DEF 14A 1 nc10019842x1_def14a.htm DEF 14A

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No.  )
Filed by the Registrant ☒
Filed by a Party other than the Registrant 
Check the appropriate box:
 Preliminary Proxy Statement
Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
☒ Definitive Proxy Statement
 Definitive Additional Materials
 Soliciting Material Pursuant to §240.14a-12
UNION PACIFIC 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):
No fee required.
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1)
Title of each class of securities to which the transaction applies:
(2)
Aggregate number of securities to which the transaction applies:
(3)
Per unit price or other underlying value of the 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 the 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:

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Union Pacific Corporation
1400 Douglas Street, 19th Floor
Omaha, NE 68179
March 31, 2021
NOTICE OF
ANNUAL MEETING OF SHAREHOLDERS
To Shareholders:
The 2021 Annual Meeting of Shareholders (the Annual Meeting) of Union Pacific Corporation (the Company) will be held at 8:00 A.M., Central Daylight Time, on Thursday, May 13, 2021 via live audio webcast at www.virtualshareholdermeeting.com/UNP2021 for the following purposes:
(1)
To elect the ten directors named in the Proxy Statement, each to serve for a term of one year or until his or her successor is elected and qualified;
(2)
To ratify the appointment of Deloitte & Touche LLP as the independent registered public accounting firm of the Company for 2021;
(3)
To approve, by non-binding vote, the compensation of the Company’s Named Executive Officers;
(4)
To adopt the Union Pacific Corporation 2021 Stock Incentive Plan;
(5)
To adopt the Union Pacific Corporation 2021 Employee Stock Purchase Plan;
(6)
To consider and vote upon three shareholder proposals if properly presented at the Annual Meeting; and
(7)
To transact such other businesses as may properly come before the Annual Meeting.
Only shareholders of record at the close of business on March 16, 2021, are entitled to notice of, and to vote at, the Annual Meeting.
As part of our precautions regarding the COVID-19 pandemic, the Annual Meeting is being held solely by means of remote communication. You may listen to the live audio webcast of the Annual Meeting via the Internet at www.virtualshareholdermeeting.com/UNP2021. Instructions on how to participate in the Annual Meeting via live audio webcast are described in the accompanying proxy statement and posted at www.virtualshareholdermeeting.com/UNP2021.
Your vote is very important. New York Stock Exchange rules provide that if your shares are held by a broker, your broker will NOT be able to vote your shares on most matters presented at the Annual Meeting, including the election of directors, unless you provide voting instructions to your broker. We strongly encourage you to submit your proxy card to your broker or utilize your broker’s telephone or internet voting services (if available) and exercise your right to vote as a shareholder

Craig V. Richardson
Executive Vice President,
Chief Legal Officer and
Corporate Secretary

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UNION PACIFIC CORPORATION
PROXY STATEMENT
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PROXY SUMMARY
This summary highlights information contained elsewhere in this Proxy Statement. This summary does not contain all of the information that you should consider. You should read the entire Proxy Statement carefully before voting.
Meeting Information and Availability of Proxy Materials

Date and Time:
May 13, 2021, at 8:00 A.M., Central Daylight Time

Place*:
Via live audio webcast at
www.virtualshareholdermeeting.com/UNP2021

Record Date:
March 16, 2021
How to Vote
We encourage you to vote in advance of the meeting. You may vote using one of the following voting methods. Make sure to have your proxy card or voting instruction form in hand and follow the instructions. Participants in Union Pacific’s thrift and retirement plans who hold Company stock through such plans will receive separate voting instructions. You can vote in one of three ways:

RECORD HOLDERS
t
Voting Matters and Board Recommendations


Matter
Our Board’s
Recommendations
Vote via the Internet
 Go to www.proxyvote.com
Proposal 1
Election of ten (10) Director Nominees (page 9)
FOR Each Director Nominee
Vote by telephone
 Call toll free 1-800-690-6903 within the USA,
   US territories & Canada
Vote by mail
 Complete, sign, date and return your proxy card
   in the envelope provided
BENEFICIAL OWNERS
Follow the instructions set forth on the Notice of Internet Availability of Proxy Materials or the voting instruction form provided by your broker with these proxy materials.
Proposal 2
Ratification of Appointment of Deloitte & Touche LLP as Independent Registered Public Accounting Firm for 2021 (page 38)
FOR
Proposal 3
Advisory Vote to Approve Executive Compensation (page 41)
FOR
Proposal 4
Adoption of the Union Pacific Corporation 2021 Stock Incentive Plan (page 42)
FOR
Proposal 5
Adoption of the Union Pacific Corporation 2021 Employee
Stock Purchase Plan (page 48)
FOR
Proposal 6
Shareholder Proposal Requesting EEO-1 Report Disclosure (page 91)
AGAINST
Proposal 7
Shareholder Proposal Requesting Annual Diversity and Inclusion Efforts Report (page 95)
AGAINST
Proposal 8
Shareholder Proposal Requesting Annual Emissions Reduction Plan & Annual Advisory Vote on Emissions Reduction Plan (page 99)
AGAINST
*
As part of our precautions regarding the COVID-19 pandemic, the Annual Meeting will be held solely by means of remote communication.
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PROXY SUMMARY
Company Performance Highlights
The year 2020 was marked by uncertainty as the Company adapted to the changing economic landscape brought about by the COVID-19 pandemic. The pandemic caused a dramatic economic slowdown and disrupted supply chains between Asia and the United States driving declines in intermodal shipments. Volume declined in almost every market segment due to the deteriorating economic conditions brought on by the COVID-19 pandemic. Our freight revenues decreased 10% year-over-year driven primarily by a volume decline of 7%. Although the environment we operated in changed due to COVID-19, we continued our operational transformation. This was evident as our key performance indicators improved substantially year-over-year. Highlights of the Company’s 2020 operational and financial performance include:

For the full year 2020, net income was $5.3 billion or $7.88 per diluted share. Excluding the effects of the $278 million one-time non-cash impairment charge related to the Company’s Brazos yard investment, adjusted full year net income was $5.6 billion, or $8.19 per diluted share compared to $5.9 billion, or $8.38 per diluted share, in 2019*

Despite the challenges presented by COVID-19, our operational transformation produced a full-year operating ratio of 59.9% and when adjusted for the impairment charge was a best-ever 58.5%*

Substantial improvement in key performance indicators year-over-year. For example, transportation plan changes to eliminate switches and improved terminal processes drove an 8% improvement in freight car terminal dwell. Improved dwell coupled with 3% faster average train speed led to a 6% improvement in freight car velocity

14% improvement in locomotive productivity and 11% improvement in work force productivity
*
2020 adjusted to exclude the impact of the Brazos one-time non-cash impairment charge. See Appendix A for a reconciliation to GAAP.
Governance Highlights
The Company’s commitment to strong corporate governance, effective risk management and strong independent oversight of management by the Board is reflected in our sound governance practices and policies. Governance Highlights include:

Board Composed of 90% Independent Directors (9 out of 10 Board Nominees)

Commitment to Board Refreshment (Four New Diverse Directors in Past Five Years, 36% of current composition, three of which are director nominees)

Annual Election of Directors with Majority Voting Standard

Four Diverse Board Members/Nominees for Re-Election (40%)

Average Board Tenure of 7.9 years with current Board Nominees

“Proxy Access” Right

Active Lead Independent Director

Executive Sessions of Independent Directors at each Board and Committee Meeting

Board Strategic Oversight and review of Enterprise Risk Management

Four Fully Independent Board Committees

Stringent Director and Executive Officer Stock Ownership Guidelines (7x Annual Salary for CEO and 4x Annual Salary for other Named Executive Officers)

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PROXY SUMMARY
Shareholder Outreach
We were encouraged with the results of our say-on-pay vote at our 2020 Annual Meeting of Shareholders as we received shareholder support of 95% for our executive compensation program. We believe that the executive compensation decisions made in 2020 together with the revisions we made in prior years benefit shareholders and continue to align with our strategy and pay-for-performance philosophy.
In 2020, as part of our regular shareholder engagement, management participated in 18 investor conferences, over 90 virtual investor meetings, and hosted more than 350 conference calls with analysts and investors. Our Investor Relations team regularly meets with investors and investment analysts and our head of Investor Relations communicates topics discussed and shareholder feedback to senior management and the Board for consideration in their decision-making.
We engaged in dialogue with holders of more than 55% of our total shares outstanding, and we engaged with 67% of our top 100 investors which represent approximately 60% of our total shares outstanding. We engaged with investors on various topics, including:
Company performance
Sustainability
Succession planning and governance
Human capital management, including diversity and inclusion
Shareholder proposals
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PROXY SUMMARY
Executive Compensation Highlights

In response to declining volumes as a result of the COVID-19 pandemic, on April 17, 2020, the Board approved a 25% reduction in base salary for each of the NEOs for the months of May, June, July and August 2020. As freight traffic began to rebound in the third quarter of 2020, the Board discontinued the 25% reduction to base salary for each of the NEOs, except for Mr. Fritz, for the month of August

In 2020, 76% of the target compensation opportunity provided to Mr. Fritz and 63% of the target compensation opportunity provided to the rest of the NEOs was in the form of long-term incentive equity awards

2020 long-term incentive awards granted in February consisted of 60% performance stock units and 40% stock options

Performance stock unit awards granted in 2020 are subject to a 3-year average ROIC and a relative Operating Income Growth modifier (+/-25% of the award earned based on ROIC, depending on our Operating Income Growth compared to companies in the S&P 500 Industrials Index)

In 2020 our executives participated for the third year in our formula-based annual incentive plan where eighty percent (80%) of annual incentive cash bonuses paid to our executives, including the named executive officers (NEOs), was based on the attainment of specified Company financial performance goals (equally weighted between operating income and operating ratio), and the remaining (20%) was based on the Company’s performance against pre-established business objectives and individual executive performance

Under our formula-based annual incentive plan, performance for 2020 resulted in a payment between 75% and 80% of target for four of the five NEOs after the Compensation and Benefits Committee’s following adjustments:

(i) exclusion of the second quarter due to the significant and unforeseen impact of the COVID-19 pandemic on freight revenue and volumes, (ii) exclusion of the one-time non-cash impairment charge related to the Company’s Brazos yard investment, and (iii) exclusion of insurance proceeds received in 2020 as a result of 2019 weather events.

