<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 [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED
BY RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
NORFOLK SOUTHERN CORPORATION
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(Name of Registrant as Specified in Its Charter)
NORFOLK SOUTHERN CORPORATION
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14a.
[_] $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 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
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LOGO
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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 9, 1996
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The Annual Meeting of Stockholders of Norfolk Southern Corporation will be
held at The Norfolk Waterside Marriott and Waterside Convention Center, 235
East Main Street, Norfolk, Virginia, on Thursday, May 9, 1996, at 10:00 A.M.,
Eastern Daylight Time, for the following purposes:
1. Election of three directors to the class whose term will expire in
1999 and one director to the class whose term expires in 1997.
2. Ratification of the appointment of independent public accountants as
auditors.
3. Transaction of such other business as may properly come before the
meeting.
Stockholders of record at the close of business on March 1, 1996, will be
entitled to vote at such meeting.
By order of the Board of
Directors,
DEZORA M. MARTIN,
Corporate Secretary.
Dated: April 1, 1996
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 1, 1996
PROXY STATEMENT
This statement and the accompanying proxy will be mailed to stockholders of
Norfolk Southern Corporation on or about April 1, 1996. The Corporation's
Annual Report for 1995 was mailed under separate cover beginning March 15,
1996. The proxy is solicited by the Board of Directors of the Corporation for
use at the Annual Meeting of Stockholders to be held May 9, 1996. 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,
facsimile, 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 $20,500 to assist in soliciting proxies directly or through
others 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 1, 1996. As of February 29, 1996, the Corporation had issued and
outstanding 135,886,190 shares of Common Stock, of which 128,625,861 shares
were entitled to one vote per share.
ELECTION OF DIRECTORS
The terms of Gerald L. Baliles, Gene R. Carter, E. B. Leisenring, Jr. and
Arnold B. McKinnon expire at the Annual Meeting on May 9, 1996.
Mr. Robert E. McNair, a member of the class containing three directors whose
term expires in 1997, will retire effective the date of the Annual Meeting
under the Corporation's retirement policy for directors. Accordingly, at its
meeting held on January 23, 1996, the Board of Directors amended the Bylaws to
decrease the number of directors from eleven to ten, effective the date of the
Annual Meeting.
<PAGE>
Unless otherwise instructed on the enclosed proxy, such proxy will be voted
in favor of the reelection of Messrs. Baliles, Carter and Leisenring to serve
in the class whose term will expire in 1999, and the election of Arnold B.
McKinnon to serve for a one-year term expiring in 1997. The election of Mr.
McKinnon to be the third director in the class whose term expires in 1997 will
result in each class containing 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, 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.
Under Virginia law and under the Corporation's Restated 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--or 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.
NOMINEE (FOR TERM EXPIRING IN 1997)
Mr. McKinnon, 68, Norfolk, Va., has been a director since
1986. He was Chairman and Chief Executive Officer of
[PHOTO] Norfolk Southern Corporation until his retirement in
1992, having served prior thereto as Chairman, President
and Chief Executive Officer.
Arnold B. McKinnon
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NOMINEES (FOR TERM EXPIRING IN 1999)
Mr. Baliles, 55, Richmond, Va., has been a director since
1990. He has been a partner in the law firm of Hunton &
[PHOTO] Williams, a business law firm with offices in several
major U. S. cities and international offices in Brussels,
Belgium, Warsaw, Poland, and Hong Kong, since 1990.
Gerald L. Baliles
(See information under the "Certain Relationships"
caption on page 10.)
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2
<PAGE>
NOMINEES (CONTINUED)
Mr. Carter, 56, Alexandria, Va., has been a director
since 1992. He has been Executive Director of the
Association for Supervision and Curriculum Development,
[PHOTO] 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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Mr. Leisenring, 70, Philadelphia, Pa., has been a
director since 1982. He is Chairman of the Philadelphia
Contributionship, the nation's oldest insurance company.
He was Chairman and Chief Executive Officer of Penn
Virginia Corporation, a natural resources holding and
[PHOTO] development company, until his retirement in 1992. 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 Union Bank), PICO Products, Inc. and
SKF USA Inc. (a controlled subsidiary of Aktiebolaget
SKF, a Swedish corporation).
E. B. Leisenring, Jr.
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DIRECTORS WHOSE TERM EXPIRES IN 1997
Mr. Goode, 55, Norfolk, Va., has been a director since
1992. He has been Chairman, President and Chief Executive
Officer of the Corporation since September 1992, having
previously become President in October 1991, and
[PHOTO] 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, Texas Instruments Inc. and
TRINOVA Corporation.
David R. Goode
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Mr. Pote, 49, New York, N.Y., has been a director since
1988. He has been a partner of The Beacon Group, a
[PHOTO] private investment partnership, since April 1993, having
served prior thereto as President of PBS Properties, Inc.
Mr. Pote is also a director of Turecamo Maritime, Inc.
Harold W. Pote
(See information under "Certain Relationships" caption on
page 10).
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3
<PAGE>
DIRECTORS WHOSE TERM EXPIRES IN 1998
Mr. Coleman, 65, Wickliffe, Ohio, has been a director
since 1982. He has been Chairman of The Lubrizol
[PHOTO] Corporation, a diversified specialty chemical company,
since January 1, 1996, having previously become Chairman
and Chief Executive Officer in April 1982. He is also a
director of Harris Corporation.
