SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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 [_] Soliciting Material Under Rule
[_] Confidential, For Use of the 14a-12
Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
Norfolk Southern Corporation
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] 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:
________________________________________________________________________________
2) Form, Schedule or Registration Statement No.:
________________________________________________________________________________
3) Filing Party:
________________________________________________________________________________
4) Date Filed:
________________________________________________________________________________
[NORFOLK SOUTHERN LOGO]
--------------------------------------------------------------------------------
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 8, 2003
--------------------------------------------------------------------------------
The Annual Meeting of Stockholders of Norfolk Southern Corporation will be
held at the Pan American Life Conference Center, 601 Poydras Street, New
Orleans, Louisiana, Thursday, May 8, 2003, at 10:00 A.M., Central Daylight Time,
for the following purposes:
1. Election of three directors to the class whose term will expire in
2006.
2. Ratification of the appointment of KPMG LLP, independent public
accountants, as auditors.
3. If properly presented at the meeting, consideration of a stockholder
proposal concerning declassification of the Board of Directors.
4. Transaction of such other business as properly may come before the
meeting.
Stockholders of record at the close of business on March 7, 2003, will be
entitled to vote at the meeting.
By order of the Board of Directors,
DEZORA M. MARTIN,
Corporate Secretary.
Dated: March 17, 2003
IF YOU DO NOT EXPECT TO ATTEND THE MEETING, YOU ARE URGED TO MARK, DATE AND SIGN
THE ENCLOSED PROXY CARD AND RETURN IT IN THE ACCOMPANYING ENVELOPE--OR TO VOTE
BY TELEPHONE OR INTERNET, AS MORE PARTICULARLY DESCRIBED ON THE ENCLOSED PROXY
MATERIALS.
Norfolk Southern Corporation
Three Commercial Place
Norfolk, Virginia 23510-2191
March 17, 2003
PROXY STATEMENT
On March 17, 2003, we expect to begin mailing to you and other stockholders
the proxy card, this proxy statement, and the Corporation's Annual Report and
its Form 10-K Report (the Annual Report and Form 10-K Report together,
hereinafter, "annual report") for 2002, which contains important financial and
narrative information. This Proxy Statement and the accompanying proxy card
relate to the Board of Directors' solicitation of your proxy for use at the
Annual Meeting of Stockholders to be held May 8, 2003 ("2003 Annual Meeting").
Only stockholders of record on March 7, 2003, are entitled to vote at the 2003
Annual Meeting. As of January 31, 2003, the Corporation had issued and
outstanding 410,211,683 shares of Common Stock, of which 389,042,558 shares were
entitled to one vote per share.
AS A CONVENIENCE TO YOU, YOU MAY VOTE BY TELEPHONE OR INTERNET. THE
ENCLOSED PROXY CARD DESCRIBES HOW TO USE THESE SERVICES. OR, YOU MAY
CONTINUE TO VOTE BY MAIL; IF YOU PROPERLY MARK, SIGN AND DATE THE ENCLOSED
PROXY CARD AND TIMELY RETURN IT TO THE BANK OF NEW YORK, THE SHARES
REPRESENTED BY THAT PROXY CARD WILL BE VOTED IN ACCORDANCE WITH ITS TERMS.
ANY STOCKHOLDER OF RECORD MAY REVOKE A SIGNED AND RETURNED PROXY CARD (OR A
PROXY GIVEN BY TELEPHONE OR INTERNET) AT ANY TIME BEFORE THE PROXY IS VOTED
BY: (A) GIVING PRIOR NOTICE OF REVOCATION IN ANY MANNER TO THE CORPORATION;
(B) DELIVERING A SUBSEQUENT PROXY BY ANY MEANS; OR (C) ATTENDING THE 2003
ANNUAL MEETING AND VOTING IN PERSON.
If shares are held for you in street name as the beneficial owner through a
broker, bank or other nominee, you may vote your shares by submitting voting
instructions to your broker or nominee. Please refer to the voting instruction
card included with these materials by your broker or nominee.
If shares are credited to your account in the Norfolk Southern Corporation
Thoroughbred Retirement Investment Plan or the Thrift and Investment Plan, your
proxy card serves as a voting instruction for the trustee of each Plan, Vanguard
Fiduciary Trust Company. If you do not return your proxy card by May 2, 2003,
the trustee will vote your shares for each item on the proxy card in the same
proportion as the shares that are voted for that item by the other participants
in the respective Plan.
The cost of soliciting these proxies will be paid by the Corporation,
including the reimbursement, upon request, of brokerage firms, banks and other
institutions, nominees and trustees for the reasonable expenses they incur to
forward proxy materials to beneficial owners. Officers and other regular
employees of the Corporation may solicit proxies by telephone, telegram,
facsimile, electronic mail or personal interview; they receive no additional
compensation for doing so. The Corporation has retained Innisfree M&A
Incorporated to assist in the solicitation of proxies at an approximate cost of
$12,500 plus reasonable out-of-pocket expenses.
In accordance with Rule 14a-3(e)(1) promulgated by the Securities and
Exchange Commission ("SEC"), multiple beneficial stockholders sharing an address
may receive a single annual report and proxy statement, unless the intermediary
or the Corporation has received contrary instructions from one or more of the
stockholders. Upon oral or written request, the Corporation will promptly
deliver a separate copy of the annual report or proxy statement to a stockholder
at a shared address to which a single copy of the document was delivered. If you
would like a separate copy of this Proxy Statement or the annual report for
2002, or if you wish to receive a separate annual report or proxy statement in
the future, you may contact: Dezora M. Martin, Corporate Secretary, Norfolk
Southern Corporation, Three Commercial Place, 13th Floor, Norfolk, Virginia
23510 (telephone 757-629-2680).
The Corporation does not currently plan to deliver a single annual report
or proxy statement to multiple record stockholders sharing an address. However,
if that procedure were to be used in the future for stockholders of record at a
shared address, you would use the above contact to request delivery of a single
document.
CONFIDENTIALITY
We have put policies 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 tabulate all proxies and ballots cast at the 2003
Annual Meeting, is bound contractually to maintain the confidentiality of the
voting process. In addition, 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 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 a 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.
2
BUSINESS TO BE CONDUCTED AT THE ANNUAL MEETING
FOR WHICH YOUR PROXY IS SOUGHT
1. ELECTION OF DIRECTORS
At the 2003 Annual Meeting, the terms of two directors will expire: those
of David R. Goode and Harold W. Pote. Effective November 29, 2002, Carroll A.
Campbell, Jr., a director whose term would have expired at the 2003 Annual
Meeting, retired from the Board of Directors. At its meeting held on November
26, 2002, the Board of Directors amended the Bylaws of the Corporation effective
December 1, 2002, to decrease the number of directors from 10 to 9. In order to
comply with the requirements of Virginia law, Steven F. Leer, elected in 2002
for a term expiring in 2005, will resign from the class of directors whose terms
will expire in 2005, effective upon completion of the election of directors at
the Annual Meeting, and has been nominated as director for a new three-year term
expiring in 2006; this will result in each class containing as nearly as
possible one third of the total number of directors, as required by Virginia
law.
UNLESS YOU INSTRUCT OTHERWISE WHEN YOU GIVE US YOUR PROXY, IT WILL BE VOTED
IN FAVOR OF THE ELECTION OF MESSRS. GOODE, LEER AND POTE AS DIRECTORS FOR
THREE-YEAR TERMS THAT EXPIRE IN 2006.
If any nominee becomes unable to serve--something we have no reason to
believe will occur--your proxy will be voted for a substitute nominee to be
designated by the Board of Directors, or the Board of Directors will reduce the
number of directors.
So that you have information concerning the independence of the process by
which nominees and directors whose terms will continue after the 2003 Annual
Meeting were selected, we confirm, as required by the SEC, that (1) there are no
family relationships among any of the nominees or directors or among any of the
nominees or directors and any officer and (2) there is no arrangement or
understanding between any nominee or director and any other person pursuant to
which the nominee or director was selected.
VOTE REQUIRED TO ELECT A DIRECTOR:Under Virginia law and under the
Corporation's Restated Articles of Incorporation, directors are elected at a
meeting, so long as a quorum for the meeting exists, by a plurality of the votes
cast by the shares entitled to vote in the election. Abstentions or shares that
are not voted, such as those held by a broker or other nominee who does not vote
in person or by proxy, are not "cast" for this purpose.
3
NOMINEES--FOR TERMS EXPIRING IN 2006
--------------------------------------------------------------------------------
Mr. Goode, 62, Norfolk, Va., has been a director
since 1992. He has been Chairman, President and
Chief Executive Officer of the Corporation since
1992. He is also a director of Norfolk Southern
Railway Company, Caterpillar, Inc., Delta Air
[PHOTO OMITTED] Lines, Inc., Georgia-Pacific Corporation and Texas
Instruments Incorporated.
David R. Goode
--------------------------------------------------------------------------------
Mr. Leer, 50, St. Louis, Mo., has been a director
since 1999. He has been President and Chief
Executive Officer of Arch Coal, Inc., a company
engaged in coal mining and related businesses,
[PHOTO OMITTED] since 1992. He is also a director of Arch Coal,
Inc. and Natural Resource Partners, LLC.
Steven F. Leer
--------------------------------------------------------------------------------
Mr. Pote, 56, New York, N.Y., has been a director
since 1988. He has been Regional Banking Group
Executive of J. P. Morgan Chase & Co. since
January 2001, having previously been Managing
Director for The Chase Manhattan Bank, and prior
[PHOTO OMITTED] thereto a partner of The Beacon Group, a private
investment partnership.
Harold W. Pote
CONTINUING DIRECTORS--THOSE WHOSE TERMS EXPIRE IN 2004
--------------------------------------------------------------------------------
Mr. Correll, 61, Atlanta, Ga., has been a director
since 2000. He has been Chairman, Chief Executive
Officer and President of Georgia-Pacific
Corporation, a manufacturer and distributor of
building products, pulp and paper products and
chemicals, since 1993. He is also a director of
SunTrust Banks, Inc., SunTrust Bank, Atlanta,
[PHOTO OMITTED] SunTrust Banks of Georgia, Inc. and Mirant
Company.
Alston D. Correll
--------------------------------------------------------------------------------
4
CONTINUING DIRECTORS--THOSE WHOSE TERMS EXPIRE IN 2004
Mr. Hilliard, 63, New York, N.Y., has been a
director since 1992. He has been a partner in
Brown Brothers Harriman & Co., a private bank in
New York City, since 1979. He is also a director
of Owens-Corning Corporation and Western World
Insurance Company.
(See information under the "Certain Relationships
[PHOTO OMITTED] and Related Transactions" caption on page 19.)
Landon Hilliard
--------------------------------------------------------------------------------
Ms. O'Brien, 49, St. Mary's City, Md., has been a
director since 1994. She has been President of St.
Mary's College of Maryland since 1996, having
[PHOTO OMITTED] served prior thereto as President of Hollins
College, Roanoke, Va.
Jane Margaret O'Brien
CONTINUING DIRECTORS--THOSE WHOSE TERMS EXPIRE IN 2005
--------------------------------------------------------------------------------
Mr. Baliles, 62, Richmond, Va., has been a
director since 1990. He has been a partner since
1990 in the law firm of Hunton & Williams, a
business law firm with offices in several major U.