These adjustments are set forth beginning on page 62 of the Compensation Discussion and Analysis (CD&A)

Upon recommendation of the Compensation and Benefits Committee, Mr. Vena received an annual incentive bonus for 2020 at 100% of target based upon his critical role implementing Unified Plan 2020 and spearheading the Company’s operational transformation

The Compensation and Benefits Committee also recommended, and the Board approved, vesting of the second tranche of Mr. Vena’s 2019 equity award at 100% of target and vesting of the first tranche of his 2020 equity award at 100% of target

Based on our three-year average return on invested capital (ROIC) of 14.6% and our relative Operating Income Growth at the 42nd percentile, performance stock units for the three-year performance period (2018-2020) ending in 2020 vested at 95% of target

The compensation earned in 2020 by Mr. Fritz and the other NEOs, as described in the CD&A section of this Proxy Statement, reflects our policy of having a significant portion of our executives’ compensation tied to annual and long-term Company performance
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UNION PACIFIC CORPORATION
1400 Douglas Street, 19th Floor
Omaha, NE 68179

PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 13, 2021
INFORMATION ABOUT THE ANNUAL MEETING, VOTING AND PROXIES
Important Notice Regarding the Availability of Proxy
Materials for the Shareholder Meeting to Be Held on May 13, 2021
This Proxy Statement and our 2020 Annual Report on Form 10-K are available at www.up.com under the “Investors” caption link by selecting “Annual Reports/Form 10-Ks and Proxy Statements” www.up.com/investors/annuals/index/shtml.
Shareholders may also request a copy of this Proxy Statement and our 2020 Annual Report
on Form 10-K by emailing investor.relations@up.com or by calling (402) 544-4939.
Date, Time and Place of Meeting
This Proxy Statement is being furnished to shareholders of Union Pacific Corporation (the Company) in connection with the solicitation of proxies by the Board of Directors of the Company (the Board) for use in voting at the Annual Meeting of Shareholders or any adjournment or postponement thereof (the Annual Meeting). The Annual Meeting will be held on Thursday, May 13, 2021, at 8:00 A.M., Central Daylight Time, via live audio webcast at www.virtualshareholdermeeting.com/UNP2021. This Proxy Statement and the accompanying proxy card are being distributed and made available to shareholders of the Company on or about March 31, 2021. As part of our precautions regarding the COVID-19 pandemic, the Annual Meeting is being held solely by means of remote communication.
Record Date, Outstanding Shares and Quorum
Only holders of record of the Company’s common stock at the close of business on March 16, 2021 (the Record Date), will be entitled to vote at the Annual Meeting. On the Record Date, we had 666,704,113 shares of common stock outstanding and entitled to vote. If a majority of the shares outstanding on the Record Date are present and entitled to vote on any matter at the Annual Meeting, we will have a quorum at the Annual Meeting. Any shares represented by proxies that are marked for, against or to abstain from voting on a proposal will be counted as present for the purpose of determining whether there is a quorum.
Internet Availability of Proxy Materials
Again this year, we are using the Securities and Exchange Commission (SEC) rule that allows companies to furnish their proxy materials over the Internet. As a result, we are mailing a Notice of Internet Availability of Proxy Materials instead of a paper copy of the proxy materials. All shareholders receiving the notice will have the ability to access the proxy materials over the Internet and may request to receive a paper copy of the proxy materials by mail. Instructions on how to access the proxy materials over the Internet or to request a paper copy may be found in the Notice of Internet Availability of Proxy Materials. In addition, the notice contains information on how you may request access to proxy materials in printed form by mail or electronically on an ongoing basis.
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INFORMATION ABOUT THE ANNUAL MEETING, VOTING AND PROXIES
Accessing Proxy Materials over the Internet
Your Notice of Internet Availability of Proxy Materials, proxy card or voting instruction card will contain instructions on how to:
View our proxy materials for the Annual Meeting on the Internet; and
Instruct us to send our future proxy materials to you electronically by email or the Internet.
Our proxy materials will be available during the voting period at www.proxyvote.com. From this website, you also will be able to vote prior to the Annual Meeting. To access this website, you will need your 16-digit control number included on your Notice of Internet Availability of Proxy Materials, on your proxy card or on the instructions that accompanied your proxy materials.
Your Notice of Internet Availability, proxy card or voting instruction card will contain instructions on how you may request proxy materials electronically on an ongoing basis. Choosing to access your future proxy materials electronically will help us conserve natural resources and reduce the costs of distributing our proxy materials.
Voting Rights
Holders of our common stock are entitled to one vote for each full share held as of the Record Date.
Under Proposal Number 1, directors will be elected by a majority of the votes cast by the shares of common stock present at the Annual Meeting (either in person or by proxy) and entitled to vote on the election of directors, which means that a nominee will be elected if he or she receives more “for” votes than “against” votes. Pursuant to Section 9 of Article I of the Company’s By-Laws and applicable laws of the State of Utah, a nominee who does not receive more “for” votes than “against” votes will be elected to a shortened term expiring on the earlier of: (i) 90 days after the day on which the Company certifies the voting results; or (ii) the day on which a person is selected by the Board to fill the office held by the director.
Approval of Proposal Number 2 (ratification of the appointment of the independent registered public accounting firm), Proposal Number 3 (advisory vote to approve executive compensation), Proposal 4 (adoption of the 2021 Stock Incentive Plan), Proposal 5 (adoption of the 2021 Employee Stock Purchase Plan), Proposal Number 6 (shareholder proposal requesting EEO-1 Report Disclosure), Proposal Number 7 (shareholder proposal requesting Annual Diversity and Inclusion Efforts Report) and Proposal Number 8 (shareholder proposal requesting Annual Emissions Reduction Plan & Annual Advisory Vote on Emissions Reduction Plan) requires the affirmative vote of a majority of the votes cast on the proposal (either in person or by proxy).
If your shares are held in street name (that is, through a broker, bank, trustee, nominee or other holder of record), you are considered a beneficial owner of those shares. As the beneficial owner of those shares, you have the right to direct your broker, bank or nominee how to vote. If you do not provide voting instructions to your broker in advance of the Annual Meeting, New York Stock Exchange (NYSE) rules grant your broker discretionary authority to vote on the ratification of the independent registered accounting firm in Proposal Number 2. If you do not provide voting instructions, your broker will not have discretion to vote your shares on Proposal Numbers 1, 3 ,4, 5, 6, 7 and 8 resulting in what is referred to as broker non-votes on those matters.
The Board recommends that you vote FOR each of the nominees in Proposal Number 1, FOR Proposal Numbers 2, 3, 4 and 5 and AGAINST Proposal Numbers 6, 7 and 8.
In accordance with Utah law, abstentions and broker non-votes are not treated as votes cast and, therefore, are not counted in determining which directors are elected under Proposal Number 1 and which matters are approved under Proposal Numbers 2, 3, 4 and 5 and Proposals 6, 7 and 8. In addition, to satisfy NYSE shareholder approval rules, abstentions are counted in the denominator for determining the total votes cast on Proposal Numbers 4 and 5.
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INFORMATION ABOUT THE ANNUAL MEETING, VOTING AND PROXIES
Solicitation and Voting of Proxies
Whether you hold shares directly as a shareholder of record or in street name (that is, through a broker, bank, trustee, nominee or other holder of record), you may direct how your shares are voted without participating in the Annual Meeting. There are three ways to vote by proxy:
Via the Internet — Shareholders who have received a Notice of Internet Availability of Proxy Materials by mail may submit proxies over the Internet by following the instructions on the notice. Shareholders who have received proxy materials by email may submit proxies over the Internet by following the instructions included in the email. Shareholders who have received a paper copy of a proxy card or voting instruction card by mail may submit proxies over the Internet by following the instructions on the proxy card or voting instruction card.
By Telephone — Shareholders who live in the United States or Canada may submit proxies by telephone by calling 1-800-690-6903 and following the instructions. Shareholders of record who have received a Notice of Internet Availability of Proxy Materials by mail must have the control number that appears on their notice available when voting. Shareholders of record who have received a proxy card by mail must have the control number that appears on their proxy card available when voting. Shareholders who hold shares in street name who have received proxy materials by email must have the control number included in the email available when voting.
By Mail — Shareholders who have received a paper copy of a proxy card or voting instruction card by mail may submit proxies by completing, signing and dating their proxy card or voting instruction card and mailing it in the accompanying pre-addressed envelope.
If you sign and return your proxy card but do not give any voting instructions, your shares will be voted “FOR” the election of each of the director nominees listed in Proposal Number 1 below, “FOR” Proposal Number 2, “FOR” Proposal Number 3, “FOR” Proposal Number 4, “FOR” Proposal Number 5, “AGAINST” Proposal Number 6, “AGAINST” Proposal Number 7 and “AGAINST” Proposal Number 8. To our knowledge, no other matters will be presented at the Annual Meeting. However, if any other matters of business are properly presented, the proxy holders named on the proxy card are authorized to vote the shares represented by proxies according to their judgment.
Confidential Voting Policy
The Board maintains a confidential voting policy pursuant to which Broadridge Financial Services, Inc. (Broadridge) receives shareholder proxies or voting instructions, and representatives of Broadridge, serving as independent inspectors of election, certify the vote. Proxies, as well as telephone and Internet voting instructions, will be kept confidential from management (except in certain cases where it may be necessary to meet legal requirements, including a contested proxy solicitation or where a shareholder writes comments on the proxy card). Reports concerning the vote may be made available to the Company, provided such reports do not reveal the vote of any particular shareholder.
Revocation of Proxies
After you submit your proxy you may revoke it at any time before voting takes place at the Annual Meeting. You can revoke your proxy in two ways: (i) deliver to the Secretary of the Company a written notice, dated later than the proxy you want to revoke, stating that the proxy is revoked or (ii) submit new telephone or Internet instructions or deliver a validly executed later-dated proxy. For this purpose, communications to the Secretary of the Company should be addressed to 1400 Douglas Street, 19th Floor, Omaha, Nebraska 68179 and must be received before the time that the proxy you wish to revoke is voted at the Annual Meeting. Please note that if your shares are held in street name (that is, a broker, bank, trustee, or nominee or other holder of record holds your shares on your behalf) and you wish to revoke a previously granted proxy, you must contact that entity and submit new voting instructions to your broker, bank, trustee, nominee or other holder of record. You may also revoke your proxy by attending and voting during the Annual Meeting before the polls are closed.
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INFORMATION ABOUT THE ANNUAL MEETING, VOTING AND PROXIES
Expenses of Solicitation
The Company will pay the entire cost of preparing, printing, mailing and distributing the notices and proxy materials and soliciting votes. In addition to the mailing of the notices and proxy materials, proxies may be solicited by personal interview, telephone and electronic communication by the directors, officers and employees of the Company acting without special compensation. We also make arrangements with brokerage houses and other custodians, nominees and fiduciaries for the forwarding of solicitation material to the street name holders of shares held of record by such individuals, and the Company will reimburse such custodians, nominees and fiduciaries for reasonable out-of-pocket expenses incurred by them in connection with such solicitation. In addition, the Company engaged Morrow Sodali, LLC, 470 West Avenue, Stamford, CT 06902, to solicit proxies on its behalf. The anticipated fees of Morrow Sodali LLC are $17,500, plus certain other customary fees and expenses.
Attending the Annual Meeting
This year’s Annual Meeting is being held solely by means of remote communication, and shareholders may not physically attend the meeting. Shareholders of record as of the record date may attend, participate in, vote at, and listen to the Annual Meeting via live audio webcast via the Internet at www.virtualshareholdermeeting.com/UNP2021 when you enter your 16-digit control number included on your Notice of Internet Availability of Proxy Materials, on your proxy card or on the instructions that accompanied your proxy materials. Instructions on how to access the Annual Meeting via the live audio webcast are posted at www.virtualshareholdermeeting.com/UNP2021. If your shares are held in street name and your voting instruction form or Notice of Internet Availability of Proxy Materials indicates that you may vote those shares through the www.proxyvote.com website, then you may access, participate in, and vote at the Annual Meeting with the 16-digit control number indicated on that voting instruction form or Notice of Internet Availability of Proxy Materials. Otherwise, shareholders who hold their shares in street name should contract their bank, broker, or other nominee (preferably at least 5 days before the Annual Meeting) and obtain a “legal proxy” in order to be able to attend, participate in, or vote at the Annual Meeting.
Access to the meeting will begin approximately 15 minutes before the scheduled meeting time, and you are encouraged to log on early to test your access. If you have technical problems accessing the annual meeting, you may contact the technical support number that will be posted on the virtual shareholder meeting log-in page. Shareholders will be provided an opportunity to ask questions in advance of and during the Annual Meeting. We will only respond to questions that relate to the Company or the matters being presented at the Annual Meeting, and that otherwise comply with the rules of conduct that will be posted on the Annual Meeting website. We may group similar questions together and present a combined response. In the event that we are not able to respond to all proper questions that are submitted during the meeting, we will post responses on our Investor Relations website as soon as practical following the Annual Meeting. In addition, a replay of the Annual Meeting will be available on our Investor Relations website.
Information Regarding the Company
References to the Company’s website included in this Proxy Statement and in the Company’s 2020 Annual Report on Form 10-K are provided as a convenience and do not constitute, and should not be deemed, an incorporation by reference of the information contained in, or available through, the website.
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PROPOSAL NUMBER 1 – Election of Directors
The Board currently consists of eleven members. The Corporate Governance and Nominating Committee of the Board proposed, and the Board recommended, that ten of the eleven individuals currently serving as directors each be nominated for re-election to the Board at the Annual Meeting. Each of the nominees has consented to being named as a nominee and to serve if elected. If any nominee(s) for director for any reason becomes unavailable for election, it is intended that discretionary authority will be exercised by the persons named in the enclosed proxy in respect of the election of such other person(s) as the Board shall nominate.
Bhavesh V. Patel has notified the Company that he will not seek re-election as a director at the Annual Meeting and will complete his term in May of 2021. As previously announced by the Company on Form 8-K dated February 17, 2021, Mr. Patel’s decision not to seek re-election does not relate to any disagreement with the Company, its management or the Board of Directors on any matter relating to the Company’s operations, policies or practices. The Company deeply appreciates Mr. Patel’s service and wishes him well.
Vote Required for Approval
Directors will be elected by a majority of the votes cast by the shares present at the Annual Meeting and entitled to vote on the election of directors, which means that a nominee will be elected if he or she receives more “for” votes than “against” votes. Pursuant to Section 9 of Article I of the Company’s By-Laws and applicable laws of the State of Utah, if a nominee does not receive more “for” votes than “against” votes, he or she will be elected to a shortened term that terminates on the earlier of: (i) 90 days after the day on which the Company certifies the voting results; or (ii) the day on which a person is selected by the Board to fill the office held by the director.
The Board recommends a vote FOR the election of each of the nominated directors.
Directors/Nominees
The following identifies the Company’s nominees for election to the Board. Each of the nominees currently serves as a director. Each nominee, if elected, will serve for a term of one year or until his or her successor is elected and qualified.
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PROPOSAL NUMBER 1 – Election of Directors
ANDREW H. CARD, JR.
INDEPENDENT