L. E. Coleman
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Mr. Hahn, 69, Atlanta, Ga., has been a director since
1985. He has been Honorary Chairman of the Board of
Georgia-Pacific Corporation, a manufacturer and
distributor of building products, pulp and paper products
and chemicals, since December 1993, having previously
[PHOTO] become Chairman of the Board in May 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 Bank
of Georgia.
T. Marshall Hahn, Jr.
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Mr. Hilliard, 56, New York, N.Y., has been a director
since 1992. He has been a partner in Brown Brothers
[PHOTO] Harriman & Co., a private bank in New York City, since
January 1979. He is also a director of Owens-Corning
Fiberglas Corporation.
Landon Hilliard
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(See information under the "Certain Relationships"
caption on page 10).
Ms. O'Brien, 42, Roanoke, Va., has been a director since
1994. She has been President of Hollins College since
[PHOTO] July 1991, having served prior thereto as Dean of the
Faculty at Middlebury College, Vt. She is also a director
of Landmark Communications, Inc.
Jane Margaret O'Brien
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4
<PAGE>
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 29, 1996, the beneficial
ownership of the Corporation's Common Stock by each director (including the
Chief Executive Officer) and nominee, each of the other five 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.
<TABLE>
<CAPTION>
SHARES OF
NAME COMMON STOCK
- ---- ------------
<S> <C>
Gerald L. Baliles 1,200/1/,/2/
Gene R. Carter 1,050/1/
L. E. Coleman 4,112/1/,/3/
David R. Goode 206,714/4/
T. Marshall Hahn, Jr. 2,200/1/
Landon Hilliard 2,000/1/
E. B. Leisenring, Jr. 9,805/1/,/5/
Arnold B. McKinnon 205,462/1/
</TABLE>
<TABLE>
<CAPTION>
SHARES OF
NAME COMMON STOCK
- ---- ------------
<S> <C>
Robert E. McNair 2,100/1/,/6/
Jane Margaret O'Brien 1,000/1/
Harold W. Pote 1,500/1/
John R. Turbyfill 192,690/7/
D. Henry Watts 120,857/8/
John S. Shannon 139,982/9/
Stephen C. Tobias 56,246/1//0/
Henry C. Wolf 59,890/1//1/
</TABLE>
<TABLE>
<S> <C>
41 Executive Officers and Directors as a group (including the
persons named above)/1//2/ 1,792,452/1//3/
</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 (see
information under the "Board of Directors" caption on page 7).
/2/Includes 200 shares owned by Mr. Baliles' wife, in which he disclaims
beneficial ownership.
/3/Includes 112 shares owned by Mr. Coleman's wife, in which he disclaims
beneficial ownership.
/4/Includes 3,011 shares credited to Mr. Goode's account in the
Corporation's Thrift and Investment Plan. Includes 14,519 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
172,521 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.
/5/Includes 5,205 shares owned by Mr. Leisenring's wife, in which he
disclaims beneficial ownership.
/6/Includes 100 shares held pursuant to an investment trust. Mr. McNair has
sole voting power and shared investment power over these shares. Also includes
1,000 shares owned by Mr. McNair's wife, in which he disclaims beneficial
ownership.
/7/Includes 8,960 shares credited to Mr. Turbyfill's account in the
Corporation's Thrift and Investment Plan. Includes 18,635 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 135,914
shares subject to stock options granted pursuant to the Corporation's Long-
Term Incentive Plan and with respect to
5
<PAGE>
which Mr. Turbyfill has the right to acquire beneficial ownership within 60
days. Also includes 2,049 shares owned by Mr. Turbyfill's wife, in which he
disclaims beneficial ownership.
/8/Includes 3,796 shares credited to Mr. Watts' account in the Corporation's
Thrift and Investment Plan. Includes 16,957 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 85,442 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 14,662 shares owned by Mr.
Watts' wife, in which he disclaims beneficial ownership.
/9/Includes 2,386 shares credited to Mr. Shannon's account in the
Corporation's Thrift and Investment Plan. Includes 17,163 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 85,820
shares subject to stock options granted pursuant to the Corporation's Long-
Term Incentive Plan and with respect to which Mr. Shannon has the right to
acquire beneficial ownership within 60 days.
/1//0/Includes 3,581 shares credited to Mr. Tobias' account in the
Corporation's Thrift and Investment Plan. Includes 5,255 shares held by the
Corporation under share retention agreements pursuant to the Corporation's
Long-Term Incentive Plan and over which Mr. Tobias possesses voting power but
has no investment power until the shares are distributed. Includes 39,547
shares subject to stock options granted pursuant to the Corporation's Long-
Term Incentive Plan and with respect to which Mr. Tobias has the right to
acquire beneficial ownership within 60 days.
/1//1/Includes 2,960 shares credited to Mr. Wolf's account in the
Corporation's Thrift and Investment Plan. Includes 4,700 shares held by the
Corporation under share retention agreements pursuant to the Corporation's
Long-Term Incentive Plan and over which Mr. Wolf possesses voting power but
has no investment power until the shares are distributed. Includes 45,527
shares subject to stock options granted pursuant to the Corporation's Long-
Term Incentive Plan and with respect to which Mr. Wolf has the right to
acquire beneficial ownership within 60 days.
/1//2/The spouse of one executive officer owns 70 shares of Norfolk Southern
Railway Company Preferred Stock, Series A, in which the officer disclaims
beneficial ownership.
/1//3/Includes 82,095 shares credited to officers' individual accounts under
the Corporation's Thrift and Investment Plan. Includes 135,125 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
1,147,178 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 25,773
shares in which beneficial ownership is disclaimed.
Section 16 of the Securities 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 1995, 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.
