<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
NORFOLK SOUTHERN CORPORATION
(Name of Registrant as Specified In Its Charter)
NORFOLK SOUTHERN CORPORATION
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[_] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
(4) Proposed maximum aggregate value of transaction:
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*Set forth the amount on which the filing is calculated and state how it was
determined.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
Notes:
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[LOGO OF NORFOLK SOUTHERN APPEARS HERE]
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NOTICE AND PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
NORFOLK SOUTHERN CORPORATION
THREE COMMERCIAL PLACE, NORFOLK, VIRGINIA 23510-2191
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON
THURSDAY, MAY 12, 1994
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The Annual Meeting of Stockholders of Norfolk Southern Corporation will be
held at the Conference Center, Williamsburg Lodge, South England Street,
Williamsburg, Virginia, on Thursday, May 12, 1994, at 10:00 A.M., Eastern
Daylight Time, for the following purposes:
1. Election of four directors to the class whose term will expire in
1997 and one director to the class whose term expires in 1995.
2. Ratification of the appointment of independent public accountants.
3. Transaction of such other business as may properly come before the
meeting.
Stockholders of record at the close of business on March 4, 1994, will be
entitled to vote at such meeting.
By order of the Board of
Directors,
DONALD E. MIDDLETON,
Corporate Secretary.
Dated: April 4, 1994
IF YOU DO NOT EXPECT TO ATTEND THE MEETING, YOU ARE URGED TO MARK, DATE AND
SIGN THE ENCLOSED PROXY AND RETURN IT IN THE ACCOMPANYING ENVELOPE.
<PAGE>
Norfolk Southern Corporation
Three Commercial Place
Norfolk, Virginia 23510-2191
April 4, 1994
PROXY STATEMENT
This statement and the accompanying proxy will be mailed to stockholders of
Norfolk Southern Corporation on or about April 4, 1994. The Corporation's
Annual Report for 1993 was mailed under separate cover beginning March 16,
1994. The proxy is solicited by the Board of Directors of the Corporation for
use at the Annual Meeting of Stockholders to be held May 12, 1994. The cost of
soliciting proxies will be paid by the Corporation, including the
reimbursement, upon request, of brokerage firms, banks and other institutions,
nominees and trustees for their reasonable expenses in forwarding proxy
material to beneficial owners. In addition to solicitation by mail, officers
and regular employees of the Corporation may solicit proxies by telephone,
telegram or personal interview at no additional compensation.
Policies are in place to safeguard the confidentiality of proxies and
ballots. The Bank of New York, New York, N.Y., which has been retained at an
estimated cost of $22,000 to assist in soliciting proxies and to tabulate all
proxies and ballots cast at the Annual Meeting, is contractually bound to
maintain the confidentiality of the voting process. Each Inspector of Election
will have taken the oath required by Virginia law to execute duties faithfully
and impartially. Members of the Board of Directors and employees of the
Corporation do not have access to the proxies or ballots and therefore do not
know how individual stockholders vote on any matter. However, when a
stockholder writes a question or comment on the proxy card or ballot, or when
there is need to determine the validity of a proxy or ballot, Management and/or
its representatives may be involved in providing the answer to the question or
in determining such validity.
If the enclosed proxy is properly signed and returned to The Bank of New
York, the shares represented thereby will be voted in accordance with its
terms. Any stockholder who has executed and returned a proxy and for any reason
wishes to revoke it may do so at any time before the proxy is voted by giving
prior notice of revocation in any manner to the Corporation, or by executing
and delivering a subsequent proxy or by attending the meeting and voting in
person.
The record date for stockholders entitled to vote at the Annual Meeting is
March 4, 1994. As of February 28, 1994, the Corporation had issued and
outstanding 145,688,019 shares of Common Stock, of which 138,427,690 shares
were entitled to one vote per share.
ELECTION OF DIRECTORS
The terms of William J. Crowe, Jr., David R. Goode, Robert E. McNair and
Harold W. Pote expire at the Annual Meeting on May 12, 1994. At its meeting
held on January 25, 1994, the Board of Directors amended the Bylaws of the
Corporation to increase the number of directors from eleven to twelve and
elected Jane Margaret O'Brien to fill the resulting vacancy. Under Virginia
law, the term of a director elected by a board of directors to fill a vacancy
expires at the next stockholders' meeting at which directors are elected.
<PAGE>
Unless otherwise instructed on the enclosed proxy, such proxy will be voted
in favor of the reelection of Admiral Crowe and Messrs. Goode, McNair and Pote
to serve in the class whose term will expire in 1997, and for the reelection of
Ms. O'Brien to serve in the class whose term expires in 1995. The nomination of
Ms. O'Brien to be the fourth member of that class results from the requirement
(see information under "Board of Directors" caption on page 7) that each of the
three classes contain as nearly as possible one third of the total number of
directors.
If any nominee becomes unable to serve (an event which is not anticipated,
except possibly in the case of Admiral Crowe), the proxy will be voted for a
substitute nominee to be designated by the Board of Directors, or the total
number of directors will be reduced. Should Admiral Crowe become Ambassador to
the Court of St. James, he will be ineligible to continue to serve as a
director of the Corporation (and to stand for reelection) during the period of
his ambassadorship.
Under Virginia law and under the Corporation's Articles of Incorporation and
Bylaws, directors are elected by a plurality of the votes cast by the shares
entitled to vote in the election at a meeting at which a quorum is present.
Votes that are withheld or shares that are not voted, such as those held by a
broker or other nominee who does not vote in person or return a proxy, are not
"cast" for this purpose.
The following information relates to the nominees and the directors whose
terms of office will continue after the stockholders' meeting. There are no
family relationships among any of the nominees or directors nor among any of
the nominees or directors and any officer, nor is there any arrangement or
understanding between any nominee or director and any other person pursuant to
which the nominee or director was selected.
NOMINEES
(FOR TERM EXPIRING IN 1997)
Admiral Crowe, 69, Washington, D. C., has been a director
[PHOTO OF WILLIAM since 1990. He has been Professor of Geopolitics at the
J. CROWE, JR University of Oklahoma since 1990. He is a retired
APPEARS HERE] Admiral and former Chairman of the Joint Chiefs of Staff,
having served as Chairman from October 1985 until
September 1989. He is also a director of General Dynamics
Corporation, Merrill Lynch & Co., Inc., Pfizer, Inc. and
Texaco, Inc.
William J. Crowe, Jr.
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Mr. Goode, 53, Norfolk, Va., has been a director since
[PHOTO OF DAVID 1992. He has been Chairman, President and Chief Executive
R. GOODE APPEARS Officer of the Corporation since September 1992, having
HERE] previously become President in October 1991, and
Executive Vice President-Administration in January 1991,
and having served prior thereto as Vice President-
Taxation. He is also a director of Caterpillar, Inc.,
Georgia-Pacific Corporation and TRINOVA Corporation.
David R. Goode
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2
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NOMINEES (CONTINUED)
Mr. McNair, 70, Columbia, S. C., has been a director
[PHOTO OF ROBERT since 1987. He has been Chairman of McNair & Sanford,
E. MCNAIR APPEARS P.A. (formerly McNair Law Firm, P.A.), since January
HERE] 1971. Mr. McNair is also a director of Georgia-Pacific
Corporation and NationsBank Corporation.
Robert E. McNair (See information under "Compensation Committee
Interlocks" caption on page 10.)
