NORFOLK SOUTHERN CORPNSC
NORFOLK SOUTHERN CORP Stock Compensation Disclosure
Stock-Based Compensation
Under the stockholder-approved LTIP, the Human Capital Management and Compensation Committee (Committee), which is made up of nonemployee members of the Board, or the Chief Executive Officer (when delegated authority by such Committee), may grant stock options, stock appreciation rights (SARs), restricted stock units (RSUs), restricted shares, performance share units (PSUs), and performance shares, up to a maximum of 104,125,000 shares of our Common Stock, of which 6,942,153 remain available for future grants as of December 31, 2025.
The number of shares remaining for issuance under the LTIP is reduced (i) by 1 for each award granted as a stock option or stock-settled SAR, or (ii) by 1.61 for an award made in the form other than a stock option or stock-settled SAR. Under the Board-approved Thoroughbred Stock Option Plan (TSOP), the Committee may grant stock options up to a maximum of 6,000,000 shares of Common Stock. We use newly issued shares to satisfy any exercises and awards under the LTIP and the TSOP.
The LTIP also permits the payment, on a current or a deferred basis and in cash or in stock, of dividend equivalents on shares of Common Stock covered by stock options, RSUs, or PSUs in an amount commensurate with regular quarterly dividends paid on Common Stock. With respect to stock options, if employment of the participant is terminated for any reason, including retirement, disability, or death, we have no further obligation to make any dividend equivalent payments. Regarding RSUs, we have no further obligation to make any dividend equivalent payments unless employment of the participant is terminated as a result of qualifying retirement or disability. Should an employee terminate employment, they are not required to forfeit dividend equivalent payments already received. Outstanding PSUs do not receive dividend equivalent payments.
The Committee granted stock options, RSUs, and PSUs pursuant to the LTIP for the last three years as follows:
| 2025 | 2024 | 2023 | |||||||||||||||||||||||||||||||||
| Granted | Weighted- Average Grant-Date Fair Value | Granted | Weighted- Average Grant-Date Fair Value | Granted | Weighted- Average Grant-Date Fair Value | ||||||||||||||||||||||||||||||
| Stock options | 80,067 | $ | 87.33 | 107,620 | $ | 77.38 | 69,580 | $ | 77.60 | ||||||||||||||||||||||||||
| RSUs | 205,871 | 256.22 | 280,111 | 238.28 | 214,936 | 230.12 | |||||||||||||||||||||||||||||
| PSUs | 66,636 | 296.61 | 64,990 | 258.60 | 59,200 | 236.16 | |||||||||||||||||||||||||||||
Recipients of certain RSUs and PSUs pursuant to the LTIP who retire prior to December 31st will forfeit a portion of awards received in the current year. Receipt of certain LTIP awards is contingent on the recipient having executed a non-compete agreement with the company. Forfeitures are recognized as they occur.
We account for our grants of stock options, RSUs, PSUs, and dividend equivalent payments in accordance with FASB ASC 718, “Compensation - Stock Compensation.” Accordingly, all awards result in charges to net income while dividend equivalent payments, which are all related to equity classified awards, are charged to retained income. Compensation cost for the awards is recognized on a straight-line basis over the requisite service period for the entire award. Related compensation costs and tax benefits during the years were:
| 2025 | 2024 | 2023 | |||||||||||||||
| ($ in millions) | |||||||||||||||||
| Stock-based compensation expense | $ | 63 | $ | 40 | $ | 40 | |||||||||||
| Total tax benefit | 16 | 11 | 15 | ||||||||||||||
Stock Options
Option exercise prices will be at least the higher of (i) the average of the high and low prices at which Common Stock is traded on the grant date, or (ii) the closing price of Common Stock on the grant date. All options are subject to a vesting period of at least one year, and the term of the option will not exceed ten years. Holders of the options granted under the LTIP who remain actively employed receive cash dividend equivalent payments for or four years in an amount equal to the regular quarterly dividends paid on Common Stock.
For all years prior to 2024, options granted under the LTIP and the TSOP may not be exercised prior to the fourth and third anniversaries of the date of grant, respectively, or if the optionee retires or dies before that anniversary date, may not be exercised before the later of one year after the grant date or the date of the optionee’s retirement or death. Beginning in 2024, a prorated portion of the total LTIP award will vest on the first anniversary of the grant date continuing annually through the fourth anniversary of the grant date.
The fair value of each option awarded was measured on the date of grant using the Black-Scholes valuation model. Expected volatility is based on implied volatility from traded options on, and historical volatility of, Common Stock. Historical data is used to estimate option exercises and employee terminations within the valuation model. Historical exercise data is used to estimate the average expected option term. The average risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant. A dividend yield of zero was used for the LTIP options during the vesting period. For 2025, 2024, and 2023, a dividend yield of 2.10%, 2.25%, and 2.24%, respectively, was used for the vested period during the remaining expected option term for LTIP options.
