UNION PACIFIC CORP

Base Salary

The CEO reviews base salaries and prior year performance and accomplishments for the other NEOs and recommends to the Committee a base salary for the coming year for each. The Committee considers and evaluates these base salary recommendations. Among many considerations, the Committee reviews: (i) the executive’s position and responsibility in the organization, (ii) the executive’s experience and expertise, (iii) Company performance, (iv) individual accomplishments and job performance during the year, (v) Peer Group pay data, (vi) internal benchmarking relative to the Company’s pay structure, and (vii) current salary. In making salary recommendations to the Board of Directors, the Committee exercises subjective judgment in evaluating many factors but applies no specific weights to any factor. The Committee, with input from its compensation consultant, and the Board’s review of CEO performance, assesses and determines the base salary of the CEO for subsequent Board approval based on the same considerations described above.

In February 2023 and 2024, the Committee reviewed each of our NEO’s base salary. Upon review of competitive market data, including our Peer Group, the Committee reviewed and recommended the salary increases shown below. The Board approved the Committee’s recommended salary increases.

2023 Annual Incentive Plan

For 2023, for the NEOs other than Mr. Vena, seventy percent (70%) of the target annual incentive cash bonuses for executives was based on the attainment of pre-established objective Company financial performance goals, twenty percent (20%) was based on a shared set of Company goals in key areas such as safety, customer service, trip plan compliance, market share, employee engagement and renewable fuel blend and ten percent (10%) was based on individual performance. The financial performance goals were equally weighted based on operating income and operating ratio. If the minimum performance thresholds for neither operating income nor operating ratio were achieved, then no annual incentive cash bonus would be paid to executives. For performance that exceeded target levels, the annual incentive plan payout was capped at 200% of target.

When determining individual annual incentive bonus targets for each of the NEOs, the Committee generally targeted the 50th percentile of Target Total Cash Compensation. These individual annual incentive bonus targets for each of the NEOs were approved by the Committee and then recommended to the Board and approved in February of 2023.

2023 Target Total Cash Compensation

Formulaic Component

Annual incentive compensation supports the Committee’s pay-for-performance philosophy and further aligns individual goals with Company goals as set forth in the Company’s annual operating plan. For 2023, the Committee did not change Operating Income and Operating Ratio as the key financial metrics because they are key performance measures in the rail industry and focus our executives’ performance on operating results.

Operating Income

Directly tied to Operating Ratio targets and quantifies our profitability.

Operating Ratio

A key indicator of the Company’s efficiency.

The table below shows the weighted average annual incentive payout for the NEOs given the Company’s 2023 year-end results relative to the Operating Income and Operating Ratio targets approved in February 2023.

Full Year 2023 Annual Incentive Plan Results

Non-Formulaic Component

The non-formulaic component of the 2023 Annual Incentive Plan was divided into two parts: twenty percent (20%) is based on a shared set of strategic goals in key areas such as safety, customer service, trip plan compliance, market share, employee engagement and renewable fuel blend and ten percent (10%) is based on individual performance. We communicated to executives, and the Committee assessed, the individual strategic scorecard items shown below, without assigning particular weighting to any one item.

The Company exceeded its goal of 85% participation in the employee engagement survey with an 89% participation rate and included the Committee’s evaluation of the employee engagement score. The Company also exceeded its goal of 6% biofuel blend, with a biofuel blend of 6.1% in 2023. Our 2023 personal injury rate did not satisfy our expectations, deteriorating year-over-year, while our reportable derailment rate improved 6% from 2022. Our operational performance and many of our operating metrics improved year-over-year. For 2023, car trip plan compliance for both intermodal and manifest/automotive products improved compared to 2022. While market share improved, carload growth and net promoter score fell short of expectations. Based on the Committee’s evaluation of the Company’s achievement of the strategic scorecard items, the Committee awarded this component at 80% of target for each of the NEOs.

The Committee awarded, based on Mr. Vena’s recommendation, the individual executive performance component (10%) at 100% for Ms. Hamann, 100% for Mr. Rocker and 100% for Mr. Gehringer. The Committee awarded Ms. Whited’s individual executive performance component at 100% and Mr. Fritz’s individual executive performance component at 100%.

The table below reflects the aggregate actual performance incentive cash bonus reported for each of the NEOs, other than Mr. Vena, for 2023.