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Mr. Pote, 47, New York, N.Y., has been a director since
[PHOTO OF HAROLD 1988. He has been a partner of The Beacon Group, a
W. POTE APPEARS private investment partnership focusing on principal
HERE] investments in energy, real estate and general corporate
buy-outs, since April 1, 1993; he also has served as
President of PBS Properties, Inc., since November 1990,
having served prior thereto as President and Chief
Executive Officer of First Fidelity Bancorporation.
Harold W. Pote
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NOMINEE
(FOR TERM EXPIRING IN 1995)
Ms. O'Brien, 40, Roanoke, Va., has been a director since
[PHOTO OF JANE January 25, 1994. She has been President of Hollins
MARGARET O'BRIEN College since July 1991, having served prior thereto as
APPEARS HERE] Dean of the Faculty at Middlebury College, Vt.
Jane Margaret O'Brien
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DIRECTORS WHOSE TERM EXPIRES IN 1995
Mr. Coleman, 63, Wickliffe, Ohio, has been a director
[PHOTO OF L.E. since 1982. He has been Chairman and Chief Executive
COLEMAN APPEARS Officer of The Lubrizol Corporation, a diversified
HERE] specialty chemical company, since April 1982. He is also
a director of Harris Corporation.
L. E. Coleman
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3
<PAGE>
Mr. Hahn, 67, Atlanta, Ga., has been a director since
[PHOTO OF 1985. He has been Honorary Chairman of the Board of
T. MARSHALL HAHN, Georgia-Pacific Corporation, a manufacturer and
JR. APPEARS HERE] distributor of building products, pulp and paper products
and chemicals, since December 2, 1993, having previously
become Chairman of the Board on May 4, 1993, and having
served prior thereto as Chairman of the Board and Chief
Executive Officer. He is also a director of Coca-Cola
Enterprises, SunTrust Banks, Inc. and Trust Company of
Georgia.
(See information under "Compensation Committee
Interlocks" caption on page 10.)
T. Marshall Hahn, Jr.
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Mr. Hilliard, 54, New York, N. Y., has been a director
[PHOTO OF since 1992. He has been a partner in Brown Brothers
LANDON HILLARD Harriman & Co., a New York City bank, since January 1979.
APPEARS HERE] He is also a director of Owens-Corning Fiberglas
Corporation.
(See information under "Certain Relationships" caption on
page 9.)
Landon Hillard
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DIRECTORS WHOSE TERM EXPIRES IN 1996
Mr. Baliles, 53, Richmond, Va., has been a director since
[PHOTO OF GERALD 1990. He has been a partner in the law firm of Hunton &
L. BALILES APPEARS Williams, a business law firm with offices in several
HERE] major U. S. cities and European offices in Brussels,
Belgium, and Warsaw, Poland, since 1990, having served
prior thereto as Governor of Virginia. He is also a
director of Dibrell Brothers, Inc.
(See information under "Certain Relationships" caption on
page 9.)
Gerald L. Baliles
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Mr. Carter, 54, Alexandria, Va., has been a director
[PHOTO OF GENE since 1992. He has been Executive Director of the
R. CARTER APPEARS Association for Supervision and Curriculum Development,
HERE] among the world's largest international education
associations, since July 1992, having served prior
thereto as Superintendent of Schools in Norfolk, Va.
Gene R. Carter
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4
<PAGE>
Mr. Leisenring, 68, Philadelphia, Pa., has been a
[PHOTO OF E. B. director since 1982. He was Chairman of the Board of Penn
LEISENRING, JR. Virginia Corporation, a natural resources holding and
APPEAS HERE] development company, until his retirement in 1992, having
served prior thereto as Chairman of the Board and Chief
Executive Officer. He is a director of Westmoreland Coal
Company. Mr. Leisenring is also a director of Fidelity
Bank, N.A. (a wholly owned subsidiary of First Fidelity
Bancorporation) and of SKF USA Inc. (a controlled
subsidiary of Aktiebolaget SKF, a Swedish corporation).
(See information under "Compensation Committee
Interlocks" caption on page 10.)
E. B. Leisenring, Jr.
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Mr. McKinnon, 66, Norfolk, Va., has been a director since
[PHOTO OF ARNOLD 1986. He was Chairman and Chief Executive Officer of
B. MCKINNON APPEARS Norfolk Southern Corporation until his retirement in
HERE] 1992, having served prior thereto as Chairman, President
and Chief Executive Officer.
Arnold B. McKinnon
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BENEFICIAL OWNERSHIP OF STOCK
To the knowledge of the Corporation, no person beneficially owns more than 5%
of its Common Stock.
The following table sets forth as of February 28, 1994, the beneficial
ownership of the Corporation's Common Stock by each director, including the
Chief Executive Officer, and nominee, each of the other four most highly
compensated executive officers and all executive officers and directors of the
Corporation as a group. Each individual and all executive officers and
directors as a group own less than 1% of the total outstanding shares of the
Corporation's Common Stock and, unless otherwise indicated, all shares are held
with sole voting and investment powers. Unless otherwise noted, no director or
executive officer beneficially owns any equity securities of the Corporation or
its subsidiaries other than the Corporation's Common Stock.
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<PAGE>
<TABLE>
<CAPTION>
SHARES OF SHARES OF
NAME COMMON STOCK NAME COMMON STOCK
- ---- ------------ ---- ------------
<S> <C> <C> <C>
Gerald L. Baliles 1,200/1/ Arnold B. McKinnon 222,643/1/,/5/
Gene R. Carter 1,050/1/ Robert E. McNair 1,100/1/,/6/
L. E. Coleman 4,112/1/,/2/ Jane Margaret O'Brien 1,000/1/
William J. Crowe, Jr. 1,400/1/ Harold W. Pote 1,500/1/
David R. Goode 107,916/3/ John R. Turbyfill 155,088/7/
T. Marshall Hahn, Jr. 2,200/1/ Paul R. Rudder 68,059/8/
Landon Hilliard 2,000/1/ John S. Shannon 109,495/9/
E. B. Leisenring, Jr. 6,805/1/,/4/ D. Henry Watts 88,249/10/
39 Executive Officers and Directors as a group (including the persons named above)/11/ 1,374,045/12/
</TABLE>
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/1/Includes 1,000 shares awarded non-employee directors pursuant to the
Directors' Restricted Stock Plan over which shares the director possesses
voting power but has no investment power until the shares are distributed.
(For additional information on the Directors' Restricted Stock Plan, see
information under "Compensation of Directors" caption on page 7.)
/2/Includes 112 shares owned by Mr. Coleman's wife, in which he disclaims
beneficial ownership.
/3/Includes 2,690 shares credited to Mr. Goode's account in the
Corporation's Thrift and Investment Plan. Includes 4,412 shares held by the
Corporation under share retention agreements pursuant to the Corporation's
Long-Term Incentive Plan and over which Mr. Goode possesses voting power but
has no investment power until the shares are distributed. Also includes 85,821
shares subject to stock options granted pursuant to the Corporation's Long-
Term Incentive Plan and with respect to which Mr. Goode has the right to
acquire beneficial ownership within 60 days.
/4/Includes 2,205 shares owned by Mr. Leisenring's wife, in which he
disclaims beneficial ownership.
/5/Includes 141,364 shares subject to stock options granted pursuant to the
Corporation's Long-Term Incentive Plan and with respect to which Mr. McKinnon
has the right to acquire beneficial ownership within 60 days.
/6/100 shares are held pursuant to an investment trust. Mr. McNair has sole
voting power and shared investment power over these shares.