AGE: 73
DIRECTOR SINCE: 2006
COMMITTEES:


EXPERIENCE
Former White House Chief of Staff
Mr. Card most recently served as Chairman of the National Endowment for Democracy, from January 2018 to January 2021. He was also interim Chief Executive Officer of the George & Barbara Bush Foundation, from June 2020 to December 2020. Previously, he also served as President of Franklin Pierce University, a private university in Ridge, New Hampshire, from 2015 until 2016, and also previously served as the Executive Director of the Office of the Provost and Vice President for Academic Affairs at Texas A&M University until he became President of Franklin Pierce University. Prior to that, Mr. Card served as Chief of Staff to President George W. Bush, under President H. W. Bush as the country’s 11th Secretary of Transportation, and Deputy Assistant to the President and Director of Intergovernmental Affairs for President Ronald Reagan. Additionally, Mr. Card previously served as Vice President-Government Relations for General Motors Corporation, and as the President and Chief Executive Officer of the American Automobile Manufacturers Association.

Mr. Card has extensive senior-level experience in the federal government and the transportation industry, as well as invaluable experience in economic and international affairs, due to his roles as Chief of Staff to President George W. Bush; under President H. W. Bush as the country’s 11th Secretary of Transportation; the Deputy Assistant to the President and Director of Intergovernmental Affairs for President Ronald Reagan; Vice President-Government Relations for General Motors Corporation, one of the world’s largest auto manufacturers; and President and Chief Executive Officer of the American Automobile Manufacturers Association.
OTHER PUBLIC DIRECTORSHIPS (within the last 5 years)
CURRENT
• Hyliion Holdings Corp. (Since 2020)
• Draganfly Inc. (since 2019)

FORMER
• Lorillard, Inc. (2011-2015)
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PROPOSAL NUMBER 1 – Election of Directors
WILLIAM J. DELANEY
INDEPENDENT


AGE: 65
DIRECTOR SINCE: 2018
COMMITTEES:




EXPERIENCE
Former Chief Executive Officer Sysco Corporation
Most recently, Mr. DeLaney served as Chief Executive Officer of Sysco Corporation (Sysco), a food marketing and distribution company, from March 2009 until his retirement in December 2017. Prior to that, Mr. DeLaney served in various other roles for Sysco, including Executive Vice President and Chief Financial Officer, and then President.

Mr. DeLaney has valuable business and strategic leadership experience, as well as knowledge of rail operations from a customer perspective, due to serving as the Chief Executive Officer of Sysco. Additionally Mr. DeLaney has an extensive finance background, having also previously acted as Sysco’s Chief Financial Officer, and has significant experience serving on the boards of other public companies.
OTHER PUBLIC DIRECTORSHIPS (within the last 5 years)
CURRENT
• Cigna Corporation (since 2018)

FORMER
• Sanmina Corporation (2018-2019)
• Sysco Corporation (2009-2017)
• Express Scripts Holding Company (2011-2018) (acquired by Cigna Corporation in 2018)
DAVID B. DILLON
INDEPENDENT



AGE: 70
DIRECTOR SINCE: 2014
COMMITTEES:



EXPERIENCE
Former Chairman and CEO The Kroger Co.
Most recently, Mr. Dillon served as the Chairman of the Board of the Kroger Co. (Kroger), and as the Chief Executive Officer of Kroger. Prior to that, Mr. Dillon served in various other roles with Kroger, including President, and Executive Vice President, and he also served as President for Dillon Companies, Inc.

Mr. Dillon has valuable retail business and strategic leadership experience as a result of his role as Chief Executive Officer of Kroger. Additionally, Mr. Dillon has a demonstrated ability to understand complex logistics operations, and skills in financial audit matters, as well as extensive experience serving on the boards of other public companies.
OTHER PUBLIC DIRECTORSHIPS (within the last 5 years)
CURRENT
• 3M Company (since 2015)


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PROPOSAL NUMBER 1 – Election of Directors
LANCE M. FRITZ
MANAGEMENT



AGE: 58
DIRECTOR SINCE: 2015
EXPERIENCE
Chairman, President and Chief Executive Officer Union Pacific Corporation and Union Pacific Railroad Company
Mr. Fritz is currently serving as the Chairman, President and Chief Executive Officer of the Company and the Railroad, and has held these roles since 2015. Prior to that Mr. Fritz served in various roles for the Railroad, including President and Chief Operating Officer, Executive Vice President-Operations, Vice President-Labor Relations, and several other executive positions in the Railroad’s operating and marketing and sales departments.

Mr. Fritz has extensive operational and managerial experience, as well as a deep institutional knowledge and track record of success, due to his lengthy tenure with the Company and the Railroad.
OTHER PUBLIC DIRECTORSHIPS (within the last 5 years)
CURRENT
• Parker Hannifin Corporation (since 2021)
DEBORAH C. HOPKINS
INDEPENDENT



AGE: 66
DIRECTOR SINCE: 2017
COMMITTEES:



EXPERIENCE
Former Chief Executive Officer Citi Ventures and Former Chief Innovation Officer Citi
Most recently, Ms. Hopkins was the Chief Executive Officer of Citi Ventures and the Chief Innovation Officer of Citigroup, Inc., a global investment bank and financial services corporation, holding both positions from 2008 to 2016. Prior to that Ms. Hopkins served in various roles with Citigroup, including Chief Operations and Technology Officer, Senior Advisor to Corporate and Investment Bank and Head of Corporate Strategy. Ms. Hopkins also has served as Chief Financial Officer for each of Lucent Technologies and The Boeing Company, and has served in various roles for General Motors Company, including Vice President of Finance, Europe and General Auditor, and as the Corporate Controller for Unisys Corporation.

Ms. Hopkins has significant experience in finance, technology and innovation due to her various leadership positions overseeing those areas at multinational companies. Additionally, Ms. Hopkins has extensive experience serving on the boards of other public companies.
OTHER PUBLIC DIRECTORSHIPS (within the last 5 years)
CURRENT
• Marsh and McLennan Companies (since 2017)

FORMER
• Virtusa Corporation (2018-2021)
• Qlik Technologies Inc. (2011-2016)
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PROPOSAL NUMBER 1 – Election of Directors
JANE H. LUTE
INDEPENDENT



AGE: 64
DIRECTOR SINCE: 2016
COMMITTEES:



EXPERIENCE
Strategic Advisor SICPA, North America
Ms. Lute is currently serving as a Strategic Advisor for SICPA, North America, a global provider of security inks, having previously served as its President and Chief Executive Officer; a Special Advisor to the Secretary-General of the United Nations, where she has held several position in peacekeeping and peace building; and as a Director for the Center for Internet Security (CIS), an operating nonprofit organization focused on developing cyberdefense best practices and home of the Multi-State Information Sharing and Analysis Center providing cyber security services for state, local, tribal and territorial governments; and has held such positions since 2017, 2016 and 2015 respectively. Prior to that, Ms. Lute served as the Chief Executive Officer for CIS from 2015 to 2016, and has also served as the Deputy Secretary for the U.S. Department of Homeland Security, and on the National Security Council Staff under Presidents George H.W. Bush and William Jefferson Clinton. Ms. Lute has also served in the United States Army.