6
<PAGE>
BOARD OF DIRECTORS
The Board of Directors of the Corporation consists of eleven members
(effective the date of the 1996 Annual Meeting of Stockholders, the number
will be reduced to ten) and is divided into three classes, each elected for a
term of three years, with each class containing as nearly as possible one
third of the total number of directors as required by the Corporation's
Restated Articles of Incorporation. The Board met a total of seven times in
1995. 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, except Gene R. Carter who attended eight of eleven such meetings, and
Harold W. Pote who attended eleven of sixteen such meetings.
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 that director's term of office expires on such date, in which
event he shall refrain from becoming a candidate for reelection.
TERMINATION OF PENSION PLAN
At its January 1996 meeting, the Board voted to terminate, effective June 1,
1996, the Corporation's pension plan both for outside directors serving on
that date and for all subsequently elected outside directors. Directors who
retired prior to June 1, 1996, will continue to receive pensions.
Because current outside directors joined the Board with the expectation that
they would receive pensions, such individuals serving on June 1, 1996, will be
made whole for the actuarially determined present value of the pension benefit
they have agreed to relinquish. Accordingly, each such director will be
credited with an amount (Terminated Pension) equal to the value--discounted at
the rate currently prescribed by the Pension Benefit Guaranty Corporation and
based on the director's age as of May 31, 1996--of the foregone right to have
received annually for life, commencing when the director became 72, an annuity
equal to the current annual retainer.
Consistent with the Board's intention to increase each outside director's
equity relationship to the Corporation and thereby more completely to align
all the directors' interests with those of stockholders generally, the
Terminated Pension will be converted into stock units (Units) (one Unit is
equal to one share of NS Common Stock), based on the mean of the high and low
trading prices of the common stock on the date of the 1996 Annual Meeting of
Stockholders. Units will be credited to each director's separate memorandum
account, which will be maintained as are accounts established pursuant to the
"Outside Directors' Deferred Stock Unit Program," described below.
COMPENSATION OF DIRECTORS
Each member of the Board of Directors who is not also an officer of the
Corporation received compensation for services during 1995 of $32,000 a year
as a retainer and, in addition, a fee of $1,800 for 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 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
7
<PAGE>
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%; and 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. Five current
directors are participants.
Under the Directors' Restricted Stock Plan each non-employee director
serving on January 1, 1994, was awarded a restricted 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 grant of 1,000 Restricted
Shares. 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 becomes 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.
At its January 1996 meeting, the Board adopted the Outside Directors'
Deferred Stock Unit Program, pursuant to which each outside director will be
granted 200 stock units (Units) (one Unit is equal to one share of NS Common
Stock), effective the date of the 1996 Annual Meeting of Stockholders. Units
will be credited to a memorandum account maintained in the director's name; it
is anticipated that outside directors will continue to be granted, effective
the date of each Annual Meeting of Stockholders, additional Units equal in
value to approximately 50% of the annual retainer in effect for that year. The
Units in each memorandum account will be credited with dividends paid on the
common stock, and the amount so credited will be converted into additional
Units, including fractions thereof, based on the mean of the high and low
trading prices of the common stock on the dividend payment date. Upon leaving
the Board for any reason, a director will receive in cash (either in a lump
sum or in ten annual installments, in accordance with an irrevocable election
made by each director) an amount determined with respect to the mean of the
high and low trading prices of the common stock. The amount of a lump-sum
payment will be determined on the basis of the mean of the high and low
trading prices of the common stock on the last business day of the month
following the director's cessation of service. The amount of installment
payments will be determined annually with respect to the mean of the high and
low trading prices of the common stock on the third business day following the
public announcement of annual earnings in January. During the ten-year period
over which installments are paid, Units in the memorandum account at any time
that have not been paid in cash will be credited with dividends as paid on the
common stock.
8
<PAGE>
In line with its long-standing commitments to contribute to educational,
cultural and other appropriate charitable institutions and to encourage others
to do the same, the Corporation has instituted the Directors' Charitable Award
Program. Each director serving on the date of this Proxy Statement may
nominate one or more tax-exempt institutions to receive up to a total of
$500,000 (payable in five equal annual installments following the director's
death); another $500,000 will be paid to the Norfolk Southern Foundation in
the director's name. The program is funded, and its costs are expected to be
recovered, through corporate-owned life insurance on the directors. Because
the Corporation makes the charitable contributions (and is entitled to the
related deduction) and is the owner and the beneficiary of the life insurance
policies, directors derive no direct financial benefit from the program.
Moreover, amounts the Foundation receives from insurance proceeds under this
program may reduce what the Corporation otherwise would contribute from
general corporate resources to support the Foundation's work.
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 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 four times in 1995, and its members are L. E.
Coleman, Chairman, Gerald L. Baliles, Gene R. Carter, Landon Hilliard and
Harold W. Pote.
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 five times in 1995, and its members are
E. B. Leisenring, Jr., Chairman, L. E. Coleman, T. Marshall Hahn, Jr. and
Robert E. McNair.
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 three times
in 1995, and its members are Arnold B. McKinnon, Chairman, David R. Goode, T.
Marshall Hahn, Jr. and E. B. Leisenring, Jr.
9
<PAGE>
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 five times in 1995, and its members are T. Marshall
Hahn, Jr., Chairman, E. B. Leisenring, Jr., Robert E. McNair, Jane Margaret
O'Brien and Harold W. Pote.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In 1995, the Corporation paid approximately $162,000 for legal services to
the law firm of Hunton & Williams, in which Mr. Baliles is a partner.