/7/Includes 8,280 shares credited to Mr. Turbyfill's account in the
Corporation's Thrift and Investment Plan. Includes 12,761 shares held by the
Corporation under share retention agreements pursuant to the Corporation's
Long-Term Incentive Plan and over which Mr. Turbyfill possesses voting power
but has no investment power until the shares are distributed. Includes 108,909
shares subject to stock options granted pursuant to the Corporation's Long-
Term Incentive Plan and with respect to which Mr. Turbyfill has the right to
acquire beneficial ownership within 60 days. Also includes 1,837 shares owned
by Mr. Turbyfill's wife, in which he disclaims beneficial ownership.
/8/Includes 5,099 shares credited to Mr. Rudder's account in the
Corporation's Thrift and Investment Plan. Includes 5,084 shares held by the
Corporation under share retention agreements pursuant to the Corporation's
Long-Term Incentive Plan and over which Mr. Rudder possesses voting power but
has no investment power until the shares are distributed. Also includes 50,255
shares subject to stock options granted pursuant to the Corporation's Long-
Term Incentive Plan and with respect to which Mr. Rudder has the right to
acquire beneficial ownership within 60 days.
/9/Includes 2,109 shares credited to Mr. Shannon's account in the
Corporation's Thrift and Investment Plan. Includes 11,001 shares held by the
Corporation under share retention agreements pursuant to the Corporation's
Long-Term Incentive Plan and over which Mr. Shannon possesses voting power but
has no investment power until the shares are distributed. Includes 60,820
shares subject to stock options granted pursuant to the Corporation's Long-
Term Incentive Plan and with respect to which
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<PAGE>
Mr. Shannon has the right to acquire beneficial ownership within 60 days. Also
includes 57 shares held by Mr. Shannon and his wife as co-trustees for their
daughter, and 597 shares held by his wife as custodian for their daughter, in
which latter shares he disclaims beneficial ownership.
/10/Includes 3,422 shares credited to Mr. Watts' account in the
Corporation's Thrift and Investment Plan. Includes 10,738 shares held by the
Corporation under share retention agreements pursuant to the Corporation's
Long-Term Incentive Plan and over which Mr. Watts possesses voting power but
has no investment power until the shares are distributed. Includes 60,442
shares subject to stock options granted pursuant to the Corporation's Long-Term
Incentive Plan and with respect to which Mr. Watts has the right to acquire
beneficial ownership within 60 days. Also includes 13,647 shares owned by Mr.
Watts' wife, in which he disclaims beneficial ownership.
/11/A relative of one executive officer owns 200 shares of Norfolk Southern
Railway Company Preferred Stock, Series A, over which the officer has
investment control. The spouse of one executive officer owns 70 shares of
Norfolk Southern Railway Company Preferred Stock, Series A, in which shares the
officer disclaims beneficial ownership.
/12/Includes 80,450 shares credited to officers' individual accounts under
the Corporation's Thrift and Investment Plan. Includes 80,458 shares held by
the Corporation for officers under share retention agreements pursuant to the
Corporation's Long-Term Incentive Plan, over which the individual possesses
voting power but no investment power until the shares are distributed, and
789,047 shares subject to stock options granted to officers pursuant to the
Corporation's Long-Term Incentive Plan, with respect to which the optionee has
the right to acquire beneficial ownership within 60 days. Also includes 18,636
shares in which beneficial ownership is disclaimed.
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Section 16 of the Securities and Exchange Act of 1934 requires the
Corporation's directors and executive officers, and any persons beneficially
owning more than 10 percent of a class of the Corporation's stock, to file
certain reports of beneficial ownership and changes in beneficial ownership
(Forms 3, 4 and 5) with the Securities and Exchange Commission and the New York
Stock Exchange. For 1993, based solely on its review of copies of Forms 3, 4
and 5 available to it, or written representations that no Forms 5 were
required, the Corporation believes that all required Forms were filed on time.
The initial report (Form 3) of Powell F. Sigmon, Vice President-Safety,
Environmental and Research Development, over-reported by 531 shares his direct
holdings of the Corporation's Common Stock, and that report has been amended.
BOARD OF DIRECTORS
The Board of Directors of the Corporation consists of twelve members and is
divided into three classes, each elected for a term of three years, with each
class containing one third of the total number of directors. Under the
Corporation's retirement policy for directors, a director who attains the age
of 72 shall resign effective the date of the next annual meeting unless his
term of office expires on such date, in which event he shall refrain from
becoming a candidate for reelection. The Board met a total of seven times in
1993. Each director attended not less than 75% of the aggregate number of
meetings of the Board and meetings of all committees on which such director
served.
COMPENSATION OF DIRECTORS
Each member of the Board of Directors who is not also an officer of the
Corporation received compensation for services during 1993 of a $32,000 a year
retainer and, in addition, a fee of $1,800 for
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each attendance at a meeting of the Board or of any committee of the Board,
plus expenses in connection with attendance at such meetings. Officers who also
serve as directors receive no additional compensation. A director who has
served for at least five years while not serving simultaneously as an officer
of the Corporation, or one of its subsidiaries, and who retires from the Board
under the Corporation's retirement policy for directors, shall receive annually
for life the annual retainer in effect for directors at the time of retirement.
A director may elect to receive all or a portion of compensation on a
deferred basis under the Corporation's Directors' Deferred Fee Plan. The amount
received on a deferred basis is credited to a separate memorandum account,
together with interest on the amount credited to the account at the beginning
of each quarter, at a rate for 1994 and later years determined on the basis of
the director's age at the time of the deferral: under age 45, 7%; age 45-54,
10%; age 55-60, 11%; over age 60, 12%. The total amount so credited (including
amounts deferred in prior years and interest earned thereon) is distributed in
ten annual installments beginning with the year following the year in which the
participant ceases to be a director. The Corporation's commitment to accrue and
pay interest on amounts deferred is facilitated by the purchase of corporate
owned life insurance on the lives of directors. If the Board of Directors
determines at any time that changes in the law affect the Corporation's ability
to recover the cost of providing the benefits payable under the Plan, the
Board, in its discretion, may reduce the interest credited on deferrals to a
rate not less than one half the rate otherwise provided for in the Plan. Seven
of the current directors are participants.
Effective January 1, 1994, the Board approved the Directors' Restricted Stock
Plan pursuant to which each current non-employee director was awarded a grant
of 1,000 shares of the Corporation's Common Stock (Restricted Shares). Any
person who is not and never has been an employee of the Corporation and who is
first elected to the Board after January 1, 1994, also will receive a 1,000
share grant on the date of election. Restricted Shares are registered in the
name of the director, who has all rights of ownership (including the right to
vote the shares and receive dividends), subject to certain restrictions. The
Restricted Shares awarded under this Plan may not be sold, pledged or otherwise
encumbered during a restriction period which (a) begins when the Restricted
Shares are granted and (b) ends on the earlier of (i) the date the director
dies or (ii) six months after the director is disabled or retires. For purposes
of the Plan, a director "retires" when service as a director terminates because
(a) the director is ineligible to continue serving under the retirement policy
for directors or (b) the director has served for at least two consecutive years
and such termination is due to (i) taking a position with or providing services
to a governmental, charitable or educational institution whose policies
prohibit continued service as a director or (ii) the fact that continued
service as a director would be a violation of law.
COMMITTEES
Each year, not later than its organization meeting, the Board of Directors
appoints the Audit Committee, Executive Committee, Compensation and Nominating
Committee and Pension Committee.