S. cities and international offices in Brussels,
Belgium; Bangkok, Thailand; London, England; and
Hong Kong, China.
(See information under the "Certain Relationships
[PHOTO OMITTED] and Related Transactions" caption on page 19.)
Gerald L. Baliles
--------------------------------------------------------------------------------
Mr. Carter, 63, Alexandria, Va., has been a
director since 1992. He has been Executive
Director and Chief Executive Officer of the
Association for Supervision and Curriculum
Development since March 2000, and prior thereto
[PHOTO OMITTED] was Executive Director of that organization, which
is among the world's largest international
education associations.
Gene R. Carter
--------------------------------------------------------------------------------
5
CONTINUING DIRECTORS--THOSE WHOSE TERMS EXPIRE IN 2005
Admiral Reason, 62, Norfolk, Va., has been a
director since January 22, 2002. He has been
President and Chief Operating Officer of Metro
Machine Corporation, an employee-owned ship repair
company, since 2000, having previously served as
Vice President-Ship Systems for Syntek
Technologies, Inc. from 1999 to 2000. He is a
retired four-star Admiral and former
Commander-in-Chief of the U.S. Atlantic Fleet from
[PHOTO OMITTED] 1996 to 1999. He is also a director of AMGEN,
Inc., and Wal-Mart Stores, Inc.
J. Paul Reason
--------------------------------------------------------------------------------
2. RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
At a meeting held on January 27, 2003, the Audit Committee of the Board of
Directors appointed the firm of KPMG LLP, independent public accountants
("KPMG"), to audit the books, records and accounts of the Corporation for the
fiscal year ending December 31, 2003. This firm has acted as auditors for the
Corporation (and for one of its predecessor companies, Norfolk and Western
Railway Company) since 1969. The Audit Committee recommends, and the Board of
Directors concurs, that the firm's appointment be ratified by the stockholders,
even though such stockholder ratification is not legally required.
All services rendered by KPMG to the Corporation in 2002 were approved in
advance or ratified by the Audit Committee. Beginning November 26, 2002, the
Audit Committee requires that management obtain the prior approval of the Audit
Committee for all audit and non-audit services to be provided by KPMG.
For the fiscal year ended December 31, 2002, KPMG performed the following
services for the Corporation:
AUDIT FEES
In fiscal 2002, KPMG performed audit services consisting of the annual
audit of the consolidated financial statements of the Corporation and its
subsidiaries and limited reviews of quarterly financial statements and
billed the Corporation an aggregate amount of $1,251,525 in connection
therewith.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
KPMG did not perform nor bill the Corporation for services relating to
financial information systems design and implementation during fiscal 2002.
ALL OTHER FEES
KPMG also performed certain other services consisting principally of
examination of internal control over financial reporting, employee benefit
plan audits, audits of unconsolidated subsidiaries and affiliates, tax
services consisting principally of general tax advice pertaining to
customary business matters and assistance with IRS interest claims and
state tax planning, accounting and financial reporting consultations and
information security and technology project reviews, including security
project and quality assurance reviews, enterprise intrusion detection, and
security classification of corporate data. KPMG also performed various IT
project reviews not related to information security,
6
including a review of changes to the Shared Assets Area (Conrail) operating
system. The aggregate fees billed by KPMG for services rendered to the
Corporation, other than the services described under the caption "Audit
Fees," were $2,602,155.
Under disclosure rules not yet effective, the sum of KPMG's "Audit Fees,"
"Audit-Related Fees" and "Tax Fees" exceeds the remaining non-audit fees under
"All Other Fees" for 2002.
KPMG has represented to the Audit Committee that its fees are customary.
The Audit Committee of the Board of Directors has considered and concluded
that the provision of services other than audit services by KPMG is compatible
with maintaining KPMG's independence.
Representatives of KPMG are expected to be present at the 2003 Annual
Meeting with the opportunity to make a statement if they so desire and available
to respond to appropriate questions.
The Board of Directors recommends that shareholders vote for the proposal
to ratify the selection of KPMG as independent auditors for the fiscal year
ending December 31, 2003.
VOTE REQUIRED TO RATIFY APPOINTMENT:Under Virginia law and under the
Corporation's Restated Articles of Incorporation, actions such as the
ratification of the appointment of auditors are approved, so long as a quorum
for the meeting exists, if the number of votes cast favoring the action exceeds
the number of 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 by proxy, are not "cast" for this purpose.
3. STOCKHOLDER PROPOSAL CONCERNING DECLASSIFICATION OF
THE BOARD OF DIRECTORS
Mr. Hugh L. Sawyer, Jr., whose mailing address is 492 Waldo Street, S.E.,
Atlanta, Georgia 30312, and who is beneficial owner of 639 shares of the
Corporation's Common Stock, has submitted the following proposal, which we are
including in the Proxy Statement for stockholder vote as required by Rule 14a-8
promulgated by the SEC. Mr. Sawyer also has provided a "Stockholders' Supporting
Statement" which appears immediately after the text of the proposal. Your
"Directors' Statement in Opposition" appears after Mr. Sawyer's Supporting
Statement.
TEXT OF PROPOSAL
----------------
RESOLVED:That the stockholders of Norfolk Southern ("the Company") urge the
Board of Directors to take the necessary steps, in compliance with state law, to
declassify the Board for the purpose of director elections. The Board's
declassification shall be completed in a manner that does not affect the
unexpired terms of directors previously elected.
STOCKHOLDER'S SUPPORTING STATEMENT
----------------------------------
The Company's Board is divided into three classes of directors serving staggered
three-year terms. This means an individual director faces election only once
every three years, and shareholders only vote on roughly a third of the Board
each year.
7
Companies often defend classified boards by suggesting that they preserve
continuity. I believe continuity is ensured through director re-elections. When
directors are performing well they routinely are re-elected with majorities of
shares voted.
I believe that annual elections can pave the way for improved board sensitivity
to important shareholder issues. In particular, it can help speed the
diversification of the Company's Board and introduce new perspectives. In
addition, a declassified board allows the company to respond quickly to changes
(such as the recent corporate malfeasance scandals and developments in the
economy) by giving the board the ability to nominate candidates that are more
qualified each year. I believe a declassified board can help give the Company
the flexibility it needs as it moves into the future.
According to a California Public Employees Retirement System (CalPERS)
official:
by classifying itself, a board insulates its members from immediate
challenge from shareholders. Insularity may have made sense in the
past, but now we believe that insularity works primarily to hamper
accountability.(1)
The evidence shows that shareholders are dissatisfied with classified
boards.(2) At the Sysco's, Kroger's and Airborne's 2002 annual meetings,
59.4%(3), 67% and 84%, respectively, voted FOR declassification.
In May 2001, at the Alaska Air annual meeting, 70% of shares cast voted FOR
declassification of its Board. In 2000, majorities of shares cast voted FOR
declassification of boards at many companies, including:
Baxter International (60.4%);
Eastman Chemical (70%);
Eastman Kodak (60.7%);
Lonestar Steakhouse & Saloon, Inc. (79%);
Silicon Graphics (81.1%);
United Health Group (75.7%);
Kmart4 (68.5%);
Weyerhaeuser (58%); and
Kroger (63.5%)
Shareholders at many companies are voting to declassify their board of director
elections. In 2001, the Investor Responsibility Research Center reports that
shareholder proposals to declassify boards received on average 52.6% of shares
cast for the proposal.(5)
By adopting annual elections, the Company can demonstrate its commitment to
fuller accountability to shareholders, accountability that honors shareholder
prerogatives.
We urge shareholders to vote YES for this proposal.
8
----------
(1) "Gateway Under Fire From CalPERS," by Gretchen Hyman.
siliconvalley.internet.com/news /article.php/1003321
(2) All percentages cited derived from respective companies' 10-Q's filed
directly after the referenced annual meeting. Available from the SEC's
website.
(3) As reported at the Annual meeting. 10-Q not yet available.
(4) Kmart's proposal was binding, receiving 68.6% of ballots cast, 45.78% of
shares outstanding. Kmart's by-laws require support of 58% of shares
outstanding.
(5) AVERAGE VOTING RESULTS ON SIGNIFICANT CORPORATE GOVERNANCE PROPOSALS. IRRC.
2001.
DIRECTORS' STATEMENT IN OPPOSITION
----------------------------------
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE AGAINST THE
PROPOSAL FOR THE FOLLOWING REASONS:
The Board of Directors believes that the proposal set forth above is not in
the best interests of the Corporation and its stockholders. With a classified
Board, the directors of the Corporation serve three-year staggered terms; this
ensures that a majority of directors on the Board at all times have experience
as directors of the Corporation. This continuity provides the Board with
knowledge of the Corporation's business, its long-term strategy and the complex
business and regulatory environment in which the Corporation operates. Research
from the Investor Responsibility Research Center (IRRC) indicates that
approximately 63% of S&P 500 companies had classified boards in 2001 and that
this percentage essentially has remained constant since 1994.
The Board of Directors believes that the current Board structure strikes an
appropriate balance between providing sufficient continuity in the Board's
composition and ensuring that directors are accountable to the stockholders of
the Corporation. A classified board allows directors to have a long-term focus
in the management of the business of the Corporation, which results in stability
of leadership and policy. This makes it less likely that a single individual or
special interest group can promote its own agenda, such as labor-management or
operational disputes, to the detriment of the Corporation and its stockholders.
In short, a classified Board ensures responsible, knowledgeable representation
of the interests of the Corporation's stockholders while allowing the Board to
focus on maximizing long-term stockholder value.
A classified board structure also enhances the Board's ability to negotiate
the best results for the stockholders in a takeover situation. Potential
acquirors would be encouraged to negotiate with the Board since it could take
more than one annual meeting to effect a change in control of the Board.
Therefore, this structure can provide the Board additional time and resulting
leverage necessary to negotiate on behalf of stockholders, to evaluate the
adequacy and fairness of any takeover proposal and to consider alternative
methods of maximizing stockholder value.
The Board of Directors does not believe that the benefits of the current
classified board are achieved at the cost of failure of accountability to
stockholders. As long as stockholders comply with the advance notice provisions
contained in the Bylaws, the stockholders of the Corporation always retain the
ability to remove directors, even without cause, or to nominate and elect
alternative nominees to the class elected in any given year. As a result, the
stockholders have a significant opportunity to express their views regarding the
Board's performance and to influence the composition of the Board. In addition,
all directors are required
9
by law to uphold their fiduciary responsibility to the Corporation's
stockholders regardless of their term of office.
Approval of this proposal, which is framed as a recommendation to the
Board, would not automatically eliminate the classified board. Under Virginia
law and under the Corporation's Articles of Incorporation, in order to eliminate
the classified Board, the Board would need to approve and submit to stockholders
an amendment to the Corporation's Articles of Incorporation. The stockholders
who hold a majority of the Corporation's outstanding shares would then have to
approve such an amendment.
FOR THE REASONS SET FORTH ABOVE, THE BOARD OF DIRECTORS UNANIMOUSLY
BELIEVES IT IS IN THE BEST INTERESTS OF THE CORPORATION AND ITS STOCKHOLDERS TO
REJECT THE PROPOSAL AND RECOMMENDS A VOTE AGAINST THE PROPOSAL.