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 1995, Brown Brothers was paid
approximately $165,000 in fees for managing a portion of the assets of the
Corporation's pension fund.
In January 1996, Beacon Group Energy Investment Fund L.P.--affiliated with
The Beacon Group in which Mr. Pote is a principal--announced that it is
purchasing a controlling interest in MAPCO Coal, Inc. During 1995 and in a
number of earlier periods, all prior to Beacon's proposed acquisition of its
interest, Norfolk Southern Railway Company provided transportation services
for MAPCO at rates fixed in conformity with law or governmental authority. It
is anticipated that the Railway will continue to provide transportation
services for MAPCO in 1996 and succeeding years.
MAPCO also had entered into various leases with a natural resources
subsidiary of the Corporation, generating 1995 rent and royalty income for the
subsidiary of slightly more than $3.5 million. The terms and conditions of
such leases are not expected to be affected by the proposed acquisition. In
the future, the parties (1) may negotiate the terms and conditions of one or
more renewals and of new leases and (2) may compete to acquire fee, leasehold
or other interests in natural resource properties.
Kathryn B. McQuade is Vice President-Internal Audit of the Corporation. Ms.
McQuade's spouse is one of approximately 6,100 partners worldwide in KPMG Peat
Marwick LLP ("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. The Corporation paid KPMG
approximately $1.9 million for all services rendered during 1995.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The following identifies any reportable business relationships between the
Corporation and Messrs. Leisenring, Coleman, Hahn or McNair, the members of
the Compensation and Nominating Committee.
In 1995, the Corporation paid approximately $273,000 to McNair Law Firm,
P.A., of which Mr. McNair is Chairman, for legal and consulting services.
10
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table sets forth the cash compensation paid, as well as
certain other compensation accrued or paid, to the Chief Executive Officer and
to each of the other five most highly compensated executive officers of the
Corporation for service in all capacities to the Corporation and its
subsidiaries for the fiscal years ending December 31, 1995, 1994 and 1993.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------- ---------------------
AWARDS PAYOUTS
---------- ----------
OTHER SECURITIES
ANNUAL UNDERLYING LTIP ALL OTHER
NAME AND PRINCIPAL SALARY/1/ BONUS/1/ COMPENSATION OPTIONS/3/ PAYOUTS/4/ COMPENSATION/5/
POSITION YEAR ($) ($) ($) (#) ($) ($)
- ------------------ ---- --------- -------- ------------ ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
David R. Goode 1995 685,000 616,500 206,077/2/,/6/ 50,000 /7/ 63,796
Chairman, President 1994 585,000 497,250 537,303 40,000 505,965 4,500
and Chief Executive 1993 535,000 376,480 300,309 40,000 217,011 50,480
Officer
John R. Turbyfill 1995 435,000 348,000 212,612/2/ 20,000 /7/ 36,693
Vice Chairman 1994 425,000 340,000 427,235 20,000 316,195 4,500
1993 414,583 273,086 331,359 12,500 217,011 36,924
D. Henry Watts 1995 381,250 290,938 255,121/2/ 12,500 /7/ 33,758
Vice Chairman 1994 370,000 277,500 459,530 12,500 316,195 4,500
1993 360,000 237,132 377,009 12,500 217,011 33,444
John S. Shannon 1995 375,000 281,250 82,504/2/ 12,500 /7/ 31,929
Executive Vice 1994 370,000 277,500 307,848 12,500 316,195 4,500
President-Law 1993 360,000 237,132 233,296 12,500 217,011 30,681
Stephen C. Tobias
Executive Vice 1995 305,000 228,750 40,843/2/ 12,500 /7/ 26,304
President- 1994 267,500 200,625 139,362 5,000 126,491 4,500
Operations 1993 223,750 147,384 99,425 5,000 86,818 22,910
Henry C. Wolf 1995 305,000 228,750 45,976/2/ 12,500 /7/ 29,693
Executive Vice 1994 267,500 200,625 142,245 12,500 126,491 4,500
President-Finance 1993 204,167 134,485 101,053 5,000 86,818 27,269
</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. Does not include a tax absorption payment, which was not
determinable in time to be reported, under the Long-Term Incentive Plan for
the 1995 award of performance shares. 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 1995, these
amounts were: for Mr. Goode, $42,117; Mr. Turbyfill, $201,104; Mr. Watts,
$242,213; Mr. Shannon, $70,162; Mr. Tobias, $29,438; and Mr. Wolf, $30,968.
/3/Options were granted without tandem SARs.
11
<PAGE>
/4/Represents market value, as of the date of award, of Common Stock earned
pursuant to the performance share feature of the Corporation's Long-Term
Incentive Plan for periods ended December 31, 1994 and 1993 (for 1993,
performance shares were awarded for achievements in the three-year period
1991-1993, and for 1994, performance shares were awarded for achievements in
the three-year period 1992-1994). For 1995, the award of performance shares
for achievements in the three-year period 1993-1995 had not been approved in
time to be reported.
/5/Includes for 1995 (i) contributions of $4,500 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, $59,296; Mr. Turbyfill, $32,193; Mr. Watts, $29,258; Mr.
Shannon $27,429; Mr. Tobias $21,804; and Mr. Wolf $25,193.
/6/Includes personal use, as directed by resolution of the Board of
Directors, of the Corporation's aircraft valued at approximately $95,000.00,
calculated on the basis of the aggregate incremental cost of such use to the
Corporation.
/7/For 1995, the award of performance shares for achievements in the three-
year period 1993-1995 had not been approved in time to be reported.