The Audit Committee recommends to the Board of Directors the engagement of,
and the fee to be paid to, the independent public accountants; reviews with the
independent accountants the annual audit plan; receives, reviews and transmits
to the Board the annual report and financial statements of the Corporation and
its consolidated subsidiaries; and reviews, in consultation with the
independent
8
<PAGE>
accountants and the Corporation's internal audit staff, as deemed necessary,
the Corporation's accounting policies, conflict of interest policy, internal
control systems and financial operations and reporting. This Committee met five
times in 1993, and its members are L. E. Coleman, Chairman, Gerald L. Baliles,
William J. Crowe, Jr., Landon Hilliard and Harold W. Pote.
The Executive Committee is empowered to exercise all the authority of the
Board of Directors to the extent permitted by Virginia law when the Board is
not in session, including the declaration of a quarterly dividend upon the
Common Stock of the Corporation at the rate of the quarterly dividend most
recently declared by the Board. All actions taken by the Committee are to be
reported to the Board at its meeting next succeeding such action and are
subject to revision or alteration by the Board. This Committee met one time in
1993, and its members are Arnold B. McKinnon, Chairman, David R. Goode,
T. Marshall Hahn, Jr. and E. B. Leisenring, Jr.
The Compensation and Nominating Committee makes recommendations to the Board
of Directors concerning executive compensation; adoption and administration of
any management incentive bonus plan, deferred compensation plan or other
similar plans of the Corporation; individuals to be elected as officers of the
Corporation; and nominees for election to the Board. The Committee will
consider Board nominees recommended by stockholders. Recommendations by
stockholders must be in writing addressed to the Corporate Secretary, Norfolk
Southern Corporation, Three Commercial Place, Norfolk, Virginia 23510-2191, and
shall include sufficient background material to enable the Committee to
consider fully the qualifications of the individual and any potential conflict
of interest or legal restrictions concerning the person's service in the
proposed capacity. This Committee met six times in 1993, and its members are E.
B. Leisenring, Jr., Chairman, L. E. Coleman, T. Marshall Hahn, Jr. and Robert
E. McNair.
The Pension Committee makes recommendations to the Board of Directors
concerning an annual investment policy for investment of the assets of the
Corporation's pension fund and the engagement of, and the fees to be paid to,
firms of investment managers to manage designated portions of such
assets within the framework of the investment policy; reviews the performance
of the investment managers; and receives, reviews and transmits to the Board
the annual reports, financial statements and actuarial valuations of the
pension plans. This Committee met four times in 1993, and its members
are T. Marshall Hahn, Jr., Chairman, Gene R. Carter, E. B. Leisenring, Jr.,
Robert E. McNair and Harold W. Pote.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Norfolk Southern maintains various banking relationships with Brown Brothers
Harriman & Co. (Brown Brothers), in which Mr. Hilliard is a partner, on bases
that are consistent with normal financial and banking practices. All
transactions are entered into in the ordinary course of business on
substantially the same terms as those prevailing at the time for comparable
transactions with other banks. Also, in 1993, Brown Brothers was paid
approximately $102,000 in fees for managing a portion of the assets of the
Corporation's pension fund.
In 1993, the Corporation paid approximately $103,700 for legal services to
the law firm of Hunton & Williams, in which Mr. Baliles is a partner.
Mr. Robert B. Claytor served as a director of Norfolk Southern until his
death on April 9, 1993. National Railroad Passenger Corporation (Amtrak), of
which Mr. Claytor's brother, W. Graham Claytor, Jr.,
9
<PAGE>
was Chairman, President and Chief Executive Officer until December 6, 1993,
leases to NS Fiber Optics, Inc., a wholly owned subsidiary of the Corporation,
rights with respect to certain portions of Amtrak's rights-of-way for
development of a fiber optic communications system. This lease was entered into
as of December 1, 1984, for a term of 20 years at a rental based on the total
number of miles of rights-of-way involved. The aggregate rental for the 20-year
term is approximately $9,981,500. The lease may be renewed at the option of the
lessee for two 20-year terms at a rental to be fixed by agreement of the
parties or by arbitration, but not to be less than the current rental. The
lease was entered into in the ordinary course of business on terms and
conditions considered no less favorable to the Corporation than if entered into
with any other party.
In 1993, the Corporation paid approximately $871,500 for legal services to
the law firm of Williams Kelly & Greer, P.C., Norfolk, Virginia, of which Mr.
Claytor's son-in-law, Samuel J. Webster, is a shareholder. This firm had
provided legal services to the Corporation or its subsidiaries for many years
prior to Mr. Webster's affiliation with the firm.
Kathryn B. McQuade is Vice President-Internal Audit of Norfolk Southern. Ms.
McQuade's spouse is one of approximately 6,100 partners worldwide in KPMG Peat
Marwick (KPMG), a firm of independent public accountants that has acted as
auditors for the Corporation or its subsidiary, Norfolk and Western Railway
Company, since 1969. Ms. McQuade's spouse does not participate in, or have
access to, KPMG's work for the Corporation. Norfolk Southern paid KPMG
approximately $1.8 million for all services rendered during 1993.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The following identifies certain business relationships between the
Corporation and Messrs. Leisenring, Coleman, Hahn or McNair, the members of the
Compensation and Nominating Committee.
Mr. Goode serves as a director of Georgia-Pacific Corporation and is a member
of its Stock Option and Compensation Committee. Mr. Hahn was an executive
officer of Georgia-Pacific Corporation for a part of 1993. In 1993, Georgia-
Pacific Corporation purchased transportation services from North American Van
Lines, Inc. (NAVL), a wholly owned subsidiary of the Corporation, in an amount
totaling approximately $705,000. Such services were provided in the ordinary
course of business on terms and conditions considered no less favorable to NAVL
than if entered into with any other party.
In 1993, the Corporation paid approximately $192,200 to McNair & Sanford,
P.A., of which Mr. McNair is Chairman, for legal and consulting services.
EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table sets forth the cash compensation paid, as well as certain
other compensation accrued or paid, to the Chief Executive Officer and to each
of the other four most highly compensated executive officers of the Corporation
for service in all capacities to the Corporation and its subsidiaries for the
fiscal years ending December 31, 1993, 1992 and 1991, except for Mr. David R.
Goode whose compensation is shown only for 1993 and 1992 (the year in which he
became Chief Executive Officer).
10
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------- -----------------------
AWARDS PAYOUTS
----------- -----------
OTHER SECURITIES
ANNUAL UNDERLYING LTIP ALL OTHER
NAME AND PRINCIPAL SALARY /1/ BONUS /1/ COMPENSATION /2/ OPTIONS /3/ PAYOUTS /4/ COMPENSATION /5/
POSITION YEAR ($) ($) ($) (#) ($) ($)
- ------------------ ---- ---------- --------- ---------------- ----------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
David R. Goode/6/ 1993 535,000 376,480 300,309/7/ 40,000 217,011 50,480
Chairman, President 1992 418,333 297,634 133,057 20,000 81,567 31,778
and Chief Executive Of-
ficer
John R. Turbyfill 1993 414,583 273,086 331,359 12,500 217,011 36,924
Vice Chairman 1992 390,000 270,738 317,988 12,500 208,435 28,895
1991 380,000 232,066 12,500 243,763
Paul R. Rudder 1993 360,000 237,132 218,221 12,500 217,011 44,688
Executive Vice Presi- 1992 350,000 242,970 153,672 12,500 118,279 38,623
dent-Operations 1991 300,000 183,207 12,500 82,896
John S. Shannon 1993 360,000 237,132 233,296 12,500 217,011 30,681
Executive Vice 1992 340,000 236,028 204,483 12,500 180,250 25,973
President-Law 1991 330,000 201,531 12,500 209,936
D. Henry Watts 1993 360,000 237,132 377,009 12,500 217,011 33,444
Executive Vice 1992 350,000 242,970 317,355 12,500 180,250 30,384
President-Marketing 1991 335,000 204,585 12,500 203,136
</TABLE>
- --------
/1/Includes portion of any salary or bonus award elected to be received on a
deferred basis.