VOTE REQUIRED TO APPROVE A STOCKHOLDER PROPOSAL:Under Virginia law and
under the Corporation's Restated Articles of Incorporation, stockholder
proposals are approved, so long as a quorum for the meeting exists, if the
number of votes cast favoring the action exceed the number of 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 by proxy, are
not "cast" for this purpose.
4. OTHER MATTERS
The Board of Directors does not know of any matters to be presented at the
2003 Annual Meeting other than as noted in this paragraph and elsewhere in this
Proxy Statement. If any proposal properly is brought before the 2003 Annual
Meeting for a vote, the holders of proxies solicited hereby intend to exercise
their discretionary authority to vote against it or them. If any other matters
properly come before the meeting, the proxies received pursuant to this
solicitation will be voted thereon in accordance with the judgment of the
holders of such proxies.
SUPPLEMENTAL INFORMATION
APPLICABLE RULES OF THE SEC REQUIRE THAT WE FURNISH YOU THE FOLLOWING
INFORMATION RELATING TO THE OVERSIGHT AND MANAGEMENT OF YOUR CORPORATION AND TO
CERTAIN MATTERS CONCERNING ITS BOARD OF DIRECTORS AND ITS EXECUTIVE OFFICERS.
BENEFICIAL OWNERSHIP OF STOCK
Based solely upon information in the most recent Schedule 13G filings with
the SEC, the following table sets forth information concerning the persons or
groups known to the Corporation to be the beneficial owners of more than five
percent of the Corporation's Common Stock, its only class of voting securities.
TITLE NAME AND ADDRESS AMOUNT AND NATURE PERCENT
OF CLASS OF BENEFICIAL OWNERS OF BENEFICIAL OWNERSHIP OF CLASS
--------- ----------------------- ----------------------- --------
Common AXA Financial, Inc.* 49,609,465** 12.8**
Stock 1290 Avenue of Americas
New York, NY 10104
10
----------
*Filing jointly pursuant to a joint filing agreement are (a) AXA Financial,
Inc., (b) four French mutual insurance companies as a group (AXA Assurances
I.A.R.D. Mutuelle, AXA Assurances Vie Mutuelle, AXA Conseil Vie Assurance
Mutuelle, and AXA Courtage Assurance Mutuelle), (c) AXA and (d) their
subsidiaries (all filers collectively called "AXA Group").
**AXA Financial, Inc. reported in its Schedule 13G filing that AXA Group
beneficially owned 12.8% of the Corporation's Common Stock as of December 31,
2002, and that as of that date it had sole voting power with respect to
23,918,274 such shares and shared voting power with respect to 6,565,266 such
shares.
The following table sets forth as of February 3, 2003, the beneficial
ownership of the Corporation's Common Stock for:
(1) each director (including the Chief Executive Officer) and each
nominee;
(2) each of the other four most highly compensated officers, based on the
sum of salary and incentive pay for 2002, from the group of officers
designated by the Board of Directors as executive officers for
purposes of Section 16 of the Securities Exchange Act of 1934
("Executive Officers"); and
(3) all directors and Executive Officers of the Corporation as a group.
Unless otherwise indicated by footnote to the data in the table, all such
shares are held with sole voting and investment powers, and no director or
Executive Officer beneficially owns any equity securities of the Corporation or
its subsidiaries other than the Corporation's Common Stock. No one director or
Executive Officer owns as much as 1% of the total outstanding shares of the
Corporation's Common Stock. All directors and Executive Officers as a group own
2.6% of the total outstanding shares of the Corporation's Common Stock.
SHARES OF SHARES OF
NAME COMMON STOCK NAME COMMON STOCK
-------- ------------ -------- ------------
Gerald L. Baliles 3,000(1) Harold W. Pote 4,593(1)
Gene R. Carter 3,150(1) J. Paul Reason 3,100(1)
Alston D. Correll 8,000(1) L. I. Prillaman 1,000,264(3)
David R. Goode 3,637,473(2) Stephen C. Tobias 1,008,087(4)
Landon Hilliard 11,000(1) Henry C. Wolf 1,020,835(5)
Steven F. Leer 4,200(1) James A. Hixon 424,992(6)
Jane Margaret O'Brien 3,000(1)
23 Directors and Executive Officers as a group (including the persons named
above) 10,523,700(7)
----------
(1) Includes a one-time grant of 3,000 shares to each non-employee
director on January 1, 1994, or when that director was first elected to the
Board thereafter. These grants are made pursuant to the Directors' Restricted
Stock Plan; the director may vote these shares, but has no investment power over
them until they are distributed (see information under the "Board of Directors"
caption on page 14). Also includes 1,530 shares over which Mr. Pote and 1,200
shares over which Mr. Leer share voting and investment power with another
individual.
11
(2) Includes 12,324 shares credited to Mr. Goode's account in the
Corporation's Thrift and Investment Plan; 126,089 shares held by the Corporation
under share retention agreements pursuant to the Corporation's Long-Term
Incentive Plan over which Mr. Goode possesses voting power but has no investment
power until the shares are distributed; 3,135,000 shares subject to stock
options granted pursuant to the Corporation's Long-Term Incentive Plan with
respect to which Mr. Goode has the right to acquire beneficial ownership within
60 days; 122,520 restricted shares awarded to Mr. Goode pursuant to the
Corporation's Long-Term Incentive Plan over which Mr. Goode possesses voting
power but has no investment power until the restriction period lapses; and 942
shares over which Mr. Goode shares voting and investment power.
(3) Includes 24,968 shares credited to Mr. Prillaman's account in the
Corporation's Thrift and Investment Plan; 50,032 shares held by the Corporation
under share retention agreements pursuant to the Corporation's Long-Term
Incentive Plan over which Mr. Prillaman possesses voting power but has no
investment power until the shares are distributed; 832,000 shares subject to
stock options granted pursuant to the Corporation's Long-Term Incentive Plan
with respect to which Mr. Prillaman has the right to acquire beneficial
ownership within 60 days; and 30,000 restricted shares awarded to Mr. Prillaman
pursuant to the Corporation's Long-Term Incentive Plan over which Mr. Prillaman
possesses voting power but has no investment power until the restriction period
lapses.
(4) Includes 15,870 shares credited to Mr. Tobias' account in the
Corporation's Thrift and Investment Plan; 44,899 shares held by the Corporation
under share retention agreements pursuant to the Corporation's Long-Term
Incentive Plan over which Mr. Tobias possesses voting power but has no
investment power until the shares are distributed; 854,500 shares subject to
stock options granted pursuant to the Corporation's Long-Term Incentive Plan
with respect to which Mr. Tobias has the right to acquire beneficial ownership
within 60 days; 30,000 restricted shares awarded to Mr. Tobias pursuant to the
Corporation's Long-Term Incentive Plan over which Mr. Tobias possesses voting
power but has no investment power until the restriction period lapses; and
10,326 shares over which Mr. Tobias shares voting and investment power.
(5) Includes 12,068 shares credited to Mr. Wolf's account in the
Corporation's Thrift and Investment Plan; 39,840 shares held by the Corporation
under share retention agreements pursuant to the Corporation's Long-Term
Incentive Plan over which Mr. Wolf possesses voting power but has no investment
power until the shares are distributed; 877,000 shares subject to stock options
granted pursuant to the Corporation's Long-Term Incentive Plan with respect to
which Mr. Wolf has the right to acquire beneficial ownership within 60 days; and
30,000 restricted shares awarded to Mr. Wolf pursuant to the Corporation's
Long-Term Incentive Plan over which Mr. Wolf possesses voting power but has no
investment power until the restriction period lapses.
(6) Includes 5,987 shares credited to Mr. Hixon's account in the
Corporation's Thrift and Investment Plan; 12,585 shares held by the Corporation
under share retention agreements pursuant to the Corporation's Long-Term
Incentive Plan over which Mr. Hixon possesses voting power but has no investment
power until the shares are distributed; 375,000 shares subject to stock options
granted pursuant to the Corporation's Long-Term Incentive Plan with respect to
which Mr. Hixon has the right to acquire beneficial ownership within 60 days;
and 12,000 restricted shares awarded to Mr. Hixon pursuant to the Corporation's
Long-Term Incentive Plan over which Mr. Hixon possesses voting power but has no
investment power until the restriction period lapses.
(7) Includes 139,866 shares credited to Executive Officers' individual
accounts under the Corporation's Thrift and Investment Plan. Also includes:
358,639 shares held by the Corporation for such officers under share retention
agreements pursuant to the Corporation's Long-Term Incentive Plan over which the
12
officer possesses voting power but has no investment power until the shares are
distributed; 9,114,450 shares subject to stock options granted to Executive
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;
344,520 restricted shares awarded to Executive Officers pursuant to the
Corporation's Long-Term Incentive Plan over which they possess voting power but
no investment power until the restriction period lapses; and 11,268 shares over
which Executive Officers share voting and investment power. Also includes 8,307
shares in which Executive Officers disclaim beneficial ownership.
The following table sets forth as of February 3, 2003, the number of Stock
Units held by each non-management director under the Outside Directors' Deferred
Stock Unit Program and NS Stock Units held by those non-management directors who
have made elections under the Directors' Deferred Fee Plan to defer all or a
portion of compensation into phantom units whose value is measured by the market
value of shares of the Corporation's Common Stock (together, "Stock Units"). A
more detailed discussion of director compensation can be found beginning on page
14. A Stock Unit represents the economic equivalent of a share of Common Stock
and further aligns the directors' individual financial interests with the
interests of the Corporation's stockholders since the value of the directors'
holdings fluctuate with the price of the Corporation's Common Stock. Stock Units
ultimately are settled in cash.
TOTAL NUMBER
NUMBER SHARES OF STOCK UNITS
OF STOCK COMMON AND SHARES OF
NAME UNITS(1) STOCK(2) COMMON STOCK
------ ------- ------- --------------
Gerald L. Baliles 25,012 3,000 28,012
Gene R. Carter 25,276 3,150 28,426
Alston D. Correll 19,394 8,000 27,394
Landon Hilliard 24,189 11,000 35,189
Steven F. Leer 22,810 4,200 27,010
Jane Margaret O'Brien 24,879 3,000 27,879
Harold W. Pote 25,828 4,593 30,421
J. Paul Reason 8,048 3,100 11,148
----------
(1) Includes (a) the grant in each year beginning in 1996 through 2003 of
Stock Units to each non-employee director and (b) the crediting, effective June
1, 1996, of Stock Units representing the actuarially determined present value of
the retirement benefit that all non-employee directors serving on the date of
the 1996 Annual Meeting of Stockholders agreed to forego. Stock Units are
credited to a separate memorandum account maintained for each director and are
administered in accordance with the Corporation's Outside Directors' Deferred
Stock Unit Program (see information under the "Board of Directors" caption on
page 14). Where applicable, also includes NS Stock Units credited to the
accounts of directors who have elected under the Directors' Deferred Fee Plan to
defer all or a portion of compensation into phantom units whose value is
measured by the market value of shares of the Corporation's Common Stock, but
which ultimately will be settled in cash, not in shares of Common Stock. NS
Stock Units have been available as a hypothetical investment option since
January 1, 2001.
(2) Figures in this column are based on the Beneficial Ownership table, on
page 11.