Mr. Vena’s 2023 Annual Incentive Bonus

Upon Mr. Vena’s election as Chief Executive Officer on August 14, 2023, the Committee established his annual target bonus at $2,250,000 which was prorated (in the amount of $937,500) to reflect his partial-year service. Because Mr. Vena commenced employment late in 2023 and did not have input into the performance goals under the 2023 Annual Incentive Plan, the Committee provided that his 2023 annual incentive bonus payout would not be less than his prorated target. After reviewing Mr. Vena’s performance during 2023, the Committee awarded Mr. Vena an annual incentive bonus for 2023 of $1,406,250 which reflects 150% of the pro-rated target. In determining his annual incentive bonus amount, the Committee considered Mr. Vena’s strong start in the CEO role, specifically his results-based leadership that drove meaningful operational improvements which better positions the Company to execute its long-term strategy and vision.

Long-Term Equity Incentive Compensation

The components of our long-term incentive compensation are:

The Committee generally seeks to make long-term incentives the largest element of each NEO’s Target Total Direct Compensation opportunity. In setting the size of long-term incentive awards, the Committee considers the individual performance of the NEO as well as the Total Target Direct Compensation opportunities of similarly situated executives of the Company’s Peer Group and competitive market information from third party compensation surveys. The CEO recommends to the Committee an aggregate value of long-term incentive awards for each of the NEOs other than himself, which is a determination reserved for the Committee, taking into account advice from its compensation consultant and the Board’s evaluation of the CEO. The Committee considers these recommendations and determines the final amounts awarded to each NEO. The Committee may vary the mix of each component of equity compensation to some degree depending on Company and individual performance and retention risk regarding an executive.

The long-term incentive awards granted by the Committee in February 2023 reflected the Committee’s desire to provide long-term incentive compensation to ensure the continued efforts of the NEOs to meet the long-term goals and strategic plans of the Company and to align this element of their compensation with the long-term interests of the Company’s shareholders. The Committee increased Mr. Gehringer’s target long-term incentive award opportunity for 2023 to better align his compensation with the Peer Group and his responsibilities as Executive Vice President-Operations.

The long-term incentive awards for the NEOs and a description of the terms of these awards are set forth on pages 66 and 67 in the Grants of Plan-Based Awards in Fiscal Year 2023 Table and accompanying narrative discussion.

Performance Stock Units

In February 2021, February 2022 and February 2023, the Committee awarded the NEOs performance stock units (PSUs) that are payable based on the attainment and certification of two-thirds (2/3) average annual return on invested capital (ROIC) for a three-year performance period (Performance Period) and one-third (1/3) operating income growth (OIG) over the Performance Period as compared to the OIG of the companies in the S&P 100 Industrials Index and the Class I Railroads. Payout of the 2021, 2022 and 2023 PSUs may be zero if threshold goals are not achieved, or may range from 25% to 200% of the target number of stock units. The threshold, target and maximum number of 2023 PSUs that may be earned by each NEO is set forth on page 66 in the Grants of Plan-Based Awards in Fiscal Year 2023 Table.

We define ROIC as net operating profit after taxes, divided by average invested capital. The Committee may adjust ROIC to reflect the effect of special or strategic transactions or events, such as excluding the impact of significant gains on sales of real estate, tax adjustments, accounting charges, or reclassifications. The Committee selected ROIC because it is one of our key measurements that indicates success in making long-term capital investment decisions that improve financial and operational performance and increase shareholder value. In addition, the Board emphasizes ROIC as a key focus area for the Company.

The ROIC performance criteria are set based on thoughtful analysis of current and projected business levels and changes in the economic environment that may impact the Company’s ability to achieve levels of return reported in previous periods. For PSUs granted in 2023, the Committee recommended Board approval of our ROIC target at 17.0%. The Committee also considered returns commensurate with other Class I railroads and large cap industrial companies.

The Committee selected relative OIG because it aligns with the Company’s objective of profitable growth. The table below summarizes the payout schedule for the relative OIG component of PSUs based on the Company’s operating income growth percentile compared to the OIG of the companies in the S&P 100 Industrials Index and the Class I Railroads for the PSUs granted in 2022 and 2023. Payout will be linearly interpolated for performance between levels.

For PSUs granted in 2021, 2022 and 2023, if the Company does not meet the threshold ROIC and OIG level for the three-year performance period, executives will not earn any performance stock units on that component. The Company does not pay dividend equivalents on unearned performance stock units.

The Committee certified the ROIC results as shown in the graph below for performance years 2021-2023.

In February 2024, the PSUs granted for the 2021-2023 performance period were settled at an overall payout of 126% of target, based on 16.4% average ROIC and 48 th percentile relative OIG for the three-year performance period.

PSUs earned under the 2021 grants for each of the NEOs are included as Earned Performance Stock Units in the Stock Awards column of the Outstanding Equity Awards at 2023 Fiscal Year-End Table on page 68.

The table below summarizes how the PSUs granted in 2021 were earned, and how the performance stock units granted in 2022 and 2023 are tracking as of the end of 2023.