/2/Includes cash payment of dividend equivalents in an amount equal to, and
commensurate with, dividends paid on the Common Stock on performance share
units awarded through 1992 pursuant to the Corporation's Long-Term Incentive
Plan (dividend equivalents are not paid on performance share units awarded
after 1992). Includes amounts reimbursed for the payment of taxes on personal
benefits. Includes tax absorption payments under the Long-Term Incentive Plan
for performance share awards. Also includes the amount by which the interest
accrued on salary and bonuses deferred under the Officers' Deferred
Compensation Plan exceeds 120% of the applicable federal long-term rate
provided under Section 1274(d) of the Internal Revenue Code; for 1993, these
amounts were: for Mr. Goode, $25,173; Mr. Turbyfill, $137,185; Mr. Rudder,
$23,601; Mr. Shannon, $37,102; and Mr. Watts, $182,677.
/3/Options were granted without tandem SARs.
/4/Represents market value, as of the date of award, of Common Stock earned
pursuant to the Corporation's Long-Term Incentive Plan for performance periods
ended December 31, 1993, 1992 and 1991. For 1991, performance shares were
issued for the three-year award period 1989-1991. For 1992, performance shares
were issued for the three-year award period 1990-1992. For 1993, performance
shares were issued for the three-year award period 1991-1993.
/5/Includes the following for 1993: (i) contributions of $4,497 to the
Corporation's 401(k) plan on behalf of each named executive officer; and (ii)
total premium payments (out-of-pocket cash cost) on "split dollar" life
insurance policies for Mr. Goode, $45,983; Mr. Turbyfill, $32,427; Mr. Rudder,
$40,191; Mr. Shannon, $26,184; and Mr. Watts, $28,947.
/6/In accordance with the Securities and Exchange Commission's transitional
provisions applicable to the revised rules on executive officer compensation
disclosure, Mr. Goode's compensation is reported only for 1993 and 1992 (the
year in which he became Chief Executive Officer).
11
<PAGE>
/7/Includes personal use, as directed by resolution of the Board of
Directors, of the Corporation's aircraft valued at $65,913, calculated on the
basis of the incremental cost of such use to the Corporation.
LONG-TERM INCENTIVE PLAN
The Corporation's Long-Term Incentive Plan, as amended by the stockholders
in 1989, provides for the award of incentive stock options, non-qualified
stock options, stock appreciation rights, restricted stock and performance
share units to officers and other key employees of the Corporation and certain
of its subsidiaries. The Compensation and Nominating Committee of the Board of
Directors ("Committee") is charged with administration of the Plan and has the
sole discretion, subject to certain limitations, to interpret the Plan; to
select Plan participants; to determine the type, size, terms and conditions of
awards under the Plan; to authorize the grant of such awards; and to adopt,
amend and rescind rules relating to the Plan.
STOCK OPTIONS
The following table sets forth certain information concerning the grant in
1993 of stock options under the Corporation's Long-Term Incentive Plan to each
named executive officer:
OPTION/SAR* GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
GRANT DATE
INDIVIDUAL GRANTS VALUE
- ----------------------------------------------------------------- ----------
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS GRANT DATE
OPTIONS GRANTED TO EXERCISE OR PRESENT
GRANTED/1/ EMPLOYEES IN BASE PRICE/2/ EXPIRATION VALUE/3/
NAME # FISCAL YEAR ($ PER SHARE) DATE ($)
- ---- ---------- ------------ ------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
D. R. Goode 40,000 5.79% 63.25 1/31/2003 645,200
J. R. Turbyfill 12,500 1.81% 63.25 1/31/2003 201,625
P. R. Rudder 12,500 1.81% 63.25 1/31/2003 201,625
J. S. Shannon 12,500 1.81% 63.25 1/31/2003 201,625
D. H. Watts 12,500 1.81% 63.25 1/31/2003 201,625
</TABLE>
*No SARs were granted in 1993
- --------
/1/Options were granted effective February 1, 1993, exercisable one year
after the date of grant. Dividend equivalents are paid in cash on these
options in an amount equal to, and commensurate with, dividends paid on the
Common Stock.
/2/The exercise price (fair market value on the date of grant) may be paid
in cash or in shares of Common Stock (previously owned by the optionee for at
least one year) valued at fair market value on the date of exercise.
/3/In accordance with regulations of the Securities and Exchange Commission,
the present value of the option grant at the date of grant was determined
using the Black-Scholes statistical model. The actual amount, if any, an
executive officer may realize depends on the stock price on the date the
option is exercised; consequently, there is no assurance the amount realized
by an executive officer will be at or near the monetary value determined by
using this statistical model.
The model assumes:
(a) a stock volatility factor of 0.2007: volatility was determined by an
independent compensation consultant using monthly data averaged over the
60-month period January 1, 1988, through December 31, 1992;
12
<PAGE>
(b) a dividend yield of 3.67%: yield was determined monthly and averaged
over the 60-month period January 1, 1988, through December 31, 1992; and
(c) a 1992 risk-free rate of return of 7%: this represents the return on
a comparatively "risk-free" investment in 1992, the year prior to the
issuance of these options.
These assumptions produce a Black-Scholes factor of 0.255 and a resulting
present value for the 1993 option grant of $16.13 per share. The factor
computed under the Black-Scholes formula was not adjusted to reflect that the
options cannot be exercised during the first year of their ten-year term, nor
does it reflect that dividend equivalents are paid on unexercised options.
The following table sets forth certain information concerning the exercise
of options and/or SARs by each named executive officer during 1993 and the
unexercised options and SARs held by each as of the end of 1993:
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR
VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS/SARS AT IN-THE-MONEY OPTION/SARS
SHARES FY-END AT FY-END/1/
ACQUIRED ON VALUE (#) ($)
EXERCISE REALIZED -------------------------------------- ---------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- -------- --------------- ---------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
D. R. Goode 0 0 50,552/2/ 40,000 1,340,238/2/ 310,000
J. R. Turbyfill 6,960/3/ 916,146/3/ 99,636/4/ 12,500 3,809,968/4/ 96,875
P. R. Rudder 0 0 37,755 12,500 983,830 96,875
J. S. Shannon 0 0 48,320 12,500 1,336,197 96,875
D. H. Watts 0 0 47,942 12,500 1,351,856 96,875
</TABLE>
- --------
/1/ Equal to the mean of the high and low trading prices on the New York
Stock Exchange-Composite Transactions ($71.00) of the Common Stock on December
31, 1993, less the exercise prices of the options, multiplied by the number of
options.
/2/ Includes 8,031 tandem SARs with a value of $338,972.
/3/ Shares of Common Stock received upon exercise of 24,747 SARs payable
one-half in stock and one-half in cash.
/4/ Includes 47,613 tandem SARs with a value of $2,311,674.