LONG-TERM INCENTIVE PLAN
The Corporation's Long-Term Incentive Plan, as last approved by stockholders
in 1995, provides for the award of incentive stock options, non-qualified
stock options, stock appreciation rights, restricted stock and performance
share units to officers and other key employees of the Corporation and certain
of its subsidiaries. The Compensation and Nominating Committee of the Board of
Directors ("Committee") is charged with administration of the Plan and has the
sole discretion, subject to certain limitations, to interpret the Plan; to
select Plan participants; to determine the type, size, terms and conditions of
awards under the Plan; to authorize the grant of such awards; and to adopt,
amend and rescind rules relating to the Plan.
STOCK OPTIONS
The following table sets forth certain information concerning the grant in
1995 of stock options under the Corporation's Long-Term Incentive Plan to each
named executive officer:
OPTION/SAR* GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
GRANT DATE
INDIVIDUAL GRANTS VALUE
- ----------------------------------------------------------------- ----------
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS GRANT DATE
OPTIONS GRANTED TO EXERCISE OR PRESENT
GRANTED/1/ EMPLOYEES IN BASE PRICE/2/ EXPIRATION VALUE/3/
NAME # FISCAL YEAR ($ PER SHARE) DATE ($)
- ---- ---------- ------------ ------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
D. R. Goode 50,000 6.96% 62.50 01/29/2005 844,000
J. R. Turbyfill 20,000 2.78% 62.50 01/29/2005 337,600
D. H. Watts 12,500 1.74% 62.50 01/29/2005 211,000
J. S. Shannon 12,500 1.74% 62.50 01/29/2005 211,000
S. C. Tobias 12,500 1.74% 62.50 01/29/2005 211,000
H. C. Wolf 12,500 1.74% 62.50 01/29/2005 211,000
</TABLE>
*No SARs were granted in 1995.
- --------
12
<PAGE>
/1/Options were granted effective January 30, 1995, exercisable one year
after the date of grant. Dividend equivalents are paid in cash for five years
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 next preceding the date of exercise) 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 0.1902: volatility was determined by an
independent compensation consultant using monthly data averaged over the
60-month period January 1, 1990, through December 31, 1994;
(b) a dividend yield of 3.23%: yield was determined monthly and averaged
over the 60-month period January 1, 1990, through December 31, 1994;
(c) a 1994 risk-free rate of return of 6.75%: this represents the return
on a comparatively "risk-free" investment in 1994, the year prior to the
issuance of these options; and
(d) that the option will be exercised during its ten-year term.
The foregoing measures and assumptions produce a Black-Scholes factor of
0.27 and a resulting present value of $16.88 for each share of common stock
subject to the 1995 option grant; that factor and resulting present value have
not been adjusted to reflect that options cannot be exercised during the first
year of their term. Values computed under the Black-Scholes model are not
affected by payment of dividend equivalents on unexercised options.
The following table sets forth certain information concerning the exercise
of options and/or SARs by each named executive officer during 1995 and the
unexercised options and SARs held by each as of the end of 1995:
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS/SARS AT IN-THE-MONEY OPTIONS/SARS
SHARES FY-END AT FY-END/1/
ACQUIRED ON VALUE (#) ($)
EXERCISE REALIZED -------------------------------------- ---------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- -------- ---------------- ---------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
D. R. Goode 3,300/2/ 144,443/2/ 172,521 50,000 2,267,537 846,875
J. R. Turbyfill 12,095/3/ 516,240/3/ 136,814/4/ 20,000 4,104,618/4/ 338,750
D. H. Watts 0 0 85,442 12,500 2,039,961 211,719
J. S. Shannon 0 0 85,820 12,500 2,057,492 211,719
S. C. Tobias 3,790 139,360 39,547 12,500 718,069 211,719
H. C. Wolf 4,157 178,839 45,527 12,500 703,951 211,719
</TABLE>
- --------
13
<PAGE>
/1/Equal to the mean ($79.4375) of the high and low trading prices on the
New York Stock Exchange-Composite Transactions of the Common Stock on December
31, 1995, less the exercise prices of the options, multiplied by the number of
options.
/2/Includes 995 shares of Common Stock received upon exercise of 3,300 SARs
payable one half in stock and one half in cash.
/3/Includes 699 shares of Common Stock received upon exercise of 2,200 SARs
payable one half in stock and one half in cash.
/4/Includes 32,291 tandem SARs with a value of $1,835,036.
PERFORMANCE SHARE UNITS ("PSUS")
The following table sets forth certain information concerning the grant in
1995 of PSUs under the Corporation's Long-Term Incentive Plan to each named
executive officer. These PSU grants 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 (1995-1997) based on the Corporation's
performance during this three-year period. Under the 1995 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 total number of PSUs granted:
(1) three-year average return on average invested capital ("ROAIC"), (2)
three-year average NS operating ratio and (3) three-year total return to NS
stockholders. A more detailed discussion of these performance criteria can be
found in the Report of the Compensation and Nominating Committee, beginning on
page 16.
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 32,000 01/01/95- 0 24,256 32,000
12/31/97
J. R. Turby- 16,000 01/01/95- 0 12,128 16,000
fill 12/31/97
D. H. Watts 10,000 01/01/95- 0 7,580 10,000
12/31/97
J. S. Shan- 10,000 01/01/95- 0 7,580 10,000
non 12/31/97
S. C. Tobias 10,000 01/01/95- 0 7,580 10,000
12/31/97
H. C. Wolf 10,000 01/01/95- 0 7,580 10,000
12/31/97
</TABLE>
- --------
/1/Performance shares, when earned out, will be issued one half in cash and
one half in stock, with the stock portion being 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 approximately one
half of the performance shares earned under the 1995 award will be subject to
a share retention agreement, the withholding taxes due will be withheld from
the cash portion of this award.