Ms. Lute has unique and invaluable knowledge and leadership experience that she has gained through her extensive military and government service, including her service at the U.S. Department of Homeland Security and the United Nations. Additionally, she has expertise with cyber security matters developed through her role as Chief Executive Officer of CIS.
OTHER PUBLIC DIRECTORSHIPS (within the last 5 years)
CURRENT
• Atlas Air Worldwide Holdings, Inc. (since 2018)*
• Marsh and McLennan Companies (since 2020)

* Director until term expires on May 25, 2021.
MICHAEL R. MCCARTHY
INDEPENDENT | LEAD DIRECTOR



AGE: 69
DIRECTOR SINCE: 2008
COMMITTEES:



EXPERIENCE
Chairman McCarthy Group, LLC
Mr. McCarthy is currently serving as Chairman of McCarthy Group, LLC, a private investment group which he co-founded in 1986, and currently serves as the Company’s lead independent director.

Mr. McCarthy has extensive experience providing strategic and operational advice to businesses in various sectors of the economy, as well as financial expertise and a valuable background in leading successful investment companies, gained through founding and serving as Chairman of McCarthy Group, LLC. Additionally, Mr. McCarthy has significant experience serving on the boards of other public companies.
OTHER PUBLIC DIRECTORSHIPS (within the last 5 years)
FORMER
• Cabela’s Incorporated (1996-2017)
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PROPOSAL NUMBER 1 – Election of Directors
THOMAS F. MCLARTY III
INDEPENDENT



AGE: 74
DIRECTOR SINCE: 2006
COMMITTEES:



EXPERIENCE
Chairman McLarty Associates
Mr. McLarty is currently serving as the Chairman of McLarty Associates (formerly Kissinger McLarty Associates), an international strategic advisory and advocacy firm; Executive Vice Chairman of RML Automotive; and Chairman and President of McLarty Companies, a fourth generation, family-owned transportation business; and has held these positions since 1999, 2007 and 1998, respectively. Prior to that, Mr. McLarty served in several positions in the Clinton White House, including Chief of Staff to the President, Counselor to the President and Special Envoy for the Americas, and also served as Chairman and Chief Executive Officer of Arkla, Inc., a Fortune 500 natural gas company.

Mr. McLarty has valuable business leadership experience due to his time as the Chief Executive Officer of Arkla, Inc., as well as extensive exposure and expertise in international business and regulatory matters gained as President of McLarty Associates. Additionally, he has significant experience in government service at the highest levels gained through his several positions in the Clinton White House. Mr. McLarty also has experience serving on the board of Acxiom Corporation and Entergy, both public companies.
JOSE H. VILLARREAL
INDEPENDENT



AGE: 67
DIRECTOR SINCE: 2009
COMMITTEES:



EXPERIENCE
Retired Advisor Akin, Gump, Strauss, Hauer & Feld LLP
Most recently, Mr. Villarreal served as a non-employee advisor with Akin, Gump, Strauss, Hauer & Feld LLP, an international law firm, and was previously a partner at the firm. Mr. Villareal also previously served as Assistant Attorney General for the Public Finance Division of the Texas Attorney General’s Office, and has served in senior roles in numerous presidential campaigns, as well as in the role of United States Commissioner General to the Shanghai 2010 World Expo.

Mr. Villarreal has valuable legal, regulatory and compliance expertise, as well as extensive government affairs experience gained from his service in state and federal public offices, his involvement in presidential campaigns, and as a partner with Akin, Gump, Strauss Hauer & Feld, LLP. Additionally, Mr. Villarreal has significant service and experience on boards of other public companies, including PMI Group, Inc., First Solar, Inc. and Walmart Inc.
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PROPOSAL NUMBER 1 – Election of Directors
CHRISTOPHER J. WILLIAMS
INDEPENDENT


AGE: 63
DIRECTOR SINCE: 2019
COMMITTEES:



EXPERIENCE
Chairman Siebert Williams Shank & Co.
Mr. Williams is currently serving as the Chairman of Siebert Williams Shank & Co., LLC, an investment banking and financial services company, and has held this position since November 4, 2019, when The Williams Capital Group, L.P. and Williams Capital Management, LLC (collectively Williams Capital), an investment banking and financial services firm that Mr. Williams founded, merged with Siebert Cisneros Shank & Co., L.L.C. Prior to the merger, Mr. Williams served as the Chairman and Chief Executive Officer of Williams Capital, holding that position since the company’s formation in 1994. Mr. Williams also previously worked at Jeffries and Company and Lehman Brothers.

Mr. Williams has extensive financial, accounting and strategic knowledge gained during his years of experience in investment banking and finance, as well as valuable executive management and leadership experience due to his role as Chairman and Chief Executive Officer of Williams Capital. Additionally, he has significant experience serving on the boards of other public companies, including, in addition to those listed below, Walmart Inc.
OTHER PUBLIC DIRECTORSHIPS (within the last 5 years)
CURRENT
• The Clorox Company (since 2015)
• Ameriprise Financial (since 2016)

FORMER
• Caesars Entertainment Corporation (2003-2019)
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PROPOSAL NUMBER 1 – Election of Directors
Director Qualifications and Experience
The Corporate Governance and Nominating Committee considered the character, experience, qualifications and skills of each director nominee when determining whether he or she should serve as a director of the Company. Consistent with the stated criteria for director nominees described on page 18 below and included in the Company’s Corporate Governance Guidelines and Policies, the Committee determined that each director nominee exhibits a high degree of integrity, has significant professional accomplishments, and has proven leadership experience. Each director nominee is or has been a leader in his or her respective field and brings diverse talents and perspectives to the Board. The Committee also considered the experience and qualifications that each director nominee brings to the Board outlined above in each director’s biographical information, as well as service on boards of other public companies.
The Committee utilizes the following list of skills, attributes and qualities that are particularly relevant to the Company when evaluating director nominees.
Economics/Finance – Background in finance, banking, economics, and the securities and financial markets, both domestic and international;
Operations – Knowledge or experience in the transportation industry, particularly the rail industry and rail operations;
Risk Management Experience – Senior executive level experience in risk management, strategic planning or compliance activities;
Customer Perspective – A strong understanding of rail customer perspectives;
Government and Regulatory Expertise – Experience in regulatory, political and governmental affairs or public service in legislative or executive positions in Washington D.C. or state government, especially in states where the Company has a significant operating presence;
Legal – Possesses a law degree or experience in the legal profession;
International/Global Expertise – An international background or global expertise given the significant rail interchange operations with Mexican and Canadian rail systems, along with the Company’s extensive international marketing efforts;
Wall Street Experience – Background or experience with an investment or brokerage firm, investment banking or similar Wall Street financial expertise;
Technology – Senior executive level or board experience in information technology, cybersecurity, information systems or information technology issues for a public or private entity;
Investor Perspective – A strong understanding of institutional investors;
CEO Experience – Business and strategic management experience gained from prior or current service as a chief executive officer; and
Publicly Traded Company Experience – Prior or current service as a CEO or director at other publicly traded companies.
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PROPOSAL NUMBER 1 – Election of Directors

Below we identify the balance of skills and qualifications each director nominee brings to the Board. The fact that a particular skill or qualification is not designated does not mean the director nominee does not possess that particular attribute. Rather, the skills and qualifications noted below are those reviewed by the Corporate Governance and Nominating Committee and the Board in making nomination decisions and as part of the Board succession planning process. We believe the combination of the skills and qualifications shown below demonstrates how the Board is well-positioned to provide strategic oversight and guidance to management.

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PROPOSAL NUMBER 1 – Election of Directors
Board Refreshment
The Corporate Governance and Nominating Committee is responsible for developing and periodically reviewing and recommending to the Board the appropriate skills and characteristics required of Board members in the context of the current composition of the Board. Such criteria, as described in the Company’s Corporate Governance Guidelines and Policies, include: business and management experience; familiarity with the business; customers and suppliers of the Company; varying and complementary talents, backgrounds and perspectives; diversity (inclusive of gender, race, ethnicity and national origin); and relevant legal, regulatory and stock exchange requirements applicable to the Board and certain of its Committees.
All potential new Board candidates should exhibit a high degree of integrity and ethics consistent with the values of the Company and the Board. In all our director nominee searches, the Committee is committed to actively seeking out highly qualified women (Ms. Lute and Ms. Hopkins) and other diverse candidates (Messrs. Villarreal and Williams), for consideration as nominees to the Board. The Committee ultimately seeks to identify and nominate candidates with diverse talents, backgrounds and perspectives who will enhance and complement the skills and expertise of the Board and satisfy the Board membership criteria included in the Company’s Corporate Governance Guidelines and Policies. In determining the independence of a candidate, the Committee relies upon the independence standards adopted by the Board. In addition, the Committee requires that all candidates:
Exhibit a high degree of integrity and ethics consistent with the values of the Company and the Board;
Have demonstrable and significant professional accomplishments; and
Have effective management and leadership capabilities.
The Committee also values familiarity with the rail transportation industry and considers the number of other public boards on which candidates serve when determining whether the individual circumstances of each candidate will allow the candidate sufficient time to effectively serve on the Board and contribute to its function and activities.
The Committee meets each year to consider the inclusion of nominees in the Company’s proxy statement. During this meeting, the Committee considers each nominee by:
Reviewing relevant information provided by the nominee in his or her Company questionnaire;
Applying the criteria listed above; and
Assessing the performance of the Board and each nominee during the previous year with respect to current members of the Board.
As part of the Committee’s oversight of the Board’s self-evaluation process, the Committee assesses the effectiveness of the criteria listed above when evaluating all new director candidates and when assessing the composition of the Board. The Committee will consider candidates recommended by shareholders under the same standards after concluding that any such recommendations comply with the requirements outlined below. During 2020, the Company retained the services of Heidrick & Struggles to help identify and evaluate suitable director candidates.
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PROPOSAL NUMBER 1 – Election of Directors
Board Tenure
We believe that Board tenure diversity is important and directors with many years of service provide the Board with a deep knowledge of our Company, while newer directors lend fresh perspectives. The chart below reflects the average tenure of all directors nominated for re-election.