13
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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 SEC and the New York Stock Exchange. 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 concerning 2002 beneficial ownership were filed on time by all
directors and Executive Officers.
BOARD OF DIRECTORS
COMPOSITION AND ATTENDANCE
On January 31, 2003, the Board of Directors of the Corporation consisted of
nine members. The Board is divided into three classes; the members of each class
are elected for a term of three years, and at the conclusion of this year's
Annual Meeting each class should contain as nearly as possible an equal number
of directors -- a requirement of the Corporation's Restated Articles of
Incorporation. The Board met seven times in 2002. 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.
The Board of Directors has adopted Governance Guidelines for the
Corporation which, among other matters, require that the non-management members
of the Board (the "outside" directors) meet at least twice a year without
members of management present. The Chair of the Executive and Governance
Committee has been designated to preside at such meetings of the outside
directors. Persons who wish to contact the outside directors of the Corporation
can do so by contacting the Chair of the Executive and Governance Committee, c/o
Corporate Secretary, Norfolk Southern Corporation, Three Commercial Place,
Norfolk, Virginia 23510. Communications directed to the Chair will remain
confidential. The Governance Guidelines are located on the Corporation's website
at nscorp.com under "Investing in the Thoroughbred."
RETIREMENT POLICY
Under the Corporation's Governance Guidelines, a director must retire
effective the date of the annual meeting that next follows the date of that
director's 72nd birthday; if a director's 72nd birthday coincides with the date
of the annual meeting, that director retires effective that date.
COMPENSATION
RETAINER AND FEES:In 2002, each member of the Board of Directors, other
than Mr. Goode, received an annual retainer for services of $32,000 and a
quarterly fee of $4,500 for each committee on which the director served, plus
expenses in connection with attendance at such meetings. Because Mr. Goode is an
officer of the Corporation, he receives no additional compensation for Board
service.
DIRECTORS' DEFERRED FEE PLAN:A director may elect to defer receipt of all
or a portion of compensation. Amounts deferred are credited to a separate
memorandum account maintained in the name of each participating director.
Amounts deferred prior to January 1, 2001, earn a fixed rate of interest, which
is
14
credited to the account at the beginning of each quarter. In general, the
interest rate is 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 percent. The total amount so credited for amounts deferred prior to January
1, 2001, (including interest earned thereon) is distributed in ten annual
installments beginning in the year following the year in which the participant
ceases to be a director.
Amounts deferred on or after January 1, 2001, are credited with variable
earnings and/or losses based on the performance of hypothetical investment
options selected by the director. The hypothetical investment options include NS
Stock Units and various mutual funds as crediting indices. NS Stock Units are
phantom units whose value is measured by the market value of shares of the
Corporation's Common Stock, but the units ultimately will be settled in cash,
not in shares of Common Stock. The total amount so credited for amounts deferred
on or after January 1, 2001, is distributed in accordance with the director's
elected distribution option in one lump sum or a stream of annual cash payments
over 5, 10, or 15 years. During 2002, eight directors participated in this Plan,
including C. A. Campbell, Jr., who retired from the Board of Directors effective
November 29, 2002.
The Corporation's commitment to accrue and pay interest and/or earnings 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 this Plan, the Board, in its
discretion, may reduce the interest and/or earnings on deferrals to a rate not
less than one half the rate otherwise provided for in the Plan.
DIRECTORS' RESTRICTED STOCK PLAN:Each non-employee director serving on
January 1, 1994, was awarded 3,000 restricted shares of the Corporation's Common
Stock ("Restricted Stock"). 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 receives a grant of 3,000 shares of Restricted Stock upon election to the
Board.
Restricted Stock is registered in the name of the director, who has all
rights of ownership (including the right to vote the shares and receive
dividends); however, Restricted Stock may not be sold, pledged or otherwise
encumbered during a restriction period which (a) begins when the Restricted
Stock is 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.
OUTSIDE DIRECTORS' DEFERRED STOCK UNIT PROGRAM:Each non-employee director
was granted 4,000 Stock Units effective February 3, 2003. It is anticipated
that, from time to time, non-employee directors may be granted additional Stock
Units in an amount sufficient to assure that their total annual compensation for
services is competitive.
Stock Units in each director's memorandum account are credited with
dividends as paid on the Corporation's Common Stock, and the amount credited is
converted into additional Stock Units, including fractions thereof, based on the
mean of the high and low trading prices of the Corporation's 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
election made by each director) an amount determined with respect to the mean of
the high and low trading prices of the Corporation's Common Stock. The amount
15
of a lump-sum payment is determined on the basis of the mean of the high and low
trading prices of the Corporation's Common Stock on the last business day of the
month following the director's cessation of service. The amount of installment
payments is determined annually with respect to the mean of the high and low
trading prices on the third business day following the first public announcement
of earnings for the preceding year. During the ten-year period over which
installments are paid, Stock Units in the memorandum account at any time that
have not been paid in cash will be credited with dividends as paid on the
Corporation's Common Stock.
DIRECTORS' CHARITABLE AWARD PROGRAM:Each director serving on February 1,
1996, could 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); directors elected after February 1, 1996, are entitled to
designate up to $100,000 per year of service until the $500,000 cap is reached.
Another $500,000 will be paid to the Norfolk Southern Foundation in the
director's name following the director's death.
This Program supports, in part, the Corporation's long-standing commitment
to contribute to educational, cultural and other appropriate charitable
institutions and to encourage others to do the same. It 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 this
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 activities.
COMMITTEES
Each year, not later than at its Organization Meeting that usually follows
the Annual Meeting of Stockholders, the Board of Directors appoints members of
the Executive and Governance Committee, the Finance Committee, the
Audit Committee, the Compensation and Nominating Committee, and the
Performance-Based Compensation Committee.
The EXECUTIVE AND GOVERNANCE COMMITTEE met four times in 2002; at year-end,
its members were Landon Hilliard, Chair, Gerald L. Baliles, Alston D. Correll,
Steven F. Leer and David R. Goode. Mr. Campbell was elected in May 2002 and
served until his retirement on November 29, 2002. This Committee:
o is empowered to exercise, to the extent permitted by Virginia law, all
the authority of the Board of Directors when the Board is not in
session, including the declaration of a quarterly dividend upon the
Corporation's Common Stock at the rate of the quarterly dividend most
recently declared by the Board; and
o monitors corporate governance trends and practices and may make
recommendations to the Board of Directors concerning corporate
governance issues.
All actions taken by the Committee are to be reported to the Board at its
meeting next following such action and are subject to revision or alteration by
the Board.
16
The Executive and Governance Committee is governed by a written charter
adopted by the Committee and approved by the Board of Directors on November 20,
2001.
The FINANCE COMMITTEE met five times in 2002; at year-end, its members were
Gerald L. Baliles, Chair, Alston D. Correll, Steven F. Leer and J. Paul Reason
(elected in March 2002). Mr. Campbell served until his retirement on November
29, 2002. This Committee:
o develops guidelines and oversees implementation of policies concerning
the Corporation's capital structure and related costs;
o makes recommendations to the Board of Directors concerning an annual
investment policy for the assets of the Corporation's pension fund and
the engagement of firms of investment managers to manage designated
portions of such assets within the framework of the investment policy;
o develops a process for reviewing the performance of the investment
managers; and
o receives and reviews the annual reports, financial statements and
actuarial valuations of the pension plans and on a quarterly bases
informs the Board of Directors about the material aspects of such
reports, statements and valuations.
The Finance Committee is governed by a written charter adopted by the
Committee and approved by the Board of Directors on November 20, 2001.
The AUDIT COMMITTEE met eight times in 2002; at year-end its members were
Harold W. Pote, Chair, Gene R. Carter, Jane Margaret O'Brien and J. Paul Reason.
Mr. Campbell served until May 2002. The Board of Directors has determined that
all members of the Audit Committee are independent, as defined by the applicable
rules of the New York Stock Exchange. This Committee:
o serves as an independent and objective monitor of the accuracy and
integrity of the Corporation's financial statements, financial
reporting process and internal control systems;
o appraises the efforts and effectiveness of the Corporation's
independent public accountants and Internal Audit Department,
including their independence and professionalism;
o facilitates communication among the Board, the independent public
accountants, the Corporation's financial and senior management, and
its Internal Audit Department;
o has sole authority to engage the independent public accountants
(subject to shareholder ratification), based on an assessment of their
qualifications and independence, and pre-approves all fees associated
with their engagement;
o supervises the Corporation's compliance with applicable legal and
regulatory requirements; and
o prepares the "Audit Committee Report" that Securities and Exchange
Commission rules require be included in the Corporation's annual proxy
statement.
17
The Audit Committee is governed by a written charter adopted by the
Committee and last approved by the Board of Directors on January 28, 2003,
following the Committee's last review and reassessment of the adequacy of the
Charter on January 27, 2003. A copy of the Charter of the Audit Committee is
attached to this Proxy Statement as Appendix A.
AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors ("Committee") has reviewed
and discussed with management the Corporation's audited financial statements for
the fiscal year ended December 31, 2002.
The Committee has discussed with KPMG LLP, the independent auditors for the
Corporation, the matters required to be discussed by Statement on Auditing
Standards 61, "Communications with Audit Committees," as amended.
The Committee also has received and reviewed the written independence
affirmation letter and disclosures from KPMG LLP and has discussed with KPMG LLP
their independence.
Based on the review and discussions referred to above, the Committee
recommended to the Board of Directors that the financial statements referred to
above be included in the Corporation's Annual Report for the year ended December
31, 2002, on Form 10-K filed with the Securities and Exchange Commission.
Harold W. Pote, CHAIR
Gene R. Carter, MEMBER
Jane Margaret O'Brien, MEMBER
J. Paul Reason, MEMBER
The COMPENSATION AND NOMINATING COMMITTEE met six times in 2002; at
year-end, its members were Gene R. Carter, Chair, Landon Hilliard, Jane Margaret
O'Brien and Harold W. Pote. This Committee:
o considers and makes recommendations to the Board of Directors
concerning the Corporation's executive compensation program, including
recommended compensation for directors and annual salaries for those
officers whose salaries are fixed by the Board of Directors;
o considers and makes recommendations to the Board of Directors
concerning the adoption and administration of any management incentive
bonus plan, deferred compensation plan or other similar plan of the
Corporation, including personnel eligible to participate and the
method of calculating bonuses or deferred compensation amounts under
any such plan;
o recommends to the Board of Directors qualified individuals to be
nominated either as additional members of the Board of Directors or to
fill any vacancy occurring in the Board of Directors; and
o recommends to the Board of Directors qualified individuals to be
elected by the Board of Directors as officers of the Corporation.
18
The Compensation and Nominating Committee is governed by a written charter
adopted by the Committee and approved by the Board of Directors on November 20,
2001.
The Committee will consider nominees recommended by stockholders for
election to the Board. Such recommendations must be in writing addressed to the
Corporate Secretary, Norfolk Southern Corporation, Three Commercial Place,
Norfolk, Virginia 23510-9219, 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.
STOCKHOLDERS WISHING TO NOMINATE AN INDIVIDUAL FOR ELECTION AS A DIRECTOR
AT AN ANNUAL MEETING MUST COMPLY WITH SPECIFIC BYLAW PROVISIONS, DETAILS OF
WHICH ARE AVAILABLE ON REQUEST FROM THE CORPORATE SECRETARY.