PERFORMANCE SHARE UNITS (PSUS)
The following table sets forth certain information concerning the grant in
1993 of PSUs under the Corporation's Long-Term Incentive Plan to each named
executive officer. PSUs entitle a recipient to "earn out" or receive
performance shares (shares of the Corporation's Common Stock) at the end of a
three-year performance cycle (1993-1995) based on the Corporation's
performance during this three-year period. For the 1993 award, corporate
performance will be measured using three predetermined and equally weighted
standards; that is, each of the following performance areas will serve as the
basis for "earning out" up to one third of the performance share units
granted: (1) three-year average earnings per share (EPS) growth over the prior
three-year base period, (2) three-year average return on average invested
capital (ROAIC) and (3) three-year average annual operating ratio measured
both absolutely and in relation to average industry performance for six major
rail carriers. A more detailed discussion of these performance criteria can be
found in the Report of the Compensation and Nominating Committee.
13
<PAGE>
LONG-TERM INCENTIVE PLANS--AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF PERFORMANCE ESTIMATED FUTURE PAYOUTS UNDER
SHARES, OR OTHER NON-STOCK PRICE-BASED PLANS
UNITS OR PERIOD UNTIL -------------------------------------
OTHER RIGHTS/1/ MATURATION THRESHOLD TARGET/2/ MAXIMUM
NAME (#) OR PAYOUT (#) (#) (#)
- ---- --------------- ------------ ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
D. R. Goode 20,000 01/01/93- 0 10,000 20,000
12/31/95
J. R. Turbyfill 6,250 01/01/93- 0 3,125 6,250
12/31/95
P. R. Rudder 6,250 01/01/93- 0 3,125 6,250
12/31/95
J. S. Shannon 6,250 01/01/93- 0 3,125 6,250
12/31/95
D. H. Watts 6,250 01/01/93- 0 3,125 6,250
12/31/95
</TABLE>
- --------
/1/Performance shares, when earned out, will be held by the Corporation for
up to 60 months pursuant to a share retention agreement unless such
requirement is waived by the Committee in its sole discretion. Because
performance shares will be subject to a share retention agreement, a tax
absorption payment in cash or as additional withholding taxes, equal to any
Federal and state income taxes imposed, will be made to or on behalf of an
executive officer as the result of this "earn out".
/2/The Long-Term Incentive Plan does not provide for a performance target;
consequently, this column presents 50% of the maximum "earn out", which is
presented as a representative amount based on the percentage of the previous
fiscal year's actual "earn out" under the Plan.
PENSION PLANS
The following table sets forth the estimated annual retirement benefits
payable on a qualified joint and survivor annuity basis in specified
remuneration and years of creditable service classifications under the
Corporation's qualified defined benefit pension plans, as well as nonqualified
supplemental pension plans that provide benefits otherwise denied participants
because of certain Internal Revenue Code limitations on qualified plan
benefits. It is assumed, for purposes of the table, that an individual retired
in 1993 at age 65 (normal retirement age) with the maximum allowable Railroad
Retirement Act annuity. The benefits shown are in addition to amounts payable
under the Railroad Retirement Act.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF CREDITABLE SERVICE
-----------------------------------------------------------------------------
REMUNERATION 25 30 35 40
- ------------ -- -- -- --
<S> <C> <C> <C> <C>
$200,000 $ 60,278 $ 74,309 $ 88,340 $102,372
300,000 97,778 119,309 140,840 162,372
400,000 135,278 164,309 193,340 222,372
500,000 172,778 209,309 245,840 282,372
600,000 210,278 254,309 298,340 342,372
700,000 247,778 299,309 350,840 402,372
800,000 285,278 344,309 403,340 462,372
900,000 322,778 389,309 455,840 522,372
</TABLE>
14
<PAGE>
Under the pension plans, covered compensation includes salary and bonus, and
each officer can expect to receive an annual retirement benefit equal to
average annual compensation for the five most highly compensated consecutive
years out of the last ten years of creditable service multiplied by 1.5% times
total years of creditable service, but not in excess of 60% of such average
compensation, less an offset for the annual Railroad Retirement Act annuity.
The respective last five-year average compensation and approximate years of
creditable service, as of January 1, 1994, for each executive officer named in
the cash compensation table were: Mr. Goode, $467,686 and 28 years; Mr.
Turbyfill, $638,394 and 33 years; Mr. Rudder, $452,653 and 40 years;
Mr. Shannon, $553,012 and 37 years; Mr. Watts, $551,511 and 40 years.
COMPENSATION AND NOMINATING COMMITTEE REPORT CONCERNING THE 1993 COMPENSATION
OF CERTAIN EXECUTIVE OFFICERS
This Report describes Norfolk Southern Corporation's officer compensation
strategy, the components of its compensation program and the manner in which
1993 compensation determinations were made for the Corporation's Chairman,
President and Chief Executive Officer, David R. Goode, and the four officers
(collectively, including Mr. Goode, referred to as the "Executive Officers")
whose 1993 compensation is disclosed in the Summary Compensation Table of this
Proxy Statement.
Among other things, the Compensation and Nominating Committee of the Board of
Directors (the "Committee") is responsible for: (1) recommending to the Board
the salaries of corporate officers and (2) administering the Corporation's
Management Incentive Plan ("MIP"), as adopted by the Board of Directors, and
its Long-Term Incentive Plan ("LTIP"), as last amended and approved by
stockholders in 1989. Included in the LTIP, and more particularly described
below, are awards of stock options and performance share units. The Committee
is composed entirely of non-employee directors and met six times during 1993.
BASE SALARY: While the Committee believes that a substantial portion of
each Executive Officer's total compensation should be "performance-based",
the Committee seeks to assure that the base salaries of Executive Officers
are generally competitive with those earned by individuals in comparable
positions.
Specifically, the Committee compares Mr. Goode's base salary with those
paid to the chief executive officers of all other holding companies of
Class I railroads (the same companies comprising the S&P Railroad Index
included in the Stock Performance Graph) and of other American corporations
of comparable revenue size. The base salaries of the other Executive
Officers--as is true of all officers of the Corporation--are evaluated,
principally by Mr. Goode, relative to survey data of base pay for
comparable positions at a large number of American corporations of
comparable revenue size, including but not limited to those identified in
the Stock Performance Graph. This information is compiled by the
Corporation's Personnel Department and by an outside consultant. The
Committee's general intention is to set the base salaries of Executive
Officers between the 50th and 75th percentiles of their peers in the
respective groups with which they are compared.
Mr. Goode discusses with the Committee the specific contributions and
performance of each of the Executive Officers. Based on such subjective
evaluations, comparative salary data and each Executive Officer's length of
service in his current position, Mr. Goode makes base salary
recommendations which are submitted for Committee and Board approval.
Mr. Goode makes no recommendations concerning, nor does he play any role in
determining, his base salary (or other compensation), which is set by the
Board. As noted, the Committee customarily
15
<PAGE>
seeks to set the Chairman's base salary between the 50th and 75th
percentiles of the base salaries paid to chairmen of the other holding
companies of Class I railroads and other American corporations of
comparable revenue size. Because Mr. Goode became Chairman of the
Corporation in 1992, his base salary in 1993 was below the 50th percentile;
the base salary of other Executive Officers in 1993 was at about the 50th
percentile.
For 1993, Mr. Goode's salary was increased by 9%. This 1993 increase, not
tied to or reflecting application of any specific formula, reflects both
the Corporation's total operating revenues and net income in 1992, despite
a sluggish economy and reduced coal traffic, and the Board's confidence in
Mr. Goode's leadership. The Committee recommended and the Board approved
average increases of 4.84% for each of the other Executive Officers; these
increases were based on Mr. Goode's recommendations and the Corporation's
1992 performance.