/2/The Long-Term Incentive Plan does not provide a performance target;
consequently, this column represents 75.8% of the maximum "earn out," which,
in accordance with applicable rules of the Securities and Exchange Commission,
is based on the percentage of the previous fiscal year's actual "earn out"
under the Plan.
14
<PAGE>
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 1995 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 $ 60,151 $ 73,639 $ 87,203 $101,129
300,000 97,651 118,639 139,703 161,129
400,000 135,151 163,639 192,203 221,129
500,000 172,651 208,639 244,703 281,129
600,000 210,151 253,639 297,203 341,129
700,000 247,651 298,639 349,703 401,129
800,000 285,151 343,639 402,203 461,129
900,000 322,651 388,639 454,703 521,129
1,000,000 360,151 433,639 507,203 581,129
1,100,000 397,651 478,639 559,703 641,129
1,200,000 435,151 523,639 612,203 701,129
1,300,000 472,651 568,639 664,703 761,129
1,400,000 510,151 613,639 717,203 821,129
1,500,000 547,651 658,639 769,703 881,129
</TABLE>
Under the pension plans, covered compensation includes salary and bonus;
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 the number
that is equal to 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, 1996, for each executive officer named in
the Summary Compensation Table were: Mr. Goode, $789,348 and 30 years; Mr.
Turbyfill, $687,595 and 35 years; Mr. Watts, $599,687 and 40 years; Mr.
Shannon, $593,438 and 39 years; Mr. Tobias, $376,668 and 26 years; Mr. Wolf,
$338,376 and 23 years.
CHANGE-IN-CONTROL ARRANGEMENTS
In 1994, the Compensation and Nominating Committee recommended, and the
Board of Directors approved, the Corporation's entering into change-in-control
compensation agreements ("Agreements") with each officer named in the Summary
Compensation Table (and with other key employees). These Agreements provide
for certain economic protections in the event of an
15
<PAGE>
involuntary or other specified Termination (each term with an initial capital
letter is defined in the Agreements) of a covered individual during a period
of twenty-four months next following a Change in Control of the Corporation.
This action was based on an analysis of U.S. corporations' practices in this
area conducted by an outside consultant (that also advises the Compensation
and Nominating Committee concerning the competitiveness and structure of
compensation for executive officers) engaged by the Committee to advise it on
these matters. Based on its research, the consultant suggested the type and
scope of coverage that would be appropriate and in line with the practices of
other U.S. corporations.
These Agreements, terminable by either the Corporation or the named
executive officer (or other key employee) on twenty-four months' notice,
provide generally for severance compensation payments (not continued
employment) equal, in the case of officers named in the Summary Compensation
Table, to three times the sum of their Base Pay and Incentive Pay and for the
redemption of outstanding, but exercisable, options (subject to restrictions
in the case of persons, such as the officers named in the Summary Compensation
Table, imposed under Section 16 of the Securities Exchange Act of 1934) and of
certain outstanding Performance Share Units. Covered individuals also are
eligible for certain continued Benefits coverage (principally medical,
insurance and death benefits) for two years following a covered Termination
and for additional service credit under the Corporation's retirement plans; in
the case of an officer named in the Summary Compensation Table, such
additional service credit may not exceed the creditable service such officer
would have had upon reaching mandatory retirement age. The Agreements also
provide for payment of any Federal excise tax that may be imposed on payments
made pursuant to these Agreements.
COMPENSATION AND NOMINATING COMMITTEE REPORT CONCERNING
THE 1995 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
1995 compensation determinations were made for the Corporation's Chairman,
President and Chief Executive Officer, David R. Goode, and the other officers
(collectively, including Mr. Goode, referred to as the "Executive Officers")
whose 1995 compensation is disclosed in the Summary Compensation Table of this
Proxy Statement.
The Compensation and Nominating Committee of the Board of Directors
("Committee") is composed entirely of non-employee directors and met five
times during 1995. Among other things, 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 since January 1, 1996, its Executive Management
Incentive Plan, as approved by the stockholders at their May 1995 Annual
Meeting), and its Long-Term Incentive Plan, as amended and approved by
stockholders at their May 1995 Annual Meeting, which authorizes, as more
particularly described below, awards of stock options and performance share
units.
BASE SALARY: While the Committee believes that a substantial portion of
each Executive Officer's total compensation should be "performance-based,"
the Committee also seeks to assure that the base salaries of Executive
Officers are competitive with those earned by individuals in comparable
positions.
16
<PAGE>
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 well as all officers of the Corporation--are evaluated,
principally by Mr. Goode, relative to survey data of base salaries 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 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 seeks to set the NS Chairman's
base salary between the 50th and 75th percentiles of the base salaries paid
to chairmen of other American corporations of comparable revenue size and
competitively (within the mid-range of compensation practice) with those of
the chairmen of the other holding companies of Class I railroads. Because
Mr. Goode became Chairman of the Corporation in 1992, his base salary in
1995 still was below the 50th percentile (using the most current data
available when the decision concerning his base pay was made); the base
salary of other Executive Officers in 1995 approximated the 50th
percentile.