Evaluation of Board and Committee Effectiveness and Performance
The Corporate Governance and Nominating Committee is responsible for overseeing the annual self-evaluation process of the Board and its committees, which is used by the Board and each committee to assess their effectiveness, their performance and opportunities for improvement. In addition, each committee reviews its Charter annually and reports to the Corporate Governance and Nominating Committee and the Board on its self-evaluation and review of its Charter.
During 2020, the Board and committee evaluation process involved the distribution of a self-assessment questionnaire to all Board and committee members inviting a review and written comments on all aspects of the Board and each committee’s role and responsibilities, as well as director performance and Board dynamics. Comments solicited related to a holistic review of how the Board can improve its key functions overseeing the Company’s overall governance and the enterprise risk profile of the Company, approving the Company’s strategic plan, monitoring strategy implementation and generally overseeing management’s operations of the business. In particular, for both the Board and the relevant committee, the process solicited ideas from directors about (i) improving prioritization of issues, (ii) improving quality of Board and committee discussions on key matters, (iii) identifying specific issues that should be discussed in the future, and (iv) identifying any other matters of importance to the functioning of the Board or committee.
The Corporate Governance and Nominating Committee will provide oversight for each committee and the Board as the directors continue discussing the results of this evaluation and work to address the recommendations.
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PROPOSAL NUMBER 1 – Election of Directors
Consideration of Director Nominees and Proxy Access
The Company’s By-Laws provide for “proxy access” for certain director candidates nominated by shareholders. Under the By-Laws, a shareholder or group of shareholders who have continuously held for three years a number of shares of Company common stock equal to three percent of the outstanding shares of Company common stock may request that the Company include in the Company’s proxy materials director nominees representing up to the greater of two directors or 20% of the current number of directors. Eligible shareholders wishing to have such candidates included in the Company’s Proxy Statement for the 2022 Annual Meeting of Shareholders should provide the information specified in the By-Laws to the Secretary of the Company in writing during the period beginning on November 1, 2021 and ending on December 1, 2021, and should include the information and representations required by the proxy access provisions set forth in the Company’s By-Laws.
The Corporate Governance and Nominating Committee will consider and evaluate individuals for service on the Board suggested by directors and other interested parties. Shareholders desiring to recommend candidates for consideration at the 2022 Annual Meeting should advise the Secretary of the Company in writing during the period beginning on January 13, 2022 and ending on the close of business February 12, 2022, and should include the following information required by the nomination procedures set forth in the Company’s By-Laws, as well as any other information that would assist the Committee in evaluating the recommended candidates: (i) the name, age, and business and residence addresses of the candidate, (ii) the principal occupation of the candidate, and (iii) the number of shares of Company common stock beneficially owned by the candidate. A shareholder should also provide (i) his or her name and address, (ii) the number of shares of Company common stock beneficially owned by such shareholder, (iii) a description of all arrangements between himself or herself and the candidate and any other person pursuant to which the recommendation for nomination is being made, and (iv) the candidate’s written consent agreeing to any resulting nomination and to serve as a director if elected. The By-Laws are available on the Company’s website at www.up.com/investors/governance, and shareholders may obtain a printed copy by contacting the Secretary of the Company at the address set forth on the notice page of this Proxy Statement.
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BOARD CORPORATE GOVERNANCE MATTERS
We are committed to implementing and following high standards of corporate governance, which we believe are important to the success of our business and create shareholder value. The Board has adopted Corporate Governance Guidelines and Policies, and, with ongoing input from the Corporate Governance and Nominating Committee, will continue to assess the appropriateness of these guidelines and policies and implement such changes and adopt such additions as may be necessary or desirable to promote the effective governance of the Company. We post these guidelines and policies on our website at www.up.com/investors/governance.
Director Independence
To assist it in making determinations of a director’s independence, the Board has adopted the independence standards set forth below. The Board affirmatively determined that retired director Mr. Davis, Mr. Patel, and all remaining directors, except for Mr. Fritz, who are also director nominees, Ms. Hopkins and Ms. Lute and Messrs. Card, DeLaney, Dillon, McCarthy, McLarty, Villarreal and Williams, have no material relationship with the Company or any of its consolidated subsidiaries, including Union Pacific Railroad Company (the Railroad), (either directly or as a partner, shareholder or officer of an organization that has a relationship with the Company) and are independent within the meaning of the applicable listing standards of the NYSE and the Director Independence Standards adopted by the Board. Additionally, the Board determined that all Board Committees are comprised entirely of independent directors and that all members of the Audit Committee, Compensation and Benefits Committee and Finance Committee meet the additional independence standards applicable to such committee members as set forth below.
The Board’s independence determination included a review of the payments over the last three years between the Railroad and LyondellBasell Industries, N.V. (LyondellBasell). Mr. Patel is the Chief Executive Officer of LyondellBasell. LyondellBasell paid the Railroad approximately $127 million, $127 million, and $115 million for transportation services in 2020, 2019 and 2018 respectively. These amounts were significantly less than 2% of LyondellBasell’s consolidated gross revenues for any of the past three years (0.5% for 2020, 0.4% for 2019 and 0.3% for 2018,).
The Board also reviewed a payment made in 2019 to The Williams Capital Group, L.P. (Williams Capital). Mr. Williams is the Chairman of Siebert Williams Shank & Co., the successor to Williams Capital. The Company paid Williams Capital $87,500 in fees to serve as a co-manager in a July 2019 debt transaction. The Board noted that this payment was significantly less than 2% of Williams Capital’s consolidated gross revenues.
Director Independence Standards
An “independent” director is a director whom the Board has affirmatively determined has no material relationship with the Company or any of its consolidated subsidiaries either directly or as a partner, shareholder or officer of an organization that has a relationship with the Company. Accordingly, a director is also not independent if:
(1)
the director is, or within the last three years has been, an employee of the Company or an immediate family member of the director is, or within the last three years has been, an executive officer of the Company;
(2)
the director (a) or an immediate family member is a current partner of a firm that is the Company’s internal or external auditor; (b) is a current employee of such a firm; (c) has an immediate family member who is a current employee of such firm and personally works on the Company’s audit; or (d) or an immediate family member was within the last three years (but is no longer) a partner or employee of such a firm and personally worked on the Company’s audit within that time;
(3)
the director, or a member of the director’s immediate family, is, or within the last three years has been, an executive officer of another company where any of the Company’s present executives at the same time serves or served on that company’s compensation committee;
(4)
the director, or a member of the director’s immediate family, received or has received during any 12-month period within the last three years any direct compensation from the Company in excess of
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BOARD CORPORATE GOVERNANCE MATTERS
$120,000, other than compensation for Board service and pension or other forms of deferred compensation for prior service with the Company, and compensation received by the director’s immediate family member for service as a non-executive employee of the Company;
(5)
the director is a current employee of a company, including a professional services firm, that has made payments to or received payments from the Company, or during any of the last three years has made payments to or received payments from the Company, for property or services in an amount that, in any of the last three fiscal years, exceeded the greater of $1 million or 2% of the other company’s or firm’s consolidated gross revenues;
(6)
a member of the director’s immediate family is a current executive officer of another company, or a partner, principal or member of a professional services firm, that has made payments to or received payments from the Company, or during any of the last three fiscal years has made payments to or received payments from the Company, for property or services in an amount that, in any of the last three fiscal years, exceeded the greater of $1 million or 2% of the other company’s or firm’s consolidated gross revenues; and
(7)
the director is an executive officer, director or trustee of a non-profit organization to which the Company or Union Pacific Foundation makes, or within the last three years has made, payments that, in any single fiscal year, exceeded the greater of $1 million or 2% of the non-profit organization’s consolidated gross revenues (amounts that the Company or Union Pacific Foundation contribute under matching gifts programs are not included in the payments calculated for purposes of this standard).
For purposes of these standards, an “immediate family” member includes a director’s spouse, parents, children, siblings, mother and father-in-law, sons and daughters-in-law, brothers and sisters-in-law, and anyone (other than a domestic employee) who shares the director’s home.
Audit Committee and Compensation and Benefits Committee Independence Criteria
In addition to the Board’s Director Independence Standards above, a director is not considered independent for purposes of serving on the Audit Committee or the Compensation and Benefits Committee, and may not serve on such committees, if the director: (a) accepts, directly or indirectly, from the Company or any of its subsidiaries, any consulting, advisory, or other compensatory fee, other than Board and committee fees and fixed amounts of compensation under a retirement plan (including deferred compensation) for prior service with the Company; or (b) is an “affiliated person” of the Company or any of its subsidiaries; each as determined in accordance with NYSE and SEC rules and regulations.
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BOARD CORPORATE GOVERNANCE MATTERS
Related Party Policy and Procedures
The Board annually reviews related party transactions involving directors and director nominees in conjunction with making director independence determinations and preparing the annual Proxy Statement. We require that executive officers report any transactions with the Company under the Statement of Policy on Ethics and Business Conduct (Business Conduct Policy) that covers all Company employees. Under the Business Conduct Policy, the Audit Committee reviews any transaction reported by executive officers and refers any reported transactions to the Corporate Governance and Nominating Committee for evaluation pursuant to the Company’s Related Party Transaction Policies and Procedures (the Related Party Policy) described below.
Under the Company’s Related Party Policy, transactions with related parties are subject to approval or ratification by the Corporate Governance and Nominating Committee. Transactions subject to Committee review and approval include any transaction in which (i) the aggregate amount involved will or may be expected to exceed $120,000 in any calendar year, (ii) the Company is a participant, and (iii) any related party will have a direct or indirect interest (other than solely as a result of being a director or a less than 10% beneficial owner of another entity).
“Related party” is defined under the policy as any (i) person who is or was during the last fiscal year an executive officer or director of the Company or nominee for election as a director, (ii) greater than 5% beneficial owner of the Company’s common stock, or (iii) immediate family member of any of the foregoing. “Immediate family” member includes a person’s spouse, parents, stepparents, children, stepchildren, siblings, mothers and fathers-in-law, sons and daughters-in-law, and brothers and sisters-in-law and anyone residing in such person’s home (other than a tenant or employee).
If advance Corporate Governance and Nominating Committee approval of a transaction is not feasible, then the transaction will be considered and, if the Committee determines it to be appropriate, ratified at the Committee’s next regularly scheduled meeting. In determining whether to approve or ratify a transaction, the Committee will consider, among other factors it deems appropriate, whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances and the extent of the related party’s interest in the transaction.
Under the Related Party Policy, the Committee may pre-approve certain transactions, even if the aggregate amount involved exceeds $120,000. Such transactions include (i) any transaction with another company at which a related party’s only relationship is as an employee (other than an executive officer), direct or beneficial owner of less than 10% of that company’s shares, if the aggregate amount involved does not exceed the greater of $1 million or 2% of that company’s total annual revenues; and (ii) any charitable contribution, grant or endowment by the Company to a charitable organization, foundation, or university at which a related party’s only relationship is as an employee (other than an executive officer) or a director, if the aggregate amount involved does not exceed the lesser of $1 million or 2% of the charitable organization’s total annual receipts. Additionally, the Board has delegated to the Chair of the Committee the authority to pre-approve or ratify, as applicable, any transaction with any related party in which the aggregate amount involved is expected to be less than $1 million. At each regularly scheduled meeting of the Committee, a summary of each new transaction deemed pre-approved will be provided to the Committee for its review.
Related Party Transactions in 2020
Since 1994, the Railroad has historically and routinely done business with Omaha Track, Inc. and its related companies (Omaha Track). Kelvin Whited, who became the Chief Financial Officer of Omaha Track in July 2015, is the spouse of Elizabeth F. Whited, who became the Company’s Executive Vice President and Chief Human Resource Officer in August 2018. Ms. Whited served as the Company’s Executive Vice President and Chief Marketing Officer until August 15, 2018, when she was appointed Executive Vice President and Chief Human Resource Officer.
In 2020, the Railroad paid Omaha Track or its affiliates approximately $22.9 million for tie disposal services, on-track scrap metal removal and railcar repairs. All of these transactions are managed by the Railroad’s Supply Department and Ms. Whited has no involvement in these matters.
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Omaha Track has been a transload provider to customers of the Railroad for transload shipments of various materials. The Railroad paid Omaha Track approximately $35,000 in 2020 in connection with these transload services. Ms. Whited is not involved in any commercial or rate discussions involving Omaha Track.
The Railroad provides transportation services to LyondellBasell. Mr. Patel is the Chief Executive Officer and a director of LyondellBasell and a director of the Company. Payments to the Railroad over the last three years from LyondellBasell are detailed on page 21 of this Proxy Statement.
April Rocker, Senior Manager Signal Design, is the spouse of Kenny G. Rocker, who became the Company’s Executive Vice President Marketing and Sales on August 15, 2018. Ms. Rocker has been employed by the Railroad since March 1, 2004. Ms. Rocker’s taxable compensation from the Railroad in 2020 was approximately $138,000.
These transactions were ratified by the Corporate Governance and Nominating Committee under the Company’s Related Party Policy.
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BOARD CORPORATE GOVERNANCE MATTERS
Board Leadership Structure
The Board believes it is in the best interest of the Company for the Board to periodically evaluate the leadership structure of the Company and make a determination regarding whether to separate or combine the roles of Chairman and CEO based on circumstances at the time of its evaluation. By retaining flexibility to adjust the Company’s leadership structure, the Board is best able to provide for appropriate management and leadership of the Company and address any circumstances the Company may face. In accordance with the Company’s Corporate Governance Guidelines and Policies, the Board annually will elect a Chairman of the Board, who may or may not be the CEO of the Company. Additionally, the Guidelines provide that if the individual elected as Chairman of the Board is not an independent director, the independent directors also will elect a lead independent director. The Board determined that having a combined Chairman and CEO at this time best allows the Board and management to focus on the oversight and implementation of the Company’s strategic initiatives and business plan to efficiently and effectively protect and enhance the Company’s long-term success and shareholder value.
In addition, the independent directors of the Board elected Mr. McCarthy as the lead independent director with the following responsibilities:

Preside at meetings of the Board at which the Chairman and CEO are not present, including executive sessions of the independent directors;

Approve the flow of information sent to the Board, and approve the agenda, schedule and what materials are sent for the Board meetings;

Serve as the liaison between the independent directors and the Chairman and CEO;

Be available for consultation and communication with major shareholders as appropriate;

Oversee the process of evaluating and compensating the Chairman and CEO (in conjunction with the Compensation and Benefits Committee);

Assure that a succession plan is in place for the Chairman and CEO, as well as the lead independent director;

Authorize or recommend the retention of consultants who report directly to the full Board; and

Assist the Board and Company officers in compliance with, and implementation of, the Company’s governance guidelines and policies.
The independent directors conducted executive sessions at all Board meetings in 2020. Mr. McCarthy also has the authority to call executive sessions of the independent directors. The Board has adopted a number of strong corporate governance practices that provide effective, independent oversight of management, including:

Holding executive sessions of the non-management, independent directors after every Board meeting;

Providing that only independent directors serve on key Board committees; and

Conducting an annual performance evaluation of the Chairman and CEO by the independent directors.
The Board believes that the current leadership structure and succession planning coupled with an active lead independent director provides effective oversight of management and responsiveness to shareholders, while also continuing the solid leadership of the Company and the Board necessary to effect execution of the Company’s strategic plans.
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BOARD CORPORATE GOVERNANCE MATTERS
Risk Oversight of the Company
The Board of Directors is responsible for overseeing the assessment and management of the critical enterprise risks affecting the Company. The Board delegates to the Audit Committee primary responsibility for oversight of managing risks related to operations of the Company.
Management identifies and prioritizes enterprise risks (included in the risk factors disclosed in our Annual Report on Form 10-K) and regularly presents them to the Board for its review and consideration. The senior executives responsible for implementation of appropriate mitigation strategies for the Company’s top enterprise risks, along with the chief compliance officer, provide reports directly to the Board during the year. The Audit Committee also receives reports throughout the year from the chief compliance officer and the senior executives responsible for financial reporting, cybersecurity and environmental matters.
In addition, the Audit Committee oversees the Company’s internal audit of enterprise risks selected for review and evaluation based upon the Company’s annual risk assessment model with the purpose of evaluating the effectiveness of mitigating controls and activities of Company personnel. The Company’s internal auditors present to the Audit Committee findings regarding the mitigating controls and processes for the enterprise risks selected for review. The Audit Committee, in turn, reports those findings to the entire Board. The Company’s enterprise risk management process is dynamic and continually monitored so that the Company can timely identify and address any potential risks that arise in the ever-changing economic, political, legal and technology threat environment in which the Company operates.
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BOARD CORPORATE GOVERNANCE MATTERS
Board of Directors Meetings and Committees
In accordance with applicable provisions of Utah law and the By-Laws of the Company, the business and affairs of the Company are managed under the direction of the Board. The Board has established standing Committees and adopted guidelines and policies to assist it in fulfilling its responsibilities as described below.
During 2020, the Board met seven times. None of the directors attended fewer than 75% of the aggregate number of meetings of the Board and the Committees on which he or she served. Our Corporate Governance Guidelines and Policies reflect our policy that all directors should attend the Annual Meeting. In accordance with this policy, all directors then serving attended last year’s Annual Meeting.
The Board currently maintains four standing committees − the Audit Committee, Finance Committee, Compensation and Benefits Committee, and Corporate Governance and Nominating Committee. Each of the committees operates under a written charter adopted by the Board, copies of which are available on the Company’s website at www.up.com/investors/governance, and shareholders may obtain copies by contacting the Secretary of the Company at the address set forth on the notice page of this Proxy Statement. Each committee has the ability to retain outside advisors to assist it in the performance of its duties and responsibilities. All Board Committees are composed entirely of independent directors, satisfying both the independence standards of the NYSE and the Director Independence Standards set forth in the Company’s Corporate Governance Guidelines and Policies. Audit Committee members and Compensation and Benefits Committee members also satisfy the additional independence criteria applicable to Audit Committee and Compensation and Benefits Committee members under the listing standards of the NYSE.


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BOARD CORPORATE GOVERNANCE MATTERS

David B. Dillon
Chair


Other Members:
William J. DeLaney
Deborah C. Hopkins
Jane H. Lute
Christopher J. Williams

Meetings in 2020: 10

FINANCIAL EXPERTS ON AUDIT COMMITTEE

The Board has determined that Mr. DeLaney, Mr. Dillon, Ms. Hopkins and Mr. Williams, each of whom are independent directors, qualify as “audit committee financial experts” as defined by the SEC and that each has accounting or related financial management expertise as required by NYSE Corporate Governance Listing Standards.
Overview
Committee Functions
The Audit Committee assists the Board in fulfilling its responsibilities for overseeing our financial reporting process and the audit of our financial statements.

The Audit Committee meets regularly with the independent registered public accounting firm of the Company, financial management, the internal auditors, the chief compliance officer and the chief legal officer to provide oversight of the financial reporting process, internal control structure, and the Company’s compliance requirements and activities. The independent registered public accounting firm, the internal auditors, the chief compliance officer and the chief legal officer have unrestricted access to the Committee and meet regularly with the Committee, without Company management representatives present, to discuss the results of their examinations, their opinions on the adequacy of internal controls and quality of financial reporting, and various legal matters.

The Audit Committee has established policies and procedures for the pre-approval of all services provided by the independent registered accounting firm (as described on page 39 of this Proxy Statement).

The Audit Committee’s Report is included on page 40 of this Proxy Statement.
• Appoint, evaluate and retain
   our independent registered
    public accounting firm

• Maintain direct responsibility
   for the compensation,
   termination and oversight of
   our independent registered
   public accounting firm and
   evaluate the independent
   registered public accounting
   firm’s qualifications,
   performance and
   independence

• Review and discuss earnings
   releases, audited financial
   statements and unaudited
   quarterly financial statements,
   including reviewing specific
    disclosures under
   “Management’s Discussion
   and Analysis of Financial
   Condition and Results of
    Operations”

• Review the Company’s policies
   and procedures to maintain
   the adequacy and effectiveness
   of internal controls and
   disclosure controls

• Review the scope, resources
   and results of the internal audit
   program, including
   participation in the General
   Auditor performance review

• Oversee the Company’s
   enterprise risk management
   program as well as the annual
   enterprise risk assessment

• Oversee the administration of
   the Company’s Code of Ethics
   for the Chief Executive Officer
   and Senior Financial Officers
   and the Statement of Policy on
   Ethics and Business Conduct
   for employees
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BOARD CORPORATE GOVERNANCE MATTERS

Thomas F. McLarty III
Chair



Other Members:
Deborah C. Hopkins
Michael R. McCarthy
Bhavesh V. Patel
Christopher J. Williams

Meetings in 2020: 5
Overview
Committee Functions
The Finance Committee is responsible for assisting the Board with its review and oversight of the Company’s financial position, plans and programs and dividend policy and actions. The Finance Committee also assists the Board by reviewing strategic options and opportunities for the Company, including acquisitions and divestitures.
• Review and oversee significant
   treasury matters such as the
   Company’s capital structure,
   balance sheet, credit ratings,
   short-and long-term financing
   plans and programs, derivative
   policy, share repurchases and
   dividend policy  

• Review the Company’s liquidity
   position, including the
   Company’s credit facilities

• Oversee the Company’s
   investor relations activities,
   including the Company’s
   interaction with the investor
   community

• Review the performance of the
   Company’s internal investment
   committee that oversees the
   investment management of
   assets held by the Company’s
   pension, thrift and other
   funded employee benefit
   programs
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BOARD CORPORATE GOVERNANCE MATTERS

William J. DeLaney
Chair


Other Members:
Andrew H. Card, Jr.
David B. Dillon
Bhavesh V. Patel
Jose H. Villarreal

Meetings in 2020: 7

COMPENSATION AND BENEFITS INTERLOCKS AND INSIDER PARTICIPATION

There were no Compensation and Benefits Committee interlocks or insider participation in 2020.
Overview
Committee Functions
The Compensation and Benefits Committee discharges the Board’s responsibilities relating to the compensation of senior executives and provides strategic oversight of our compensation structure, including equity compensation plans and benefits programs.

The Compensation and Benefits Committee annually reviews and approves corporate goals and objectives relevant to the compensation of the Chairman and CEO and certain other elected executives. The details of the processes and procedures involved are described in the Compensation Discussion and Analysis (CD&A). The independent members of the full Board ultimately make the final decisions regarding the Chairman and CEO’s compensation.