The PERFORMANCE-BASED COMPENSATION COMMITTEE met two times in 2002; at
year-end, its members were Gene R. Carter, Chair, Jane Margaret O'Brien and
Harold W. Pote. This Committee:
o makes awards and takes other actions under the Long-Term Incentive
Plan of Norfolk Southern Corporation and Participating Subsidiaries;
and
o makes any other compensation decisions for which it is desirable to
achieve the protections afforded by Section 162(m) of the Internal
Revenue Code or by other laws or regulations that may be or become
relevant in this area and in which only "disinterested" directors may
participate.
The Performance-Based Compensation Committee is governed by a written
charter adopted by the Committee and approved by the Board of Directors on
November 20, 2001.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In 2002, the Corporation paid the law firm of Hunton & Williams, in which
Mr. Baliles is a partner, for legal services. These fees were less than 1% of
the gross revenues of Hunton & Williams for 2002.
The Corporation 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. Brown Brothers was paid fees for managing a
portion of the assets of the Corporation's pension fund and fees for brokerage
and custodial services rendered to the Norfolk Southern Foundation in 2002. The
total fees paid by the Corporation to Brown Brothers in 2002 were less than 1%
of the gross revenues of Brown Brothers for fiscal year 2002.
19
COMPENSATION COMMITTEES INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation and Nominating Committee during 2002 were
Mr. Carter, Chair, Mr. Hilliard, Ms. O'Brien and Mr. Pote. The members of the
Performance-Based Compensation Committee during 2002 were Mr. Carter, Chair, Ms.
O'Brien and Mr. Pote. Other than Mr. Hilliard's relationship with Brown Brothers
(about which information is provided under the preceding caption), there were no
reportable business relationships between the Corporation and such individuals.
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 in 2002 (together, the "Named Executive Officers"), for service in
all capacities to the Corporation and its subsidiaries by the Named Executive
Officers in the fiscal years ending December 31, 2002, 2001 and 2000.
SUMMARY COMPENSATION TABLE
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 ($) ($) ($) (#) ($) ($)
---------------- ---- -------- ------- -------------- --------- --------- --------------
David R. Goode 2002 970,833 883,944 932,322(7) 650,000 1,690,170 47,030
Chairman, President and 2001 950,000 959,025 526,034(7) 525,000 426,410 49,545
Chief Executive Officer 2000 950,000 410,400(6) 530,535(7) 525,000 167,130 62,343
L. I. Prillaman 2002 481,250 292,119 287,313 200,000 267,293 28,027
Vice Chairman and Chief 2001 406,250 273,406 66,163 150,000 106,603 17,413
Marketing Officer 2000 375,000 108,000 86,799 150,000 55,710 21,824
Stephen C. Tobias 2002 545,833 331,321 376,761 200,000 267,293 32,135
Vice Chairman and Chief 2001 510,417 343,510 150,400 150,000 106,603 28,049
Operating Officer 2000 500,000 144,000 164,377 150,000 55,710 33,821
Henry C. Wolf 2002 545,833 331,321 407,412 200,000 267,293 35,631
Vice Chairman and Chief 2001 510,417 343,510 156,140 150,000 106,603 30,785
Financial Officer 2000 500,000 144,000 176,612 150,000 55,710 37,804
James A. Hixon 2002 292,500 150,930 154,205 100,000 133,646 16,205
Senior Vice President- 2001 270,000 154,454 33,768 60,000 35,534 12,307
Administration 2000 235,000 63,450 38,854 60,000 16,713 12,582
----------
(1) Includes portion of any salary or bonus award elected to be received
on a deferred basis.
(2) Includes amounts reimbursed for the payment of taxes on personal
benefits. Also includes the amount by which the interest accrued on salary and
bonuses deferred under the Officers' Deferred Compensation
20
Plan exceeds 120% of the applicable Federal long-term rate provided under
Section 1274(d) of the Code; for 2002, these amounts were: for Mr. Goode,
$161,328; Mr. Prillaman, $25,031; Mr. Tobias, $114,599; Mr. Wolf, $130,296; and
Mr. Hixon, $3,767. Includes tax absorption payments in 2000 and 2001 for gains
realized upon exercise of certain stock options. Includes awards paid in 2002
under the NS Stock Unit Plan: for Mr. Goode, $509,000; Mr. Prillaman, $244,320;
Mr. Tobias, $244,320; Mr. Wolf, $244,320; and Mr. Hixon, $142,520.
(3) Options were granted without tandem SARs.
(4) Represents the value of the "earn out" pursuant to the performance
share feature of the Corporation's Long-Term Incentive Plan for periods ended
December 31, 2002, 2001 and 2000 (for 2002, performance shares were earned for
achievements in the three-year period 2000-2002; for 2001, for achievements in
the three-year period 1999-2001; and for 2000, for achievements in the
three-year period 1998-2000).
(5) Includes for 2002 (i) contributions of $5,500 to the Corporation's
401(k) plan on behalf of each of the Named Executive Officers; and (ii) total
premium payments (out-of-pocket cash cost) on "split dollar" life insurance
policies: for Mr. Goode, $41,530; Mr. Prillaman, $22,527; Mr. Tobias, $26,635;
Mr. Wolf, $30,131; and Mr. Hixon, $10,705.
(6) Represents the value of 26,520 Restricted Shares awarded to Mr. Goode
effective January 29, 2001, pursuant to the terms of the Corporation's Long-Term
Incentive Plan, in lieu of the cash bonus Mr. Goode earned in 2000 pursuant to
the Corporation's Executive Management Incentive Plan. These Restricted Shares
vested immediately, however Mr. Goode will not have investment power over the
shares during a 36-month Restriction Period ending on January 29, 2004.
Dividends will be paid on the Restricted Shares during the Restriction Period.
Other than this grant, there were no restricted stock holdings by the Named
Executive Officers outstanding at the end of the last fiscal year.
(7) Includes personal use, as directed by resolution of the Board of
Directors, of the Corporation's aircraft valued at $143,456 for 2002; $164,683
for 2001; and $173,789 for 2000--calculated on the basis of the aggregate
incremental cost of such use to the Corporation.
LONG-TERM INCENTIVE PLAN
The Corporation's Long-Term Incentive Plan, as last approved by
stockholders in 2001, provides for the award of Incentive Stock Options,
Non-qualified Stock Options, Stock Appreciation Rights, Restricted Shares and
Performance Share Units to directors, officers and other key employees of both
the Corporation and certain of its subsidiaries. The Performance-Based
Compensation Committee of the Board of Directors ("Committee") administers the
Plan and has sole discretion, subject to certain limitations, to interpret the
Plan; to select Plan participants; to determine the type, size, terms and
conditions of awards under the Plan; to authorize the grant of such awards; and
to adopt, amend and rescind rules relating to the Plan. Except for capital
adjustments, the option price may not be decreased after the option is granted,
nor may any outstanding option be modified or replaced through cancellation if
the effect would be to reduce the price of the option, unless such repricing,
modification or replacement is approved by the Corporation's stockholders.
21
STOCK OPTIONS
The following table sets forth certain information concerning the grant in
2002 of stock options under the Long-Term Incentive Plan to each Named Executive
Officer:
OPTION/SAR* GRANTS IN LAST FISCAL YEAR
GRANT DATE
INDIVIDUAL GRANTS VALUE
-------------------------------------------------------------------------------------------- ------------
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS GRANT
OPTIONS GRANTED TO EXERCISE OR DATE PRESENT
GRANTED(1) EMPLOYEES IN BASE PRICE(2) EXPIRATION VALUE(3)
NAME (#) FISCAL YEAR ($ PER SHARE) DATE ($)
------ ----------- ------------ ------------- ---------- ------------
D. R. Goode 650,000 8.80% 22.49 01/27/2012 7,696,000
L. I. Prillaman 200,000 2.71% 22.49 01/27/2012 2,368,000
S. C. Tobias 200,000 2.71% 22.49 01/27/2012 2,368,000
H. C. Wolf 200,000 2.71% 22.49 01/27/2012 2,368,000
J. A. Hixon 100,000 1.35% 22.49 01/27/2012 1,184,000
*No SARs were granted in 2002.
----------
(1) These options (of which the first 4,446 granted to each Named
Executive Officer are Incentive Stock Options and the remainder are
Non-qualified Stock Options) were granted as of January 28, 2002, and are
exercisable one year after the date of grant. Dividend equivalents are paid in
cash on these options for five years 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 SEC, the present value of the
option grant on the date of grant was determined using the Black-Scholes
statistical model. The actual amount, if any, a Named Executive Officer may
realize upon exercise depends on the stock price on the exercise date;
consequently, there is no assurance the amount realized by a Named Executive
Officer will be at or near the monetary value determined by using this
statistical model.
In the case of Common Stock, the Black-Scholes model used the following
measures and assumptions:
(a) a stock volatility factor of 0.4228: volatility was determined by an
independent compensation consultant using monthly data averaged over
the 60-month period January 1, 1997, through December 31, 2001;
(b) a dividend yield of 1.24%: yield was determined monthly and averaged
over the 60-month period January 1, 1997, through December 31, 2001;
(c) a 2001 risk-free rate of return of 5.40%: this represents the monthly
average 10-year Treasury strip rate during 2001, the year prior to the
issuance of these options; and
22
(d) that the option will be exercised during its 10-year term.
The foregoing produces a Black-Scholes factor of 0.5264 and a resulting
present value of $11.84 for each share of Common Stock subject to the 2002
option grant; the factor and resulting present value have not been adjusted to
reflect (i) that options cannot be exercised during the first year of their
10-year term or (ii) the payment of dividend equivalents on unexercised options.
The following table sets forth certain information concerning the exercise
of options by each Named Executive Officer during 2002 and the number of
unexercised options held by each as of December 31, 2002:
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS/SARS AT IN-THE-MONEY OPTIONS/SARS
SHARES FY-END AT FY-END(1)
ACQUIRED ON VALUE (#) ($)
EXERCISE REALIZED ------------------------------ ---------------------------------
NAME (#) ($) EXERCISABLE* UNEXERCISABLE EXERCISABLE(7) UNEXERCISABLE(8)
---- ----------- -------- ----------- ------------- ------------- ---------------
D. R. Goode 120,0002 94,4042 2,175,000 650,000 3,726,187 --
L. I. Prillaman 15,0003 13,4503 552,000 200,000 1,064,625 --
S. C. Tobias 15,0004 14,7254 574,500 200,000 1,064,625 --
H. C. Wolf 15,0005 11,8005 597,000 200,000 1,064,625 --
J. A. Hixon 7,5006 7,3626 235,000 100,000 425,850 --
*Reports, for each Named Executive Officer, the total number of unexercised
options that have passed the first anniversary of their grant date.
----------
(1) Equal to the mean ($19.755) of the high and low trading prices on the
New York Stock Exchange-Composite Transactions of the Common Stock on December
31, 2002, less the exercise prices of in-the-money options, multiplied by the
number of such options.
(2) Mr. Goode surrendered 115,684 shares of stock already owned in full
satisfaction of the exercise price of options on 120,000 shares.
(3) Mr. Prillaman surrendered 14,389 shares of stock already owned in full
satisfaction of the exercise price of options on 15,000 shares.