For 1995, Mr. Goode's salary was increased by $100,000, or 17.1%. This 1995
increase, not tied to or reflecting application of any specific formula,
reflects both the Corporation's total operating revenues and record net
income in 1994, despite uncertainties about the domestic economy and
reduced export coal traffic, and the Board's confidence in Mr. Goode's
leadership. The Committee recommended and the Board approved average
increases of 3.5% for Messrs. Turbyfill, Shannon, Tobias, Watts and Wolf;
these increases were based on Mr. Goode's recommendations and the
Corporation's 1994 performance.
MANAGEMENT INCENTIVE PLAN ("MIP"): The Corporation's MIP is designed and
administered to ensure that a significant portion of each Executive
Officer's total annual cash compensation is based on the Corporation's
annual profitability. 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%. Beginning in calendar year 1996, incentive
opportunities previously offered the Executive Officers and certain other
Board-elected officers will be made available through the Executive
Management Incentive Plan.
Base salaries of the Corporation's Executive Officers have tended to be
lower than at comparable organizations, and their incentive pay
opportunities have tended to be higher. It is the Committee's philosophy
that, when the Corporation achieves MIP profitability goals, the total of
17
<PAGE>
the Executive Officers' base salaries and MIP awards should be competitive
with the total 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.
Specifically, 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 companies
of comparable revenue size, including but not limited to those identified
in the Stock Performance Graph.
Using those criteria, in November of 1994 the Committee set Mr. Goode's
maximum 1995 incentive opportunity at 90% of 1995 base salary, the Vice
Chairman's at 80% of 1995 base salary, and the other Executive Officers' at
75% of 1995 base salary. Actual payments, if any, are based on the total
amount in the annual incentive fund. For 1995, 312 key employees, including
the Executive Officers, earned MIP awards. In light of the Corporation's
1995 performance, the related MIP payments earned by Mr. Goode and the
other Executive Officers were equal to 100% of their respective maximum
incentive opportunities. The 1995 MIP award paid to Mr. Goode fell below
the 50th percentile with respect to 1994 bonuses (the most current data
available when decisions concerning his incentive opportunity were made)
earned by chief executive officers in his peer group. The 1995 MIP awards
paid to the other Executive Officers also fell below the 50th percentile
with respect to 1994 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 efficient use of assets, its
profitability and the total returns (stock price appreciation and
dividends) to its stockholders. This is achieved by making annual grants of
stock options and performance share units and through share retention
agreements entered into with the Executive Officers. These LTIP
arrangements are intended to ensure that the longer-term financial
interests of the Executive Officers are directly aligned with those of the
Corporation's stockholders and to provide the Executive Officers with the
opportunity to acquire a meaningful beneficial stock ownership position in
the Corporation.
In determining current LTIP awards, the size of prior grants is 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. 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 and other considerations. Since the inception of the Plan and
continuing through the awards made in 1994, this analysis resulted in a
general practice of granting options to performance share units in a ratio
of 2 to 1. For grants made in 1995, that ratio changed, reflecting the
award of relatively more performance share units than in past years--
reflecting, in part, the effects of the Committee's decision not to make
tax absorption payments on the actual earnouts of the 1995 awards: for Mr.
Goode, the ratio of awarded options to awarded performance share units was
roughly 1.56 to 1; for the other Executive Officers, that ratio was 1.25 to
1. Those ratios may or may not be maintained.
18
<PAGE>
The Committee compares Mr. Goode's total compensation to that of 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 total compensation of the other Executive Officers is evaluated
relative to survey data for comparable positions at 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 (assuming that all
performance share units actually are earned--which has not happened to
date) so as to place the total compensation of Mr. Goode and the other
Executive Officers, when corporate performance warrants, above the 75th
percentile of total compensation for their respective peer groups.
At its January 1995 meeting, the Committee granted--subject to receipt of
stockholders' approval at their May 1995 Annual Meeting, which approval was
obtained--stock options to each of the six Executive Officers and to 307
other key employees at 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.
At the same meeting, the Committee granted--subject to receipt of
stockholders' approval at their May 1995 Annual Meeting, which approval was
obtained--performance share units which provide the Executive Officers and
other recipients the opportunity to earn awards (that will be paid one half
in cash and one half in shares of the Corporation's Common Stock) during
the first quarter of 1998. The number of performance share units that are
actually earned by recipients is based on criteria approved by stockholders
at their May 1995 Annual Meeting--specifically, the Corporation's three-
year (i.e., 1995-1997) average Return on Average Invested Capital, three-
year average operating ratio and three-year total Return to Stockholders,
evaluated relative to pre-established performance measures set out in the
schedules below. One third of the performance share units granted in 1995
are available to be earned based on each of the three performance criteria.
<TABLE>
<CAPTION>
- ---------------------------------------- ------------------------------------------
TOTAL STOCKHOLDER RETURN RETURN ON AVERAGE INVESTED CAPITAL
("TSR") VS. S&P 500 ("ROAIC")
- ---------------------------------------- ------------------------------------------
PERCENTAGE OF PERCENTAGE OF
THREE-YEAR PERFORMANCE THREE-YEAR PERFORMANCE
AVERAGE TSR SHARE UNITS AVERAGE SHARE UNITS
VS. S&P 500 EARNED ROAIC EARNED
- ---------------------------------------- ------------------------------------------
<S> <C> <C> <C>
90th percentile 100% 20% 100%
80th 90% 19% 90%
70th 85% 18% 80%
60th 80% 17% 70%
50th 75% 16% 60%
40th 50% 15% 50%
30th 30% 14% 40%
25th and below 0% 13% 20%
Below 13% 0%
- ---------------------------------------- ------------------------------------------
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
----------------------------------
OPERATING RATIO ("OPR")
----------------------------------
PERCENTAGE OF
PERFORMANCE
THREE-YEAR NS SHARE UNITS
AVERAGE OPR EARNED
----------------------------------
<S> <C>
70% 100%
75% 75%
80% 50%
85% 25%
Above 85% 0%
----------------------------------
</TABLE>
All stock options and performance share units granted in 1995 to Executive
Officers were subject to the following terms. For the first five (5) years
following the date stock options are granted and while the 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. The Executive Officers have entered into share
retention agreements with the Corporation whereby they have agreed to have
the Corporation hold shares of the Corporation's Common Stock actually
earned pursuant to the performance share feature of the LTIP for a period
of five years following the date such shares are earned.