The Compensation and Benefits Committee Report is included on page 71 of this Proxy Statement.
• Evaluate the CEO’s performance
   and, together with the other
   independent directors,
   determine and approve the
   CEO’s compensation

• Oversee the Company’s
   executive incentive plans and
   review amounts of awards and
   the executives who will receive
   awards and refer its
   determinations with respect to
   the annual incentive program to
   the Board for approval

• Review the CD&A and
   recommend to the Board its
   inclusion in our Proxy
   Statement

• Oversee the Company’s
   pension, thrift and equity
   compensation plans and review
   and recommend to the Board all
   material amendments to these
   plans

• Oversee the administration of
    the Company’s general
   compensation plans and
   employee benefit plans and
   periodically review the
   Company’s benefit plans to
   assess whether such benefit
   plans remain competitive
Compensation Consultant
Under its charter, the Compensation and Benefits Committee has the authority to retain, terminate and approve fees for advisors and consultants as it deems necessary. The Committee, in its discretion, uses outside advisors and experts to assist it in performing its duties and fulfilling its responsibilities. The Committee has retained Frederic W. Cook & Co., Inc. (FW Cook) as its independent compensation consultant. A representative of FW Cook attends all Committee meetings. The Committee is solely responsible for the engagement and termination of this relationship. At its March 2020 meeting, the Committee reviewed and reaffirmed the engagement of FW Cook as the Committee’s compensation consultant and determined that the retention of FW Cook did not raise any conflicts of interest.
FW Cook advises the Committee on compensation philosophy and matters related to CEO and other executive and director compensation. The Committee annually requests that FW Cook update compensation and performance data on the peer companies selected by the Committee, as described on page 55 of this Proxy
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BOARD CORPORATE GOVERNANCE MATTERS
Statement. In addition, the Committee periodically requests that FW Cook make presentations on various topics, such as compensation trends and best practices, regulatory changes, long-term incentive components and award mix and stock plan utilization. The Committee Chair reviews and approves all charges for these consulting services.
Under the Committee’s engagement, FW Cook also confers with management on a limited basis to promote consistency and efficiency. In such matters, FW Cook acts in its capacity as the Committee’s advisor, and the Committee Chair reviews and approves any major projects for which management requests the assistance of FW Cook. Such projects involve only the amount and form of executive or director compensation and may include analysis of competitive director compensation data, design and development of new compensation and stock plans, calculation of compensation amounts reported in this Proxy Statement and review of materials prior to distribution to the Committee to confirm that the materials conform with the Committee’s philosophy and policies. The Committee Chair reviews and approves all charges for any projects requested by management. During 2020, the Company paid fees to FW Cook only for advising on matters under the Committee’s purview. The Company did not pay any fees for additional projects or services.
In early 2021, the Committee, with the assistance of FW Cook, conducted its annual compensation risk assessment of our executive compensation programs and confirmed that they were designed and operate within a system of guidelines and controls to avoid creating any material adverse risks to the Company.
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BOARD CORPORATE GOVERNANCE MATTERS

Michael R. McCarthy
Chair


Other Members:
Andrew H. Card, Jr.
Jane H. Lute
Thomas F. McLarty III
Jose H. Villarreal
Meetings in 2020: 3
Overview
Committee Functions
The Corporate Governance and Nominating Committee oversees and assists the Board in fulfilling its responsibilities relating to our corporate governance, including the practices, policies and procedures of the Board and its committees.

The Committee also reviews the size, structure and needs of the Board and Board committees, reviews possible candidates for the Board and recommends director nominees to the Board for approval.
• Identify and recommend
   candidates to be nominated for
   election as directors at the
   Annual Meeting or to fill Board
   vacancies

• Review the composition and
   activities of the Board,
   including, but not limited to,
   committee memberships,
   Board self-evaluation, Board
   size, continuing education,
   retirement policy and stock
   ownership requirements

• Review the Board’s leadership
   structure, recommending
   changes to the Board when
   appropriate, and oversee the
   election of the lead
   independent director

• Oversee the Corporate
   Governance Guidelines and
   Policies, and the Company’s
   Code of Business Conduct and
   Ethics for members of the
   Board of Directors

• Establish policies and
   procedures for the review and
   approval of related party
   transactions

• Review current trends in
   environmental, social and
   corporate governance (ESG)
   and recommend to the Board
   for adoption new (or
   modifications of existing)
   practices, policies and
   procedures

• Review director compensation
   periodically to assess whether
   compensation is competitive
   and reflects duties and
   responsibilities of Board
   members
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Codes of Conduct and Ethics
The Board has adopted the Union Pacific Corporation Code of Ethics for the Chief Executive Officer and Senior Financial Officers, the Statement of Policy on Ethics and Business Conduct for employees (the Business Conduct Policy) and the Union Pacific Corporation Code of Business Conduct and Ethics for Members of the Board of Directors. We post these codes of conduct on our website at www.up.com/investors/governance, and printed copies are available to any shareholder upon request to the Secretary of the Company at the address set forth on the notice page of this Proxy Statement. To the extent permitted by SEC rules and the NYSE listing standards, we intend to disclose any future amendments to, or waivers from, certain provisions of these codes of conduct on our website.
Communications with the Board
Interested parties wishing to communicate with the Board may do so by U.S. mail c/o the Corporate Secretary, Union Pacific Corporation, 1400 Douglas Street, 19th Floor, Omaha, NE 68179. Communications intended for a specific director or directors (e.g., the lead independent director, a committee chairperson or all of the non-management directors) should be addressed to their attention and sent, by U.S. mail, to the address above. The Board has appointed and authorized the Corporate Secretary of the Company to process these communications and forward them to the appropriate directors. We forward appropriate communications from shareholders directly to the appropriate Board member(s). If a communication is illegal, unduly hostile or threatening, or similarly inappropriate, the Corporate Secretary of the Company has the authority to disregard or take appropriate action regarding any such communication.
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ENVIRONMENTAL, SOCIAL & GOVERNANCE (ESG)
Union Pacific’s vision of Building America means we connect the nation’s businesses and communities to each other and the world by providing safe, reliable and efficient supply chain solutions that support sustainable economic growth.
ESG Governance Structure
The Board of Directors provides oversight of our ESG strategy. The Corporate Governance and Nominating Committee reviews current developments in ESG and recommends adoption of new, or modifications to existing, practices, policies and procedures. To see that ESG is appropriately managed throughout the Company, we have designed the following governance structures:
Board of Directors: Provides oversight of ESG strategy
Chief Executive Officer: Provides executive direction on ESG strategy
Management Leadership: Our Executive Vice President and Chief Human Resource Officer oversees ESG strategy and sustainability efforts
Sustainability Steering Committee: Senior leaders from law, finance, supply chain, environmental management, corporate relations and investor relations meet quarterly to drive decision-making, accountability and ownership of specific ESG initiatives
Our ESG Strategy
In 2020, we reinforced our commitment to a more sustainable future by introducing our environmental, social and governance (ESG) strategy: Building a Sustainable Future 2030.
Built on four areas of concentration – Engaging Employees, Sustainable Solutions, Protecting the Environment and Strengthening Communities – our strategy is designed to address the evolving needs of our stakeholder groups over the next decade and is more inclusive of the overall impact we can have. It builds on our foundation of safety as our No. 1 priority and addresses our most material issues, while aligning with our commitment to the United Nation’s Sustainable Development Goals (SDGs).
The COVID-19 pandemic taught the world about the importance of resiliency, and, in many cases, businesses like Union Pacific reacted faster than governments to support employees, supply chains and communities. As a critical part of America’s infrastructure, we played a key role ensuring continuity of functions to support public health and safety, as well as delivering materials to support hospitals, stock grocery store shelves, purify water, make medicine and feed livestock. These responsibilities and our ability to be agile in responding to evolving customer and community needs will continue to be critical long into the future as we face the impacts of climate change, social injustice and other global crises.
More information about the Company’s ESG goals in each of these four areas can be found in the Company’s 2020 Building America Report which will be available in early May 2021. The Company’s prior Building America Reports are available on our website www.up.com under the Investors caption link by selecting “Sustainability.” Please note that information contained on our website is not incorporated by reference in this Proxy Statement or considered to be part of this document.

Investing in Our Workforce. Our employees are passionate about their role in Building America. We believe the work that every employee does matters, and how the work is accomplished is just as important as producing results and achieving goals. Every employee’s career path is unique, from working on or with trains to in an office setting. At Union Pacific, our goal is to help employees develop skill sets enabling them to grow, move into positions across the Company and become experts in their role, leading to fulfilling careers.
Providing employees with fulfilling, family-supporting careers is important to us. We offer competitive compensation to our employees. Our Board of Directors evaluates our compensation plans and reviews recommendations from the Compensation and Benefits Committee. The median annual total compensation for all our employees who were employed as of December 31, 2020, was $99,153.*
*
The median annual compensation reported in the Company’s Form 10-K for the year ended December 31, 2020, was $77,778 and is calculated differently than the $99,153 noted above. The $99,153 includes $21,375 for pre-tax medical premiums and 401(k)/thrift plan contributions.
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ENVIRONMENTAL, SOCIAL & GOVERNANCE (ESG)
Agreement professionals who worked at least 30 days during the pandemic received a one-time $1,000 gross bonus payment in December 2020 in recognition of their critical role during the COVID-19 pandemic.
We are committed to improving and strengthening performance through an inclusive workforce that reflects the diverse markets and communities we serve. Recognizing we still have work to do, we continue to focus on building an inclusive culture, and a talented workforce and marketplace with a goal to reach 40% minority and 11% female representation in total for the Company by 2030.

Driving Sustainable Solutions. By operating a safe, efficient and environmentally responsible rail network, we aim to deliver the best customer experience, create economic strength and grow our business profitably and responsibly, allowing us to invest in the future.
Union Pacific owns and operates more than 32,000 track miles in 23 states across the western two-thirds of the United States. We create economic opportunities for local communities through direct employment with Union Pacific, as well as contributing to prosperity by local employee spending.
The Company’s capital investments create economic opportunity through employment and supply chain activity and represent investments in building a rail network that supports sustainable economic growth for generations to come. The more we invest in building a safe and efficient railroad today, the better our infrastructure can support communities going forward.


Championing Environmental Stewardship. A healthy environment is an essential foundation for a strong country and a vibrant economy. Our vision of Building America involves protecting and strengthening this foundation.
Railroads are one of the most fuel efficient means of transportation. Today, Union Pacific moves a ton of freight 454 miles on a single gallon of fuel and rail remains the most environmentally responsible way to move freight, cutting greenhouse gas (GHG) emissions by up to 75% compared to commercial trucks. While our ESG strategy supports Union Pacific’s corporate strategy to be the best freight railroad in North America, it leverages our expertise and enables further sustainable growth across our supply chain.
We already can move freight in an environmentally responsible way while enabling sustainable economic growth, but we are not complacent about our operations’ impact. As we work to reduce our GHG emissions, we have set science-based targets to determine how much and how quickly we need to act to support global climate change goals outlined in the Paris Agreement. The agreement encourages all nations to combat climate change by keeping the global temperature rise this century well below 2°C above pre-industrial levels. Our actions also can enable our customers to reduce their carbon footprint and create meaningful global change. In early 2021, the Science Based Targets initiative (SBTi) approved our targets to reduce absolute scope 1 and 2 GHG emissions from our operations 26% by 2030 against a 2018 baseline.


