UNION PACIFIC CORP
For the period ended May 8, 2025. Filed Mar 25, 2025.
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May 8, 2025 · Filed Mar 25, 2025
Contents
Elements of Our Executive Compensation Program
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 2024 and 2025, 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.
| NAME | 2023 SALARY | INCREASE FOR 2024 | 2024 SALARY | INCREASE FOR 2025 | 2025 SALARY |
|---|---|---|---|---|---|
| V. James Vena | $1,250,000 | 8.0% | $1,350,000 | 11.1% | $1,500,000 |
| Jennifer L. Hamann | 640,000 | 7.8% | 690,000 | 3.0% | 711,000 |
| Elizabeth F. Whited | 800,000 | 6.3% | 850,000 | — | 850,000 |
| Eric J. Gehringer | 600,000 | 10.0% (1) | 660,000 | 6.1% | 700,000 |
| Kenny G. Rocker | 505,000 | 9.9% (2) | 555,000 | 9.9% (2) | 610,000 |
| (1) | Mr. Gehringer’s 2024 salary was increased to reflect alignment with the Peer Group as well as his increased responsibilities as Executive Vice President – Operations. |
| (2) | Mr. Rocker’s salary increases in both 2024 and 2025 were intended to better align with the Peer Group as Executive Vice President – Marketing & Sales. |
2024 Annual Incentive Plan
For 2024, seventy percent (70%) of the target annual incentive cash bonuses for the NEOs was based on the attainment of pre-established objective Company financial performance goals, ten percent (10%) on the attainment of pre-established safety goals consisting of the reportable personal injury rate (5%) and the reportable derailment rate (5%) and twenty percent (20%) was based on a shared set of non-formulaic Company goals in key areas such as service performance index for intermodal and manifest, net promoter score, volume growth above market, employee engagement and renewable fuel blend. 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 regardless of performance on the other measures. For performance that exceeded target levels, the annual incentive plan payout was capped at 200% of target.
The Committee determined individual annual incentive bonus targets for each of the NEOs such that when added to their base salaries, the resulting Target Total Cash Compensation was generally in the median range of competitive market data. 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 2024.
2024 Target Total Cash Compensation
| NAME | 2024 SALARY | 2024 TARGET BONUS | 2024 TARGET TOTAL CASH COMP |
|---|---|---|---|
| V. James Vena | $1,350,000 | $2,450,000 | $3,800,000 |
| Jennifer L. Hamann | 690,000 | 800,000 | 1,490,000 |
| Elizabeth F. Whited | 850,000 | 1,000,000 | 1,850,000 |
| Eric J. Gehringer | 660,000 | 750,000 | 1,410,000 |
| Kenny G. Rocker | 555,000 | 750,000 | 1,305,000 |
Formulaic Component
Annual incentive compensation supports the Committee’s pay-for-performance philosophy and further aligns individual performance with Company goals as set forth in the Company’s annual operating plan. For 2024, the Committee did not change Operating Income and Operating Ratio as the key financial metrics as they are key performance measures in the rail industry and focus our NEO’s performance on operating results.
The table below shows the weighted average annual incentive payout for the NEOs given the Company’s 2024 year-end results relative to the Operating Income, Operating Ratio, Reportable Personal Injury Rate, and Reportable Derailment Rate targets approved in February 2024.