MANAGEMENT INCENTIVE PLAN (MIP): The Corporation's MIP is designed and
administered to ensure that a significant portion of each Executive
Officer's annual cash compensation is based on the Corporation's annual
profitability. MIP awards to Executive Officers, and other MIP
participants, are paid from an annual incentive fund equal to a percentage
(from 0.75% to 1.5%) of the Corporation's adjusted pretax net income when
the Corporation's annual return on average invested capital (ROAIC) equals
or exceeds 10%. For 1993, 288 key employees, including the Executive
Officers, earned MIP awards. The 1993 MIP award earned by Mr. Goode
represented 70.37% of his 1993 salary. 1993 MIP awards earned by the four
other Executive Officers equaled 65.87% of their 1993 salaries.
The Committee set the maximum amount of Mr. Goode's incentive pay (paid at
the discretion of the Committee and based on available MIP funds) at 80% of
his salary during 1993, and at 75% of salary for the other Executive
Officers. Incentive pay opportunities for Mr. Goode are determined annually
by the Committee by comparing Mr. Goode's incentive pay with that paid to
the chief executive officers of all other holding companies of Class I
railroads (the same companies comprising the S&P Railroad Index included in
the Stock Performance Graph) and of other American corporations of
comparable revenue size. Incentive pay opportunities for the other
Executive Officers are determined annually by the Committee based on its
review of the annual cash compensation of comparable positions at a large
number of American companies of comparable revenue size, including but not
limited to those identified in the Stock Performance Graph.
The Corporation's base salaries have tended to be lower than at comparable
organizations, and its incentive pay opportunities have tended to be
higher. When the Corporation achieves MIP profitability goals, the
Executive Officers' base salary and MIP awards are competitive with the
annual cash compensation paid by comparable organizations. In years in
which those goals are not realized, the Executive Officers will receive
less (or no) incentive pay. Mr. Goode's 1993 MIP award approximates the
50th percentile with respect to 1992 bonuses earned by chief executive
officers in his peer group. The 1993 MIP award paid to the other Executive
Officers approximates the 75th percentile with respect to 1992 bonuses
earned by individuals in similar positions in their respective peer group.
LONG-TERM INCENTIVE PLAN (LTIP): The Committee believes that a substantial
component of the Executive Officers' total compensation should be based on
and reflect the Corporation's longer-term earnings growth, its
profitability and the total returns (stock price appreciation and
dividends) realized by the Corporation's stockholders. This is achieved by
annual grants of stock options and performance share units and through
share retention agreements entered into with the Executive Officers. These
LTIP arrangements ensure that the longer-term financial interests of the
Executive Officers are directly aligned with those of the Corporation's
stockholders and provide the Executive
16
<PAGE>
Officers with the opportunity to acquire a meaningful beneficial stock
ownership position in the Corporation.
At its January 1993 meeting, the Committee granted stock options to each of
the five Executive Officers and to 292 other key employees. Stock options
were granted with an exercise price equal to the market value of the shares
on the date of grant. These options are exercisable during a ten-year
period following the date of grant, after a one-year period has elapsed.
The 1993 grants of performance share units provide the Executive
Officers, and other recipients, with the opportunity to earn shares of the
Corporation's Common Stock during the first quarter of 1996. The number of
performance share units, and equivalent common shares, that are earned by
recipients is based on the Corporation's three-year (i.e., 1993-1995)
earnings per share growth, three-year average ROAIC and three-year average
operating ratio evaluated relative to pre-established performance criteria
set out in the schedules below. One third of the performance share units
granted are available to be earned based on each of the three performance
criteria.
<TABLE>
<CAPTION>
EARNINGS PER SHARE ROAIC
- ----------------------------------------------- ------------------------------------------------
PERCENTAGE OF PERCENTAGE OF
THREE-YEAR PERFORMANCE THREE-YEAR PERFORMANCE
AVERAGE EPS SHARE UNITS AVERAGE SHARE UNITS
GROWTH EARNED ROAIC EARNED
- ----------------------------------------------- ------------------------------------------------
<S> <C> <C> <C>
40% 100% 20% 100%
35% 90% 19% 90%
30% 80% 18% 80%
25% 60% 17% 70%
20% 40% 16% 60%
15% 20% 15% 50%
Below 15% 0% 14% 40%
13% 20%
Below 13% 0%
</TABLE>
<TABLE>
<CAPTION>
3-YEAR AVERAGE OPERATING RATIO (OPR)
- ------------------------------------------------------------------------------------------
AVERAGE OF A AND B = PERCENTAGE OF PERFORMANCE SHARE UNITS
EARNED UNDER OPERATING RATIO CRITERIA
- ------------------------------------------------------------------------------------------
<CAPTION>
A B
- ------------------------------------------------------------------------------------------
PERCENTAGE OF 3-YEAR AVERAGE PERCENTAGE OF
PERFORMANCE NS OPR BELOW PERFORMANCE
NS 3-YEAR SHARE UNITS INDUSTRY OPR SHARE UNITS
OPR AVERAGE EARNED AVERAGE EARNED
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
70% 100% 15.0+ 100%
75% 90% 10.0 80%
80% 80% 7.5 70%
85% 60% 5.0 60%
90% 40% 2.5 30%
Greater than 0% 0.0 0%
90%
</TABLE>
17
<PAGE>
All stock options and performance share units granted in 1993 to
Executive Officers were subject to the following terms. During the period
that the stock options remain outstanding (i.e., until such time as they
are exercised by the Executive Officer), the Corporation pays cash dividend
equivalents on such options to the Executive Officers. At the time
performance share units are earned, the Corporation makes a cash payment so
the Executive Officers can pay taxes due on the value of such performance
shares. In exchange for these cash payments, the Executive Officers have
entered into share retention agreements with the Corporation whereby they
have agreed to have the Corporation hold performance shares for a period of
up to five years following the date such performance shares were earned.
In 1993, Mr. Goode was granted 40,000 stock options and 20,000 performance
share units. The other Executive Officers as a group were awarded 50,000
stock options and 25,000 performance share units. In determining the size
of these awards, the size of prior grants was analyzed within a current
total compensation framework predicated on a review of both the long-term
awards and the total compensation (base salary, bonus and long-term awards)
of comparable positions at a number of U.S. companies. Specifically, the
Committee compares Mr. Goode to the chief executive officers of all other
holding companies of Class I railroads (the same companies comprising the
S&P Railroad Index included in the Stock Performance Graph) and of other
American corporations of comparable revenue size. The other Executive
Officers are evaluated relative to survey data for comparable positions at
a large number of American corporations of comparable revenue size,
including but not limited to those identified in the Stock Performance
Graph. Based on this review, the number of stock options and performance
share units granted is fixed so as to place Mr. Goode and the other
Executive Officers above the 75th percentile of total compensation for
their respective peer groups. These award opportunities and this total
compensation will be attained only if future corporate performance
warrants.
The mix of options and performance share units may vary from year to year
to reflect an analysis of the relative value of each type of award. Since
the inception of the Plan, this analysis has resulted in a general practice
of granting options to performance share units in a ratio of 2 to 1.