(4) Mr. Tobias surrendered 14,333 shares of stock already owned in full
satisfaction of the exercise price of options on 15,000 shares.
(5) Mr. Wolf surrendered 14,461 shares of stock already owned in full
satisfaction of the exercise price of options on 15,000 shares.
(6) Mr. Hixon surrendered 7,167 shares of stock already owned in full
satisfaction of the exercise price of options on 7,500 shares.
(7) Because the market price of the Common Stock on December 31, 2002,
($19.755) was below the exercise price of options granted in 1999 and for all
earlier years, they are "out-of-the-money" and have no reportable value. The
numbers shown are for the options granted in 2000 and 2001, which are
in-the-money.
(8) Because the market price of the Common Stock on December 31, 2002,
($19.755) was below the exercise price of options granted in 2002, they are
"out-of-the-money" and have no reportable value.
23
PERFORMANCE SHARE UNITS ("PSUS")
The following table sets forth certain information concerning the grant in
2002 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 compensation at the end of a three-year performance cycle
(2002-2004) based on the Corporation's performance during that three-year
period. Under the 2002 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
capital invested ("ROACI"), (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 Joint Committee Report Concerning the
2002 Compensation of Certain Executive Officers under the caption, "Long-Term
Incentive Plan," beginning on page 29.
LONG-TERM INCENTIVE PLAN--AWARDS IN LAST FISCAL YEAR
(PERFORMANCE SHARE UNITS)
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 (#) (#) (#)
------ -------------- ------------ --------- -------- -------
D. R. Goode 125,000 01/01/02- 0 19,750 125,000
12/31/04
L. I. Prillaman 40,000 01/01/02- 0 6,320 40,000
12/31/04
S. C. Tobias 40,000 01/01/02- 0 6,320 40,000
12/31/04
H. C. Wolf 40,000 01/01/02- 0 6,320 40,000
12/31/04
J. A. Hixon 15,000 01/01/02- 0 2,370 15,000
12/31/04
----------
(1) "Earn outs" may be satisfied in cash or in shares of Common Stock (or
in some combination of the two).
(2) The Long-Term Incentive Plan does not provide a performance target for
an "earn out" under this feature of the Plan; consequently, this column
represents 15.8% of the maximum potential "earn out," which, in accordance with
applicable rules of the SEC, is the percentage actually "earned out" under the
Plan at the end of the performance cycle which ended on December 31, 2001.
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
24
in 2002 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
ESTIMATED ANNUAL RETIREMENT BENEFITS
FOR YEARS OF SERVICE INDICATED
YEARS OF CREDITABLE SERVICE
----------------------------------------------------------------
REMUNERATION 15 20 25 30 35 40
------------ ------- ------- ------- --------- --------- ---------
$ 300,000 $ 47,954 $ 69,063 $ 90,173 $ 111,282 $ 132,392 $ 153,501
400,000 70,454 99,063 127,673 156,282 184,892 213,501
500,000 92,954 129,063 165,173 201,282 237,392 273,501
600,000 115,454 159,063 202,673 246,282 289,892 333,501
700,000 137,954 189,063 240,173 291,282 342,392 393,501
800,000 160,454 219,063 277,673 336,282 394,892 453,501
900,000 182,954 249,063 315,173 381,282 447,392 513,501
1,000,000 205,454 279,063 352,673 426,282 499,892 573,501
1,100,000 227,954 309,063 390,173 471,282 552,392 633,501
1,200,000 250,454 339,063 427,673 516,282 604,892 693,501
1,300,000 272,954 369,063 465,173 561,282 657,392 753,501
1,400,000 295,454 399,063 502,673 606,282 735,000 813,501
1,500,000 317,954 429,063 540,173 651,282 762,392 873,501
1,600,000 340,454 459,063 577,673 696,282 814,892 933,501
1,700,000 362,954 489,063 615,173 741,282 867,392 993,501
1,800,000 385,454 519,063 652,673 786,282 919,892 1,053,501
1,900,000 407,954 549,063 690,173 831,282 972,392 1,113,501
2,000,000 430,454 579,063 727,673 876,282 1,024,892 1,173,501
2,100,000 452,954 609,063 765,173 921,282 1,077,392 1,233,501
2,200,000 475,454 639,063 802,673 966,282 1,129,892 1,293,501
2,300,000 497,954 669,063 840,173 1,011,282 1,207,500 1,353,501
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 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 five-year average compensation and approximate years of
creditable service, as of January 1, 2003, for each Named Executive Officer
were: Mr. Goode, $1,818,552 and 37 years; Mr. Prillaman, $659,325 and 33 years;
Mr. Tobias, $830,029 and 33 years; Mr. Wolf, $830,029 and 30 years; and Mr.
Hixon, $393,727 and 18 years.
The Board of Directors approved on September 25, 2001, the Corporation's
entering into agreements with each of Messrs. Prillaman, Tobias and Wolf,
providing enhanced pension benefits in exchange for each individual's continued
employment with the Corporation for an additional two years. If the individual
remains employed with the Corporation through September 30, 2003, he will
receive an additional three years of creditable service and his benefit will be
based on average annual compensation for the three
25
most highly compensated years, instead of the five most highly compensated
years, out of the last ten years of creditable service.
CHANGE-IN-CONTROL ARRANGEMENTS
In May 1996, the Compensation and Nominating Committee recommended, and the
Board of Directors approved, the Corporation's entering into change-in-control
agreements ("Agreements") with each of the Named Executive Officers and with
certain other key employees. These Agreements, the terms of which were reviewed
by outside counsel, were first filed as an exhibit to the Corporation's Report
on Form 10-Q for the period ended June 30, 1996, and refiled as an exhibit to
the Corporation's 2001 Annual Report on Form 10-K, and provide certain economic
protections in the event of an 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. As consideration for these Agreements and to help
encourage management continuity, covered individuals agreed not to engage in
Competing Employment for a period of (a) three years, in most cases, from the
date they execute an Agreement and (b) one year from their Termination Date, if
they accept benefits payable or provided under the Agreements.
These Agreements are terminable by either the Corporation or a covered
employee on twenty-four months' notice; however, the term of the prohibition on
engaging in Competing Employment is not affected by an Agreement's being
terminated.
Generally, these Agreements provide for (a) severance compensation payments
(not continued employment) equal, in the case of each Named Executive Officer,
to three times the sum of their Base Pay and Incentive Pay (most other covered
employees are entitled to receive a lower multiple of Base Pay and Incentive
Pay); (b) redemption of outstanding Performance Share Units and of outstanding,
exercisable options (subject to restrictions, if any, in the case of persons,
such as each Named Executive Officer, imposed under Section 16 of the Securities
Exchange Act of 1934) and payment of dividend equivalents foregone as a result
of the redemption of such options; (c) payment of an amount equal to the present
value of the projected value of amounts deferred under the Officers' Deferred
Compensation Plan; (d) eligibility for certain Benefits (principally medical,
insurance and death benefits) for up to three years following Termination; and
(e) certain additional service credit under the Corporation's retirement plans.
The Agreements also provide for payment of any Federal excise tax that may be
imposed on payments made pursuant to these Agreements.
In 2002, the Board of Directors agreed to abide by a stockholder approved
proposal that future severance agreements with senior executives that exceed
2.99 times the sum of the executive's base salary plus bonus be approved by
stockholders.
JOINT COMMITTEE REPORT CONCERNING
THE 2002 COMPENSATION OF CERTAIN EXECUTIVE OFFICERS
This Report describes Norfolk Southern Corporation's Executive Officer
compensation philosophy, the components of its compensation program and the
manner in which 2002 compensation determinations were
26
made for the Corporation's Chairman, President and Chief Executive Officer,
David R. Goode, and for the four other officers (collectively, including Mr.
Goode, referred to in this report as the "Named Executive Officers") whose 2002
compensation is reported in the Summary Compensation Table of this Proxy
Statement.
The Board's Compensation and Nominating Committee ("C&N Committee") and its
Performance-Based Compensation Committee ("PBC Committee") are composed entirely
of directors who are not also officers of the Corporation and met, respectively,
six times and two times during 2002. Among other things, the C&N Committee is
responsible for recommending to the Board the salaries of Executive Officers and
administering the Corporation's annual cash incentive plans (the Executive
Management Incentive Plan and the Management Incentive Plan) and the NS Stock
Unit Plan. The PBC Committee is responsible for administering the Long-Term
Incentive Plan, as amended and last approved by stockholders at their May 2001
Annual Meeting, which authorizes awards of stock options and performance share
units and certain other equity-based incentive awards.
BASE SALARY: While the Board believes that a substantial portion of each
Executive Officer's total compensation should be "performance-based," both
it and the C&N Committee seek to assure that the base salaries of the
Executive Officers are competitive with those earned by individuals in
comparable positions.
Specifically, the C&N Committee compares Mr. Goode's base salary with
salaries paid to chief executive officers of other holding companies of
Class I railroads (the same companies comprising the S&P Railroad Index
included in the Performance Graph) and of other U.S. corporations of
comparable size. The base salaries of the other Named Executive
Officers--as well as all other Executive 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 U.S. corporations of
comparable size, including but not limited to those included in the S&P 500
Index and S&P 500 Railroad Index; both of these indices are included in the
Performance Graph. These data are compiled by the Corporation's Human
Resources Department and by an outside compensation consultant. The
Committee's general intention is to set the base salaries of the Executive
Officers around the 50th percentile 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, including each of the other
Named Executive Officers. Based on such evaluations, comparative salary
data and each such Executive Officer's performance in light of the 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 recommendation concerning, nor does he play any role in
determining, his base salary (or other compensation), which is set by the
Board. As noted, the C&N Committee customarily seeks to set the NS
Chairman, President and CEO's base salary between the 25th and 50th
percentile of the base salaries paid to CEOs of other U.S. corporations of
comparable size and competitively (within the mid-range of compensation
practice) with those of the chairmen of the other holding companies of
Class I railroads. Mr. Goode's base salary in 2002 was between the 25th and
the 50th percentile.
Mr. Goode received a base salary increase in August 2002, his first salary
increase since 1999. This decision, not tied to or based on the application
of any specific formula, reflected the Board's assessment
27
of the Corporation's performance in 2001 and year-to-date 2002, including
its total operating revenues and net income, and market analysis
considerations. The base salaries of each of the other Named Executive
Officers were increased in 2002, based on their performance and market
analyses.
EXECUTIVE MANAGEMENT INCENTIVE PLAN ("EMIP"): The Corporation's EMIP 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 financial performance. Awards to Executive Officers
including Named Executive Officers, and to participants in the
Corporation's Management Incentive Plan (MIP) are paid, if at all, based on
the Corporation's performance relative to two pre-determined criteria:
operating ratio for the year and pre-tax net income; the performance
standards relative to these two criteria are established by the C&N
Committee not later than the end of the first month of each incentive year.
It is the C&N Committee's philosophy that, to the extent the Corporation
achieves EMIP goals, the total of each Executive Officer's base salary and
EMIP award should become increasingly 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 C&N Committee by comparing Mr. Goode's total annual cash
compensation 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
U.S. corporations of comparable size. Incentive pay opportunities for the
other Executive Officers are determined annually by the C&N Committee based
on its review of the annual cash compensation of comparable positions at
companies of comparable size, including but not limited to those identified
in the Stock Performance Graph.