Full Year 2024 Annual Incentive Plan Results
| Threshold 25% Payout · Target 100% Payout · Maximum 200% Payout · 2024 Plan Results · Performance Achieved Weighted Average Payout | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Company Performance(Formulaic 80%) | Operating Income – 35% | $8,400 | $9,400 | $10,500 | $9,713 | 45% | ||||||
| Operating Ratio – 35% | 64.0% | 62.0% | 60.0% | 60.1%(1) | 68% | |||||||
| Reportable Personal Injury Rate – 5% | 1.17 | 1.11 | 1.05 | 0.90 | 10% | |||||||
| Reportable Derailment Rate – 5% | 2.72 | 2.58 | 2.45 | 2.17 | 10% | |||||||
| Strategic Scorecard(Non-Formulaic 20%) | Strategic Scorecard – 20% | 25% | 100% | 200% | 150% | 30% | ||||||
| (1) | The 2024 Annual Incentive Plan design provides for an adjustment to Operating Ratio for the reported fuel expense and fuel revenue from the actual price to the price assumed in the Board approved financial plan. This adjustment neutralizes the impact of fuel price fluctuations during the year. |
Non-Formulaic Component
The non-formulaic component of the 2024 Annual Incentive Plan provides that twenty percent (20%) of the target annual incentive cash bonuses for the NEOs is based on a shared set of Company goals in key areas such as service performance index for intermodal and manifest, net promoter score, volume growth above market, employee engagement and renewable fuel blend. The Committee assessed the individual strategic scorecard items shown below without assigning a particular weighting to any one item.
| 2024 Strategic Scorecard | |
| Manifest Service Performance Index | Improved Year-Over-Year |
| Intermodal Service Performance Index | Improved Year-Over-Year |
| Net Promoter Score | Exceeded Goal |
| Volume Growth Above Market | Exceeded Goal |
| Employee Engagement | Met Goal |
| Renewable Fuel Blend Percentage | Exceeded Goal |
The Committee considered the following in its evaluation of the above strategic scorecard items:
| • | The Service Performance Index (SPI) for both manifest and intermodal improved compared to 2023. Intermodal SPI improved 2 points in 2024 at the same time international volume unexpectedly surged, and Manifest SPI improved 4 points. |
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| • | Net promoter score improved year-over-year and exceeded the Company’s set goal. |
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| • | Volume growth above market included the Committee’s evaluation of multiple economic indicators compared to carload volume. |
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| • | The Company exceeded its participation goal in the employee engagement survey with an 86% participation rate and included the Committee’s evaluation of the Company’s employee engagement score which improved 5 points compared to 2023. The Company slightly missed its top talent and craft professional retention goals. |
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| • | The Company also exceeded its goal for renewable fuel blend percentage with a 5.2% biofuel blend. |
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Based on the Committee’s evaluation of the Company’s achievement of the strategic scorecard items, the Committee awarded this component at 150% of target for each of the NEOs.
The table below reflects the aggregate actual performance incentive cash bonus reported for each of the NEOs for 2024.
| ACTUAL | ||||||||
|---|---|---|---|---|---|---|---|---|
| NAME | 2024 TARGET BONUS | OPERATING INCOME 35% | OPERATING RATIO 35% | REPORTABLE PERSONAL INJURY RATE 5% | REPORTABLE DERAILMENT RATE 5% | STRATEGIC SCORECARD 20% | 2024 TOTAL ANNUAL INCENTIVE BONUS | 2024 OVERALL PAYOUT (AS A % OF TARGET) |
| V. James Vena | $2,450,000 | $1,101,888 | $1,672,125 | $245,000 | $245,000 | $735,000 | $3,999,013 | 163% |
| Jennifer L. Hamann | 800,000 | 359,800 | 546,000 | 80,000 | 80,000 | 240,000 | 1,305,800 | 163% |
| Elizabeth F. Whited | 1,000,000 | 449,750 | 682,500 | 100,000 | 100,000 | 300,000 | 1,632,250 | 163% |
| Eric J. Gehringer | 750,000 | 337,313 | 511,875 | 75,000 | 75,000 | 225,000 | 1,224,188 | 163% |
| Kenny G. Rocker | 750,000 | 337,313 | 511,875 | 75,000 | 75,000 | 225,000 | 1,224,188 | 163% |
Long-Term Equity Incentive Compensation
The components of our long-term incentive (LTI) compensation are:
Performance Stock Units Performance stock units 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) • 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
Stock Options Stock option awards become fully exercisable if the executive remains an employee through a three-year vesting period. One-third of each stock option grant vests each year over the three-year vesting period.