The Committee believes that compensation of the Executive Officers is
competitive with that of comparable corporations. More importantly, the
Committee believes Executive Officer compensation has been appropriately
structured and administered so that a substantial component of total
compensation is dependent upon, and directly related to, the Corporation's
annual and longer-term earnings growth, its profitability and the total returns
to the Corporation's stockholders.
Regulations of the Securities and Exchange Commission require the Committee
to report to stockholders on actions the Committee has taken as a result of the
Revenue Reconciliation Act of 1993 (RRA) -- even though that legislation had no
effect on the Committee's compensation decisions for Executive Officers that
became effective in 1993. RRA amended Section 162 of the Internal Revenue Code
to eliminate the deductibility of certain compensation over $1 million paid to
executive officers. A review of the proposed regulations interpreting this
provision suggests that a number of the Corporation's compensation arrangements
meet many of the requirements for so-called "performance-based" compensation
and should not be subject to the limitation on tax deductibility. Since it is
not anticipated that this provision will affect the deductibility of amounts
paid under the Corporation's 1994 compensation
18
<PAGE>
arrangements, the Committee believes it is not yet appropriate to formulate a
final response to the new tax provision and will continue to monitor the matter
and, as necessary, make recommendations to the Board.
E. B. Leisenring, Jr., Chairman
L. E. Coleman, Member
T. M. Hahn, Jr., Member
R. E. McNair, Member
PERFORMANCE GRAPH*
Set forth below is a line graph comparing the yearly percentage change in the
cumulative total stockholder return on the Corporation's Common Stock, the
cumulative total return of the S&P Composite-500 Stock Index and the S&P
Railroad Composite Index for the five-year period commencing December 31, 1988,
and ending December 31, 1993.
<TABLE>
[GRAPH APPEARS HERE]
COMPARISON OF FIVE YEAR CUMULATIVE RETURN
AMONG NORFOLK SOUTHERN CORP., S&P 500 COMP. INDEX AND RAILROADS INDEX
<CAPTION>
NORFOLK S&P RAILROADS
Measurement period SOUTHERN 500 COMP. COMPOSITE
(Fiscal year Covered) CORP. INDEX INDEX
- --------------------- -------- -------- --------
<S> <C> <C> <C>
Measurement PT -
12/31/88 $ 100.00 $ 100.00 $ 100.00
FYE 12/31/89 $ 134.10 $ 131.69 $ 128.55
FYE 12/31/90 $ 143.80 $ 127.60 $ 122.85
FYE 12/31/91 $ 211.12 $ 166.47 $ 200.51
FYE 12/31/92 $ 224.32 $ 179.15 $ 225.15
FYE 12/31/93 $ 265.56 $ 197.21 $ 279.02
</TABLE>
- --------
*Assumes that the value of the investment in the Corporation's Common Stock
and each index was $100 on December 31, 1988, and that all dividends were
reinvested.
19
<PAGE>
RATIFICATION OF APPOINTMENT OF INDEPENDENT
PUBLIC ACCOUNTANTS
The Board of Directors, upon the recommendation of its Audit Committee, has
appointed the firm of KPMG Peat Marwick, independent public accountants, to
audit the books, records and accounts of the Corporation for the year 1994.
This firm has acted as auditors for the Corporation or its subsidiary, Norfolk
and Western Railway Company, since 1969, and the Board of Directors recommends
that its appointment be ratified by the stockholders.
Under Virginia law and under the Corporation's Articles of Incorporation and
Bylaws, actions such as the ratification of the appointment of auditors are
approved, so long as a quorum exists, if the votes cast favoring the action
exceed the votes cast opposing the action. Abstentions or shares that are not
voted, such as those held by a broker or other nominee who does not vote in
person or return a proxy, are not "cast" for this purpose.
With respect to 1993, KPMG Peat Marwick performed audit services which
consisted of the annual audit of the consolidated financial statements of the
Corporation and its subsidiaries, including annual reports of the Corporation
to the stockholders and the Securities and Exchange Commission, audits of the
financial statements of various subsidiaries, audits of the financial
statements of various employee benefit plans, limited reviews of quarterly
financial statements and review of internal controls not directly related to
the audit of the financial statements.
All services rendered by KPMG Peat Marwick to the Corporation in 1993 were
approved in advance or ratified by the Audit Committee of the Board of
Directors, and this Committee determined that none jeopardized the auditing
firm's independence. (See "Certain Relationships and Related Transactions"
caption on page 9.) KPMG Peat Marwick has represented to the Audit Committee
that its fees are customary and that no agreement exists to limit current or
future years' audit fees.
Representatives of KPMG Peat Marwick are expected to be present at the Annual
Meeting of Stockholders with the opportunity to make a statement if they so
desire and available to respond to appropriate questions.
STOCKHOLDER PROPOSALS
Stockholders are entitled to submit proposals on matters appropriate for
stockholder action consistent with regulations of the Securities and Exchange
Commission. In order for a stockholder proposal for the 1995 Annual Meeting of
Stockholders to be eligible for inclusion in the Corporation's proxy statement
and form of proxy, it must be received by the Corporate Secretary, Norfolk
Southern Corporation, Three Commercial Place, Norfolk, Virginia 23510-2191, no
later than December 5, 1994.
OTHER MATTERS
The Board of Directors does not know of any matters to be presented at the
Annual Meeting other than as set forth above. However, if any other matters
come before the meeting, the proxies received pursuant to this solicitation
will be voted thereon in accordance with the judgment of the person or persons
acting under the proxies.
By order of the Board of Directors,
DONALD E. MIDDLETON,
Corporate Secretary.
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NORFOLK SOUTHERN CORPORATION
THREE COMMERCIAL PLACE, NORFOLK, VIRGINIA 23510-2191
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints L. E. Coleman, E. B. Leisenring, Jr. or Arnold
B. McKinnon, and each or any of them, proxy for the undersigned, with power of
substitution, to vote with the same force and effect as the undersigned at the
annual meeting of stockholders of Norfolk Southern Corporation to be held at
the Conference Center, Williamsburg Lodge, South England Street, Williamsburg,
Virginia, on Thursday, May 12, 1994, and any adjournments thereof, upon the
following matters more fully set forth in the Proxy Statement and to transact
such other business as may properly come before the meeting:
(1)Election [_]FOR all nominees listed below, [_]WITHHOLD AUTHORITY to vote
of except as marked to the for all nominees listed
Directors contrary (see instruction). below.
Term expiring 1997: William J. Crowe, Jr., David R. Goode, Robert E. McNair
and Harold W. Pote
Term expiring 1995: Jane Margaret O'Brien
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
STRIKE A LINE THROUGH THAT NOMINEE'S NAME IN THE LIST ABOVE.)
(2) Ratification of the appointment of KPMG Peat Marwick, independent public
accountants. (The Board of Directors recommends a vote FOR)
[_] FOR [_] AGAINST [_] ABSTAIN
(Continued, and to be MARKED, DATED AND SIGNED on the other side)
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(Continued from other side)
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER
DIRECTED ON THE OTHER SIDE BY THE UNDERSIGNED STOCKHOLDER. IF NO
DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF
DIRECTORS AND FOR ITEM (2).
Dated , 1994
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(SIGNATURE)
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(SIGNATURE)
SIGN EXACTLY AS NAME
APPEARS HEREON.
ATTORNEYS-IN-FACT,
EXECUTORS, TRUSTEES,
GUARDIANS, CORPORATE
OFFICERS, ETC., SHOULD
GIVE FULL TITLE.
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PLEASE MARK, DATE, SIGN AND RETURN THIS PROXY
PROMPTLY
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