Using those criteria, in November of 2001 the C&N Committee set Mr. Goode's
target 2002 incentive opportunity at 150% of his 2002 base salary, Mr.
Prillaman's, Mr. Tobias' and Mr. Wolf's at 100% of their 2002 base salary
and Mr. Hixon's at 85% of his 2002 base salary. At the same time, the C&N
Committee raised the performance standards for both operating ratio and
pre-tax net income. Actual payments, if any, are based on the extent to
which established performance standards are achieved.
For 2002, Mr. Goode and all other Executive Officers earned EMIP awards and
each of the other officers and key employees earned EMIP or MIP awards, as
applicable, equal in the case of each such individual to 60.7% of that
individual's target incentive opportunity.
NS STOCK UNIT PLAN ("PLAN"): The Board adopted the NS Stock Unit Plan in
July 2001 to provide for the grant of stock units whose value is measured
by the fair market value of the Corporation's common stock and which is
payable in cash upon satisfaction of applicable restrictions. In July 2001,
the C&N Committee granted awards under the Plan to Mr. Goode and each of
the other Executive Officers. The 2001 NS Stock Unit awards were subject to
a one-year performance period, and the C&N Committee could adjust the
awards at any time during the performance period to increase or decrease
the award based on the performance of the Corporation or on the
individual's performance. The Committee evaluated the awards in July 2002
based on the improvement in NS' operating ratio (3.42 percent) and free
cash flow ($683 million) during the performance period. Based on the
improvement in both measures, the Committee did not make any adjustments.
Accordingly, the 2001
28
NS Stock Unit awards were paid in full in July 2002 upon expiration of the
twelve month performance period, and these awards are included as an
element of total 2002 cash compensation for Mr. Goode and the other Named
Executive Officers.
As a result, total 2002 cash compensation--2002 base salary and NS Stock
Unit awards and 2002 EMIP awards paid in 2003--earned by Mr. Goode was
positioned at approximately the 58th percentile. No NS Stock Unit awards
were made during 2002.
LONG-TERM INCENTIVE PLAN ("LTIP"): The Board and the PBC Committee believe
that a substantial component of each Executive Officer's total direct
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 objective is
supported through the making of annual grants of stock options and
performance share units to each of the Corporation's Executive Officers,
including each of the Named 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 LTIP awards, the size of prior grants is analyzed within a
current total direct compensation framework predicated on a review of both
the long-term awards and the total compensation (base salary, short-and
long-term awards) of comparable positions in U.S. companies of comparable
size. The mix of options and performance share units may vary from year to
year to reflect the relative expected value of each type of award and
certain other considerations. The number of stock options and performance
share units granted in any year is determined so as to place the total
compensation of Mr. Goode and the Executive Officers, when corporate
performance warrants, around or above the 75th percentile of total direct
compensation for their respective peer groups.
At its January 2002 meeting, the PBC Committee granted stock options to
each of the Executive Officers, including each of the Named Executive
Officers, and to other officers and key employees at an exercise price
equal to the fair 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 vesting period has elapsed.
For all stock options granted in 2002 to the Executive Officers, for the
first five (5) years following the date stock options are granted, the
Corporation pays in cash to each Executive Officer dividend equivalents on
unexercised options equal to the dividend paid on the Corporation's Common
Stock.
At the same January 2002 meeting, the PBC Committee granted performance
share units which provide the Executive Officers, including each of the
Named Executive Officers, and other recipients the opportunity to earn
awards (that will be paid either in cash or in shares of the Corporation's
Common Stock, or in some combination thereof) during the first quarter of
2005. The number of performance share units actually payable to recipients
is based on criteria specified in LTIP, last approved by stockholders at
their May 2001 Annual Meeting--specifically, the Corporation's three-year
(I.E., 2002-2004) average Return on Average Capital Invested, three-year
average Operating Ratio and
29
three-year Total Stockholder Return, evaluated relative to performance
measures established by the PBC Committee and set out in the schedules
below. One-third of the performance share units granted in 2002 are
available to be earned based on each of the three performance criteria.
-------------------------------- --------------------------------
2002-2004 CYCLE 2002-2004 CYCLE
TOTAL RETURN ON AVERAGE CAPITAL
STOCKHOLDER RETURN INVESTED ("ROACI")
("TSR") VS. S&P 500 --------------------------------
-------------------------------- PERCENTAGE OF
PERCENTAGE OF THREE-YEAR PERFORMANCE
THREE-YEAR PERFORMANCE AVERAGE SHARE UNITS
AVERAGE TSR SHARE UNITS ROACI EARNED OUT
VS. S&P 500 EARNED OUT 17 and above% 100%
-------------------------------- 16% 90%
90th percentile 15% 80%
and above 100% 14% 70%
80th 90% 13% 60%
70th 85% 12% 50%
60th 80% 11% 40%
50th 75% 10% 30%
40th 50% 9% 20%
30th 30% 8% 10%
25th and below 0% Below 8% 0%
-------------------------------- --------------------------------
--------------------------------
2002-2004 CYCLE
OPERATING RATIO ("OpR")
--------------------------------
PERCENTAGE OF
THREE-YEAR PERFORMANCE
NS AVERAGE SHARE UNITS
OPR EARNED OUT
75% or below 100%
80% 75%
85% 50%
90% 25%
Above 90% 0%
--------------------------------
For 2002, Mr. Goode was granted options (including 4,446 incentive stock
options that may receive capital gains treatment) on 650,000 shares of
common stock and the opportunity to earn up to 125,000 performance shares;
the other four Named Executive Officers as a group were awarded options
(including in the case of each such officer, 4,446 incentive stock options
that may receive capital gains treatment) on a total of 700,000 shares of
common stock and the opportunity to earn up to 135,000 performance shares.
30
In summary, the C&N Committee and the PBC Committee believe that the
compensation program for Executive Officers, including the Named Executive
Officers, is designed to offer opportunities competitive with those of similar
positions at comparable American corporations. More importantly, these
Committees believe 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.
Section 162(m) of the Internal Revenue Code limits to $1 million the
corporate federal income tax deduction for certain "non-performance based"
compensation paid in a year to any of the Corporation's Executive Officers. Each
Committee has carefully considered the Corporation's executive compensation
program in light of the applicable tax rules. Accordingly, the Corporation
amended the Long-Term Incentive Plan in 1995 with stockholder approval to permit
the grant of stock options that meet the requirements of Section 162(m), and
stockholders last approved the Plan in 2001. However, each Committee believes
that tax-deductibility is but one factor to be considered in fashioning an
appropriate compensation package for executives. As a result, each Committee
reserves and will exercise its discretion in this area so as to serve the best
interests of the Corporation and its stockholders.
Compensation and Performance-Based
Nominating Committee Compensation Committee
Gene R. Carter, CHAIRMAN Gene R. Carter, CHAIRMAN
Landon Hilliard, MEMBER Jane Margaret O'Brien, MEMBER
Jane Margaret O'Brien, MEMBER Harold W. Pote, MEMBER
Harold W. Pote, MEMBER
31
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,
1997, and ending December 31, 2002. These data are furnished by Bloomberg
Financial Markets.
[The table below represents a line chart in the printed report.]
Norfolk S&P S&P
Southern Railroad 500
Corporation Index Index
----------- -------- -----
Dec. 97 100 100 100
Dec. 98 106.52 91.71 128.34
Dec. 99 71.6 77.55 155.14
Dec. 00 49.29 83.51 141.13
Dec-2001 68.76 98.55 124.4
Dec-2002 75.96 97.38 97.08
----------
*Assumes that the value of the investment in the Corporation's Common Stock
and each index was $100 on December 31, 1997, and that all dividends were
reinvested.
STOCKHOLDER PROPOSALS
Stockholders are entitled to submit proposals on matters appropriate for
stockholder action consistent with regulations of the Securities and Exchange
Commission and with the Corporation's Bylaws. Any such proposal for the 2004
Annual Meeting of Stockholders must comply with applicable regulations and be
RECEIVED by the Corporate Secretary, Norfolk Southern Corporation, Three
Commercial Place, Norfolk, Virginia 23510-9219, as follows:
to be eligible for inclusion in the Corporation's proxy statement and form
of proxy, it must be received no later than November 18, 2003; or to be eligible
to be presented from the floor for vote at the meeting (but not intended for
inclusion in the Corporation's proxy materials), it must be received during the
period that begins November 30, 2003, and ends February 8, 2004.
By order of the Board of Directors,
DEZORA M. MARTIN,
CORPORATE SECRETARY.
32
APPENDIX A
NORFOLK SOUTHERN CORPORATION
CHARTER
OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
COMMITTEE'S ROLE AND PURPOSE
----------------------------
The Audit Committee (Committee) is a standing committee, the chair and members
of which are appointed annually by the Board of Directors not later than at its
Organizational Meeting. The Committee meets a minimum of four times per year,
establishes its own procedures (including designating a chair, if necessary) and
acts by majority vote when at least a quorum is present. In general, the
Committee's function is to assist the Board in discharging fully its statutory
and fiduciary responsibilities with respect to oversight of the Corporation's
financial statements and reports, internal controls and related matters. The
Committee also facilitates communication among the Board, the independent
auditors, the Corporation's financial and senior management and its Internal
Audit Department.
While the Committee has oversight responsibilities and powers as set forth in
this Charter, it is not the responsibility of the Committee to prepare the
Corporation's financial statements or to plan or conduct audits to determine if
such statements are complete, accurate and in accordance with Generally Accepted
Accounting Principles (GAAP). This is the responsibility of Management and the
independent auditors. Management also is responsible for compliance with
applicable laws, regulations, internal controls and procedures, and with the
Corporation's disclosure controls and procedures, internal operating and
compliance policies, and codes of conduct and ethics.
Accordingly, the Committee's purpose includes, without limitation:
(a) Assisting board oversight of the:
o accuracy and integrity of the Corporation's financial statements
and periodic financial reports, and
o the Corporation's compliance with legal and regulatory
requirements;
(b) Direct responsibility for the engagement of independent auditors based
on an assessment of their qualifications and independence;
(c) Evaluation of the performance of the independent auditors and internal
audit function; and
(d) Preparation of the "Audit Committee Report" required by SEC rules to
be included in the Corporation's annual proxy statement.
33
COMMITTEE MEMBERSHIP
--------------------
The Board's policy requires that the Committee must consist of no fewer than
three directors, each of whom satisfies all requirements, applicable at the
time, of the Securities and Exchange Commission (SEC) and of the New York Stock
Exchange (NYSE). No member may be a serving executive officer of the
Corporation. Each member must be free of any relationship that would interfere
with the exercise of her or his independent judgment and must meet the Board's
definition of "independence" and "financial literacy," and at least one member
must have accounting or related financial management expertise. Additionally, if
a Committee member serves on the audit committee of more than three public
companies, the Committee and the Board must determine that such simultaneous
service does not impair the ability of such member to effectively serve on the
Corporation's Audit Committee. The Committee seeks to maintain at least one
member who is an "audit committee financial expert" as defined by the SEC.
Committee members shall accept directors' fees as their sole form of
compensation from the Corporation.