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 LTI 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 LTI 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 LTI awards granted by the Committee in February 2024 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 Ms. Hamman’s, Mr. Gehringer’s and Mr. Rocker’s target LTI award opportunities for 2024 to incentivize the continued growth of each in their respective roles and to better align their compensation with the competitive market rates. Ms. Whited’s 2024 target LTI award was established in August 2023 upon her promotion to President. Mr. Vena’s 2024 target LTI award was established in August 2023 when he was hired as Chief Executive Officer.
The LTI awards for the NEOs and a description of the terms of these awards are set forth on pages 62 and 63 in the Grants of Plan-Based Awards in Fiscal Year 2024 Table and accompanying narrative discussion.
Performance Stock Units
In February 2022, February 2023 and February 2024, the Committee granted the NEOs performance stock units (PSUs), two-thirds (2/3) of which are payable based on the attainment and certification of average annual return on invested capital (ROIC) for a three-year performance period (Performance Period) and one-third (1/3) of which are payable based on the attainment and certification of our 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 2022, 2023 and 2024 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 2024 PSUs that may be earned by each NEO is set forth on page 62 in the Grants of Plan-Based Awards in Fiscal Year 2024 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 2024, the Committee recommended Board approval of our ROIC target at 15.5%. The Committee also considered returns commensurate with other Class I railroads and large-cap industrial companies.
| PERFORMANCE PERIOD | PERFORMANCE CRITERIA | ROIC THRESHOLD | ROIC TARGET | ROIC MAXIMUM |
|---|---|---|---|---|
| 2022 – 2024 | 2/3 ROIC and 1/3 Relative OIG | 13.0% | 17.0% | 19.5% |
| 2023 – 2025 | 2/3 ROIC and 1/3 Relative OIG | 13.0% | 17.0% | 19.5% |
| 2024 – 2026 | 2/3 ROIC and 1/3 Relative OIG | 12.0% | 15.5% | 18.0% |
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. Payout will be linearly interpolated for performance between levels.
| OPERATING INCOMEGROWTH (PERCENTILE) | PAYOUT(% OF EARNED SHARES) |
|---|---|
| 25% | 25% |
| 50% | 100% |
| 75% | 150% |
| 90% | 200% |
For PSUs granted in 2022, 2023 and 2024, 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. Additionally, if the Company’s absolute annualized OIG for the Performance Period is below 2%, the payout on this component is capped at 100% of target.
The Committee certified the ROIC results as shown in the graph below for performance years 2022-2024.
| * | ROIC is not considered a financial measure under GAAP by SEC Regulation G and Item 10 of SEC Regulation S-K and may not be defined and calculated by other companies in the same manner. For a reconciliation to GAAP, please see Item 7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2024. |
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In February 2025, the PSUs granted for the 2022-2024 performance period were settled at an overall payout of 90% of target. Three-year average ROIC was 16.2%, resulting in an 85% of target payout for two-thirds (2/3) of the award. Relative OIG was 65th percentile for the Performance Period, which would have resulted in payout of 130% of target for one-third (1/3) of the award, but because our absolute OIG was below 2%, this component was capped at 100% of target. The resulting weighted payout was 90% of target.
PSUs earned under the 2022 grants for each of the NEOs are included as Earned Performance Stock Units in the Stock Awards column of the Outstanding Equity Awards at 2024 Fiscal Year-End Table on page 65.
The table below summarizes how the PSUs granted in 2022 were earned, and how the performance stock units granted in 2023 and 2024 are tracking as of the end of 2024.
| PERFORMANCE PERIOD | AVERAGE ROIC | RELATIVE OPERATING INCOME GROWTH (PERCENTILE RANK) | PERCENT OF TARGET ACHIEVED TO DATE | PERCENT OF TARGET EARNED |
|---|---|---|---|---|
| 2022 – 2024 | 16.2% | 65th | 90% | 90% of the target number of stock units |
| 2023 – 2025 | 15.7% | 52nd | N/A | No stock units earned until the end of the performance period |
| 2024 – 2026 | 16.0% | 59th | N/A | No stock units earned until the end of the performance period |
The text of this filing, as the company filed it with the SEC, without its images or exhibits. This is not investment advice.