Chair or a subcommittee of the Committee.
AdvisersThe Committee shall have available to it such support personnel, including management staff, outside auditors, attorneys and consultants as it deems necessary to discharge its responsibilities. The Committee may obtain advice and assistance from outside advisers who are advisers to the Corporation.
In addition, the Committee may select and appoint advisers to separately advise the Committee. Accordingly, the Committee shall have the sole authority to select, retain and terminate any compensation consultant, legal counsel or other advisers to the Committee as the Committee deems appropriate in discharging its duties. With respect to such advisers, the Committee will be directly responsible for the selection, appointment, terms of engagement (including compensation) and oversight of such advisers. Whether the Committee receives advice from an adviser to the Corporation or an adviser separately selected and appointed by the Committee, prior to engaging such advisor, the Committee will consider the adviser independence factors under applicable NASDAQ Stock Market listing standards and any other factors deemed relevant by the Committee.
The Committee shall receive appropriate funding from the Corporation, as determined by the Committee, for the payment of compensation to its compensation consultants, legal counsel and other advisors.
Mr. Steven T. Halverson Ms. Donna M. Alvarado Ms. Linda H. Riefler Mr. John J. Zillmer Mr. John D. McPherson
- Financial Expert
- Independent Director