PRINCIPAL COMMITTEE DUTIES, RESPONSIBILITIES AND POWERS
-------------------------------------------------------
The Committee will have the full cooperation of Management, including
unrestricted access, in the Committee's sole discretion, to personnel, books and
records, and shall have all the resources it deems necessary. The Committee
shall have sole power and authority to engage and evaluate the independent
auditors and other outside counsel and experts. The Corporation shall provide
funding, as determined by the Committee, for payment of such auditors or
advisors.
Among the Committee's principal duties and responsibilities, which it discharges
as a fiduciary, are the following:
(1) OVERSEE THE SERVICES, ACTIVITIES AND INDEPENDENCE OF THE CORPORATION'S
INDEPENDENT AUDITORS. To carry out this responsibility, to the extent
(a) required by law or by applicable rules or regulations of the SEC,
NYSE, Financial Accounting Standards Board (FASB) or other body with
jurisdiction, or (b) the Committee determines is appropriate, the
Committee:
o has sole authority to engage, evaluate and, if necessary, replace
the independent auditors (subject to shareholder ratification, as
applicable);
o will pre-approve all audit and non-audit services of the
independent auditors; review the annual audit plan (including
scope, staffing, reliance on Management and general audit
approach); approve estimates of and final fees for such services;
and evaluate the extent to which the provision of services is
consistent with auditor independence;
o annually, obtain and review a report from the independent
auditors describing: the firm's internal quality-control
procedures; any material issues raised by the most recent
internal quality review, or peer review, of the firm, or by any
inquiry or investigation of governmental or professional
authorities, within the preceding five years, respecting any
audit carried out by the firm, and any steps taken to deal with
any such issues; all relationships between the independent
auditors and the Corporation;
34
o annually, review and discuss with the independent auditors all
matters required at the time by (a) Statement on Auditing
Standards (SAS) No. 61 and (b) the written disclosures required
by the Independent Standards Board Standard No. 1 (as either may
be amended, supplemented or superseded) regarding the auditors'
independence;
o prior to the filing of the Corporation's quarterly and annual
financial statements and reports with the SEC, or any other
public release thereof, either acting through the Chair alone or
as a Committee, review key issues presented by such statements
and reports with the independent auditors (for quarterly
information, as required by SAS No. 100 (formerly SAS No. 71), as
it may be amended, supplemented or superseded), including
significant findings prepared by the independent auditors
regarding applicability of accounting principles and practices,
the adequacy of internal control over financial reporting and
disclosure controls and procedures, and receive the independent
auditors' review letter or audit opinion, as applicable, on such
statements and reports;
o quarterly, meet with the independent auditors to review those
matters required at the time by SAS No. 61 (as may be amended,
supplemented or superseded), including all critical accounting
policies and practices, all alternative treatments of financial
information and disclosures within GAAP that have been discussed
with Management, and the ramifications of such alternative
disclosures and treatments, the disclosure or treatment preferred
by the auditors, and other material written communications
between the independent auditors and Management;
o periodically, meet privately with the independent auditors to
review any audit problems, difficulties, significant
disagreements with Management regarding financial statement
presentation or content, and Management's response, and determine
whether the independent auditors have been subject, either
directly or indirectly, to any action to fraudulently influence,
coerce, manipulate or mislead the auditors;
o will set clear hiring policies for employees or former employees
of the independent auditors;
(2) OVERSEE THE ACTIVITIES OF MANAGEMENT IN ITS PREPARATION OF THE
CORPORATION'S FINANCIAL STATEMENTS AND RELATED FINANCIAL DISCLOSURES.
To carry out this responsibility, to the extent it deems appropriate,
the Committee will:
o prior to the filing of the Corporation's quarterly and annual
financial statements and reports with the SEC, or any other
public release thereof, either acting through the Chair alone or
as a Committee, review key issues presented by such statements
and reports with Management, including: (1) disclosures, (2)
MD&A, (3) the adequacy of internal control over financial
reporting and disclosure controls and procedures, and (4) other
information that could significantly affect the quality of such
statements and reports;
o quarterly, review and discuss with Management all critical
accounting policies and estimates identified by Management;
35
o quarterly, review the existence and substance of significant
accruals, reserves or other financial reporting judgments that,
in the opinion of Management or the independent auditors, had or
may have a material impact on the financial statements, and any
significant changes in accounting and financial reporting
standards proposed by the SEC, NYSE, FASB, or other body having
regulatory jurisdiction;
o discuss earnings press releases, as well as any financial
information and earnings guidance provided to analysts and rating
agencies;
o quarterly, discuss CEO and CFO certifications of the
Corporation's financial statements and reports;
o annually, receive and review the Report of Management, assessing
the effectiveness of internal control over financial reporting
and reporting on updates to the Compendium of Internal Controls;
(3) PERIODICALLY REVIEW WITH MANAGEMENT THE AREAS OF GREATEST RISK TO THE
OPERATIONS AND FINANCIAL RESULTS OF THE CORPORATION, such as safety of
operations, environmental regulations, major pending litigation,
matters pertaining to financing costs and credit ratings, tax issues,
any other major financial risks and exposures and the steps Management
has taken or intends to take to manage and control such risks. The
Committee will, to the extent it considers appropriate:
o periodically meet with Management to review such areas of risk
and discuss steps to govern the process by which risk assessment
and management is undertaken by Management;
o oversee activities of the internal audit function including
staffing, training, budget, audit planning and charter, review
significant issues raised by its periodic reports, and
Management's responses, review its responsibilities, authorities
and reporting relationships, and assure the continuing
independence and objectivity of the internal auditors;
o approve decisions regarding the appointment or removal of the
chief audit executive;
o periodically, meet privately with the chief audit executive to
discuss any matters that require confidential and/or discreet
discussion, review and/or handling;
o review with the chief legal officer and other appropriate
Management, legal and regulatory matters that may have a material
impact on the financial statements and the scope and
effectiveness of its compliance policies;
o review, as necessary, with the chief audit executive and other
members of Management as appropriate, the procedures established
for the receipt, retention, and treatment of complaints received,
including confidential, anonymous submissions by employees, or
others, of concerns regarding questionable accounting or auditing
matters, and significant cases of alleged employee conflict of
interest, ethical violations, misconduct, or fraud, the volume
and nature of calls to the "Internal Audit Hotline" and other
matters similar in nature; and
36
o receive annually the results of internal audit reviews of
officers' expense accounts/perquisites and employee
conflict-of-interest questionnaires.
(4) APPROPRIATELY RECORD DELIBERATIONS AND DECISIONS OF THE COMMITTEE AND
REGULARLY REPORT TO THE BOARD THE COMMITTEE'S ACTIVITIES AND
CONCLUSIONS WITH RESPECT TO THE PRINCIPAL MATTERS IT HAS CONSIDERED
and such other items as the Board may request, including (a) the
Committee's review and discussion of the quarterly and annual audited
financial statements with Management and the independent auditor and
its recommendation that the Corporation's audited financial statements
be included in the annual Form 10-K filing with the SEC; (b) any
mandatory report that the Committee has approved for inclusion in a
proxy statement of the Corporation or mandatory affirmation regarding
the independence and qualifications of members of the Committee; (c)
its assessments and conclusions concerning the Committee's annual
review and evaluation of the adequacy of this Charter; and (d) its
assessments and conclusions concerning the Committee's annual
performance evaluation.
37
[Graphic Omitted]
-------------------------------------------------------
TWO MORE WAYS TO VOTE YOUR PROXY
VOTE BY TELEPHONE OR INTERNET
24 HOURS A DAY -- 7 DAYS A WEEK
SAVE YOUR COMPANY MONEY -- IT'S FAST AND CONVENIENT
-------------------------------------------------------
TELEPHONE INTERNET MAIL
--------- -------- ----
1-866-874-4879 https://www.proxyvotenow.com/nsc
o Use any touch-tone telephone. o Go to the website address shown o Mark, sign and date your Proxy
o Have your Proxy Card in hand. above. Card.
o Enter the Control Number located in o Have your Proxy Card in hand. o Detach card from this Form.
the box below. OR o Enter the Control Number located in OR o Return the card in the postage-paid
o Follow the simple recorded the box below. envelope provided.
instructions. o Follow the simple instructions.
Your telephone or Internet vote authorizes the named proxies to vote your
shares in the same manner and to the same extent as if you marked, signed and
returned the proxy card. IF YOU HAVE SUBMITTED YOUR PROXY BY TELEPHONE OR THE
INTERNET, THERE IS NO NEED FOR YOU TO MAIL BACK YOUR PROXY.
-------------------------------
CONTROL NUMBER FOR
TELEPHONE/INTERNET VOTING
-------------------------------
1-866-874-4879
CALL TOLL-FREE TO VOTE
o DETACH PROXY CARD HERE IF YOU ARE NOT VOTING BY TELEPHONE OR INTERNET o
--------------------------------------------------------------------------------
------- X
------- VOTES MUST BE INDICATED
(X) IN BLACK OR BLUE INK.
MANAGEMENT RECOMMENDS A VOTE FOR THE FOLLOWING ITEMS:
1. ELECTION OF DIRECTORS:
Nominees: 1. David R. Goode FOR AGAINST ABSTAIN
2. Steven F. Leer, and 2. Ratification of the appointment of [ ] [ ] [ ]
3. Harold W. Pote KPMG LLP, independent public
accountants, as auditors.
FOR WITHHOLD
ALL [ ] FOR ALL [ ] Exceptions* [ ]
Exceptions
----------------------------------------------
*(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR INDIVIDUAL NOMINEE(S), MARK
THE "EXCEPTIONS" BOX AND WRITE THE NAME(S) ON THE FOLLOWING BLANK LINE; PROXY
WILL BE VOTED FOR REMAINING NOMINEES.)
MANAGEMENT RECOMMENDS A VOTE AGAINST THE FOLLOWING PROPOSAL IF
PROPERLY PRESENTED AT THE ANNUAL MEETING:
3. Stockholder proposal FOR AGAINST ABSTAIN
concerning declassification [ ] [ ] [ ]
of the Board of Directors.
IN ADDITION, IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH
OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
----
|
|
| Please sign exactly as the name appears hereon.
| If stock is held in names of joint owners,
---- both should sign.
-----------------------------------------------
Date | Share Owner sign here | Co-Owner sign here
-----------------------------------------------
Sign, Date and Return the Proxy Card Promptly Using the Enclosed Envelope.
o DETACH PROXY CARD HERE o
--------------------------------------------------------------------------------
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 Gerald L. Baliles, Landon Hilliard or Gene
R. Carter, and each or any of them, proxy for the undersigned, with full 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
Pan American Life Conference Center, 601 Poydras Street, New Orleans, Louisiana,
on Thursday, May 8, 2003, and at any adjournments, postponements or
reschedulings thereof, upon the matters more fully set forth in the Proxy
Statement, dated March 17, 2003, and to transact such other business as properly
may come before such meeting(s).
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, RATIFICATION OF KPMG AS
AUDITORS AND TRANSACTION OF OTHER BUSINESS, AND AGAINST THE LISTED STOCKHOLDER
PROPOSAL.
(Continued, and to be MARKED, DATED AND SIGNED on the other side)
NORFOLK SOUTHERN CORPORATION
P. O. BOX 11145
NEW YORK, N. Y. 10203-0145
To change your address, please mark this box [ ]