The assumptions for the LTIP grants for the last three years are shown in the following table:
| 2025 | 2024 | 2023 | |||||||||||||||
| Average expected volatility | 29 | % | 28 | % | 27 | % | |||||||||||
| Average risk-free interest rate | 4.39 | % | 3.93 | % | 3.54 | % | |||||||||||
| Average expected option term | 6.5 years | 6.7 years | 7.0 years | ||||||||||||||
A summary of changes in stock options is presented below:
| Stock Options | Weighted- Average Exercise Price | ||||||||||
| Outstanding at December 31, 2024 | 372,664 | $ | 179.14 | ||||||||
| Granted | 80,067 | 257.26 | |||||||||
| Exercised | (140,819) | 119.62 | |||||||||
| Forfeited | (40) | 104.23 | |||||||||
| Outstanding at December 31, 2025 | 311,872 | 226.08 | |||||||||
The aggregate intrinsic value of options outstanding at December 31, 2025 was $20 million with a weighted-average remaining contractual term of 6.1 years. Of these options outstanding, 152,877 were exercisable and had an aggregate intrinsic value of $15 million with a weighted-average exercise price of $194.51 and a weighted-average remaining contractual term of 3.8 years.
The following table provides information related to options exercised for the last three years:
| 2025 | 2024 | 2023 | |||||||||||||||
| ($ in millions) | |||||||||||||||||
| Options exercised | 140,819 | 348,533 | 206,016 | ||||||||||||||
| Total intrinsic value | $ | 20 | $ | 46 | $ | 27 | |||||||||||
| Cash received upon exercise | 17 | 41 | 19 | ||||||||||||||
| Related tax benefits realized | 4 | 8 | 6 | ||||||||||||||
At December 31, 2025, total unrecognized compensation related to options granted under the LTIP was $4 million, and is expected to be recognized over a weighted-average period of approximately 2.1 years.
Restricted Stock Units
RSUs granted primarily have - and four-year ratable restriction periods and will be settled through the issuance of shares of Common Stock. Certain RSU grants include cash dividend equivalent payments during the restriction period in an amount equal to regular quarterly dividends paid on Common Stock. The fair value of each RSU was measured on the date of grant as the average of the high and low prices at which Common Stock is traded on the grant date, adjusted for the impact of dividend equivalent payments as applicable.
| 2025 | 2024 | 2023 | |||||||||||||||
| ($ in millions) | |||||||||||||||||
| RSUs vested | 183,396 | 171,620 | 157,417 | ||||||||||||||
| Common Stock issued net of tax withholding | 127,310 | 118,365 | 110,069 | ||||||||||||||
| Related tax benefits realized | $ | 1 | $ | 1 | $ | 1 | |||||||||||
A summary of changes in RSUs is presented below:
| RSUs | Weighted- Average Grant-Date Fair Value | ||||||||||
| Nonvested at December 31, 2024 | 468,869 | $ | 240.80 | ||||||||
| Granted | 205,871 | 256.22 | |||||||||
| Vested | (183,396) | 242.47 | |||||||||
| Forfeited | (7,863) | 242.04 | |||||||||
| Nonvested at December 31, 2025 | 483,481 | 246.71 | |||||||||
At December 31, 2025, total unrecognized compensation related to RSUs was $51 million and is expected to be recognized over a weighted-average period of approximately 1.9 years.
Performance Share Units
PSUs provide for awards based on the achievement of certain predetermined corporate performance goals at the end of a three-year cycle and are settled through the issuance of shares of Common Stock. All PSUs will earn out based on the achievement of performance conditions and some will also earn out based on a market condition. The market condition fair value was measured on the date of grant using a Monte Carlo simulation model.
| 2025 | 2024 | 2023 | |||||||||||||||
| ($ in millions) | |||||||||||||||||
| PSUs earned | 8,540 | 41,580 | 58,599 | ||||||||||||||
| Common Stock issued net of tax withholding | 5,633 | 26,056 | 40,255 | ||||||||||||||
| Related tax benefits realized | $ | — | $ | — | $ | — | |||||||||||
A summary of changes in PSUs is presented below:
| PSUs | Weighted- Average Grant-Date Fair Value | ||||||||||
| Balance at December 31, 2024 | 75,024 | $ | 256.08 | ||||||||
| Granted | 66,636 | 296.61 | |||||||||
| Earned | (8,540) | 274.26 | |||||||||
| Unearned | (14,232) | 274.26 | |||||||||
| Balance at December 31, 2025 | 118,888 | 275.32 | |||||||||
At December 31, 2025, total unrecognized compensation related to PSUs granted under the LTIP was $6 million and is expected to be recognized over a weighted-average period of approximately 1.9 years.
Shares Available and Issued
Shares of Common Stock available for future grants and issued in connection with all features of the LTIP and the TSOP at December 31, were as follows:
| 2025 | 2024 | 2023 | |||||||||||||||
| Available for future grants: | |||||||||||||||||
| LTIP | 6,942,153 | 7,438,613 | 7,731,573 | ||||||||||||||
| TSOP | 437,746 | 437,746 | 436,571 | ||||||||||||||
| Shares issued during the year: | |||||||||||||||||
| LTIP | 236,986 | 444,189 | 315,700 | ||||||||||||||
| TSOP | 36,776 | 48,765 | 40,640 | ||||||||||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 9, 2026 | Showing above |
| 2024 | Feb 10, 2025 | |
| 2023 | Feb 5, 2024 | |
| 2022 | Feb 3, 2023 | |
| 2021 | Feb 4, 2022 | |
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.