Mr. Goode was granted options on 50,000 shares of common stock and 32,000
performance share units in 1995, and the other Executive Officers as a
group were awarded options on 70,000 shares of common stock and 56,000
performance share units.
In sum, the Committee believes that the compensation of Executive Officers
is competitive with that of similar positions at comparable American
corporations. More important, the Committee believes each Executive Officer's
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 efficient use of assets, its profitability and
the total returns to its stockholders.
Regulations of the Securities and Exchange Commission require the Committee
to report to stockholders on the Committee's policy concerning the Revenue
Reconciliation Act of 1993 which amended Section 162 of the Internal Revenue
Code to eliminate the deductibility of certain compensation over $1 million
paid to executive officers. Based on the requirements of this new legislation
and on interpretive regulations and transition rules, the Committee
recommended to the Board, the Board approved and recommended to the
stockholders, and at their 1995 Annual Meeting the stockholders approved,
modifications to the LTIP and establishment of the Executive Management
Incentive Plan (effective as of January 1, 1996, for certain Board-elected
officers), all as more particularly described in the Corporation's 1995 Proxy
Statement. The Committee will continue to seek to offer its Executive Officers
and other personnel competitive compensation and to structure such
compensation arrangements to entitle the Corporation to take appropriate
related tax deductions.
E. B. Leisenring, Jr., Chairman
L. E. Coleman, Member
T. M. Hahn, Jr., Member
R. E. McNair, Member
20
<PAGE>
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 Price Index and the S&P
Railroad Stock Price Index for the five-year period commencing December 31,
1990, and ending December 31, 1995.
COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN
AMONG NORFOLK SOUTHERN CORPORATION, S&P 500 INDEX
AND S&P RAILROADS INDEX
PERFORMANCE GRAPH APPEARS HERE
<TABLE>
<CAPTION>
NORFOLK S&P
Measurement Period SOUTHERN S&P RAILROADS
(Fiscal Year Covered) CORPORATION 500 INDEX INDEX
- --------------------- --------------- --------- ----------
<S> <C> <C> <C>
Measurement Pt-12/31/1990 $100.00 $100.00 $100.00
FYE 12/31/1991 $146.81 $130.47 $163.22
FYE 12/31/1992 $156.00 $140.41 $183.27
FYE 12/00/1993 $184.67 $154.56 $227.13
FYE 12/00/1994 $163.49 $156.60 $196.22
FYE 12/00/1995 $220.53 $215.45 $287.07
</TABLE>
- --------
*Assumes that the value of the investment in the Corporation's Common Stock
and each index was $100 on December 31, 1990, and that all dividends were
reinvested.
21
<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 LLP, independent public accountants,
to audit the books, records and accounts of the Corporation for the year 1996.
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 Restated 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 1995, KPMG Peat Marwick LLP 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 LLP to the Corporation in 1995
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 the "Certain Relationships and Related Transactions"
caption on page 10.) KPMG Peat Marwick LLP 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 LLP 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 1997 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 3, 1996.
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,
DEZORA M. MARTIN,
Corporate Secretary.
22
<PAGE>
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, David R. Goode or T. Marshall
Hahn, Jr., 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 Norfolk Waterside Marriott and Waterside Convention Center, 235 East Main
Street, Norfolk, Virginia, on Thursday, May 9, 1996, and any adjournments
thereof, upon the matters more fully set forth in the Proxy Statement and to
transact such other business as may properly come before the meeting.
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).
NORFOLK SOUTHERN CORPORATION
(Continued, and to be MARKED, DATED AND SIGNED P.O. Box 11145
on the other side) New York, N.Y. 10203-0145
<PAGE>
-----
-----
PLEASE MARK BOXES [ ] OR [X] IN BLUE OR BLACK INK.
(1) Election of Directors FOR all nominees listed WITHHOLD AUTHORITY to vote
below, except as marked for all nominees listed
to the contrary below. [_]
(see instruction). [_]
TERM EXPIRING 1999: Gerald L Baliles, Gene R. Carter and E. B. Leisenring, Jr.
TERM EXPIRING 1997: Arnold B. McKinnon
(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 LLP, independent
public accountants. (The Board of Directors recommends a vote FOR)
FOR [_] AGAINST [_] ABSTAIN [_]
Address Change
and/or Comments
Mark Here [_]
SIGN EXACTLY AS NAME
APPEARS HEREON. ATTORNEYS-
IN-FACT, EXECUTORS,
TRUSTEES, GUARDIANS,
CORPORATE OFFICERS, ETC.,
SHOULD GIVE FULL TITLE.
Dated:_______________, 1996
___________________________
(SIGNATURE)
___________________________
(SIGNATURE)
- --------------------------------------------------------
PLEASE MARK, DATE, SIGN AND RETURN THIS PROXY PROMPTLY
- --------------------------------------------------------