Strengthening Our Communities. Communities are one of Union Pacific’s key stakeholders, and we are committed to serving and investing in their futures. We take tremendous pride in our relationships and efforts to improve the communities where we operate through the Community Ties Giving Program and volunteer efforts. In 2020, we supported nearly 3,000 nonprofit partners, donated more than $26 million to community efforts, and our representatives are members of more than 180 local civic organizations, such as chambers of commerce and economic development organizations. The results lead to safe, prosperous and vibrant communities where people want to live and work.
In the four years since we redefined our philanthropic pillars to focus on safety, workforce development and community spaces, we’ve served approximately 48 million people, 18 million of which are in underserved populations. We believe our impact has a ripple effect and the potential to change future generations.
In 2020, the Company purchased about $423 million in goods and services from more than 275 diverse suppliers in 35 states. Our spending with diverse suppliers grew 29% from 2019 to 2020. Approximately 89% of our strategic suppliers reported purchasing goods and services from diverse suppliers, demonstrating their support for our diversity initiative.
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DIRECTOR COMPENSATION IN FISCAL YEAR 2020
Non-Management Directors’ Fees and Compensation
During 2020, non-employee directors were compensated for their Board service as shown below. Directors who are employees do not receive retainers or any other Board-related compensation.
Annual Retainer: $280,000 ($160,000 annual mandatory deferral into a Stock Unit Account, remainder ($120,000) may be deferred at the director’s election or taken in cash)
Annual Mandatory Deferral: $160,000 of their Annual Retainer deferred in the Stock Unit Account described below
Committee Chair Retainer: $20,000 for each standing Committee chair
Audit Committee Member Retainer: $10,000
Lead Director Retainer: $30,000
In response to declining volumes as a result of the COVID-19 pandemic, on April 17, 2020, the Board approved a 25% reduction applicable to the cash retainer portion ($120,000) and Committee and Lead Director retainer portions of each non-management director’s compensation for the months of May, June, July and August 2020.
Stock Unit Grant and Deferred Compensation Plan for the Board of Directors
Under our Stock Unit Grant and Deferred Compensation Plan for non-management directors, a director may, by December 31 of any year, elect to defer all or a portion of any compensation (in addition to the amount mentioned above that is required to be invested in their Stock Unit Account) for service as a director in the ensuing year or years, excluding reimbursements for expenses. Such deferred amounts may be invested, at the option of the director, in (i) a Fixed Rate Fund administered by the Company, (ii) a Stock Unit Account administered by the Company, or (iii) various notional accounts administered by The Vanguard Group. These accounts are unfunded, unsecured obligations of the Company. The Company Fixed Rate Fund bears interest equal to 120% of the applicable federal long-term rate compounded annually. The Stock Unit Account fluctuates in value based on changes in the price of our common stock, and equivalents to cash dividends paid on the common stock are deemed to be reinvested in the Stock Unit Account. The Vanguard Accounts are subject to earnings and value fluctuations from the investment performance of the notional accounts at Vanguard. Payment of all deferred amounts begins in January of the year following separation from service as a director. Deferred amounts may be paid, at the election of the director, in either a lump-sum or in up to 15 equal, annual installments.
2000 Directors Stock Plan
Under the 2000 Directors Stock Plan (the 2000 Directors Plan) adopted by the shareholders on April 21, 2000, the Company may grant options to purchase shares of our common stock to non-management directors. Upon recommendation of the Corporate Governance and Nominating Committee in September 2007, the Board eliminated the annual grant of options for 2008 and future years. The Company did not award any options to non-management directors in 2020.
Previously, each non-management director, upon election to the Board of Directors, would receive a grant of 4,000 restricted shares of our common stock or restricted share units that represent the right to receive our common stock in the future (which number has been adjusted to reflect the Company’s two-for-one stock splits on May 28, 2008 and June 6, 2014). The restricted shares or share units vest on the date a director ceases to be a director by reason of death, disability or retirement, as defined in the 2000 Directors Plan. During the restricted period, the director has the right to vote such restricted shares and receive dividends or dividend equivalents, but may not transfer or encumber such shares or units. The director would forfeit such shares or units upon ceasing to be a director for any reason other than death, disability or retirement. Effective August 1, 2018, the Board approved the elimination of this initial equity grant for newly elected directors.
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DIRECTOR COMPENSATION IN FISCAL YEAR 2020
Non-Management Director Compensation in Fiscal Year 2020
The following table provides a summary of the compensation of our non-management directors for 2020.
NAME
FEES EARNED
OR PAID IN CASH
STOCK AWARDS (a)
OPTION AWARDS
ALL OTHER
COMPENSATION (b)
TOTAL
COMPENSATION
Andrew H. Card, Jr.
$273,958
$0
$0
$28,536
$302,494
Erroll B. Davis, Jr. (c)
122,084
0
0
29,744
151,828
William J. DeLaney
290,833
0
0
23,292
314,125
David B. Dillon
297,500
0
0
13,452
310,952
Deborah C. Hopkins
279,166
0
0
24,072
303,238
Jane H. Lute
279,166
0
0
26,332
305,498
Michael R. McCarthy
315,834
0
0
26,549
342,383
Thomas F. McLarty III
288,334
0
0
29,147
317,481
Bhavesh V. Patel
270,000
0
0
6,575
276,575
Jose H. Villareal
270,000
0
0
9,115
279,115
Christopher J. Williams
277,499
0
0
1,867
279,366
(a)
The following table provides the outstanding equity awards at fiscal year-end held by all individuals who served as non-management directors in 2020. The Number of Shares in the Vesting Upon Termination column represents the shares granted to each director upon initial election to the Board and required to be held until his or her service as a member of the Board ends.
NAME
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED OPTIONS
NUMBER OF SHARES
VESTING UPON TERMINATION
NUMBER OF UNITS IN
DEFERRED STOCK UNIT ACCOUNT
Andrew H. Card Jr.
0
4,000
32,470
Erroll B. Davis, Jr. (c)
0
4,000 (d)
 39,378 (d)
William J. Delaney
0
0 (e)
2,097
David B. Dillon
0
4,000
8,150
Deborah C. Hopkins
0
4,000
7,248
Jane H. Lute
0
4,000
5,065
Michael R. McCarthy
0
4,000
 54,200
Thomas F. McLarty III
0
4,000
31,805
Bhavesh V. Patel
0
4,000
3,305
Jose H. Villarreal
0
4,000
25,194
Christopher J. Williams
0
0 (e)
1,422
(b)
Excess liability insurance premiums paid in 2020 for each non-management director were $1,549. Under the Company’s charitable matching gift program which is also available to all employees of the Company, the Company matched the following amounts for each director: Mr. Card, $25,000; Mr. Davis, $25,000; Mr. DeLaney, $20,000; Mr. Dillion, $10,000; Ms. Hopkins, $22,500; Ms. Lute, $22,750; Mr. McCarthy, $25,000; Mr. McLarty, $25,000; Mr. Patel, $5,000; and Mr. Villarreal, $5,100. In addition, the Company began paying Nebraska state income taxes on behalf of nonresident directors in 2014 because of their travel to Nebraska required for Company business. The reimbursement covers the incremental cost of these nonresident directors’ taxes. The directors do not claim any tax benefits for the reimbursement in their resident states. The amounts shown in the table reflect additional federal and Nebraska income taxes paid in 2021 for the applicable director’s service, and stock option exercises, if any, during the director’s service in 2020. The Company does not consider this a perquisite and does not gross-up or pay any state income taxes that the directors incur in their normal work locations.
(c)
Mr. Davis retired from the Board on May 14, 2020.
(d)
Mr. Davis’ 4,000 shares vested upon his retirement. Mr. Davis’ Deferred Stock Unit Account was paid out on January 4, 2021.
(e)
Upon recommendation of the Corporate Governance and Nominating Committee, effective August 1, 2018, the Board eliminated the 4,000 share grant to non-management directors upon their election to the Board.
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PROPOSAL NUMBER 2 − Ratification of Appointment of Deloitte & Touche LLP as Independent Registered Public Accounting Firm for the Year Ending December 31, 2021
The Audit Committee has appointed Deloitte & Touche LLP as the independent registered public accounting firm to audit the books and accounts of the Company and its consolidated subsidiaries for the year ending December 31, 2021 and submits this selection for ratification by a vote of shareholders as a matter of good corporate governance. In the event that the Audit Committee’s selection of Deloitte & Touche LLP does not receive an affirmative vote of a majority of the votes cast, the Audit Committee will review its future selection of an independent registered public accounting firm.
The Audit Committee believes that the continued retention of Deloitte & Touche LLP as our independent registered public accounting firm is in the best interests of our shareholders as there are several benefits to the Company of having a long-tenured auditor.
Enhanced Audit Quality. Through more than 50 years of experience with the Company, Deloitte & Touche LLP has gained institutional knowledge and deep expertise regarding the Company’s rail operations and business, accounting policies and practices and internal control over financial reporting.
Competitive Fee Structure. Due to Deloitte & Touche LLP’s familiarity with the Company, audit fees are competitive with peer companies.
Avoids Costs Associated with New Auditor. Onboarding a new independent accountant is costly and requires a significant time commitment that could distract from management’s focus on financial reporting and controls.
The Company expects that a representative of Deloitte & Touche LLP will be present at the Annual Meeting and will have an opportunity to make a statement if such representative desires to do so and will be available to respond to relevant questions by shareholders.
Vote Required for Approval
Ratification of the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2021 requires the affirmative vote of a majority of the votes cast on this proposal at the Annual Meeting.
The Board recommends a vote FOR ratification of the appointment of Deloitte & Touche LLP as independent registered public accounting firm for the year ending December 31, 2021.
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Independent Registered Public Accounting Firm’s Fees and Services
Aggregate fees billed to the Company for services rendered by our independent registered public accounting firm for each of the past two years are set forth below:
 
YEAR ENDED DECEMBER 31,
 
2020
2019
Audit Fees
$3,057,700
$2,974,700
Audit-Related Fees
460,262
509,603
Tax Fees
201,023
244,713
All Other Fees
0
0
Total
$3,718,985
$3,729,016
Audit Fees. Audit services included the integrated audit of financial statements and internal control, quarterly reviews, comfort letters provided in conjunction with the issuance of debt, and agreed-upon procedures performed on the Annual Report R-1 filed by Union Pacific Railroad Company with the Surface Transportation Board.
Audit-Related Fees. Audit-related services included consultation on accounting standards and transactions, audits of employee benefit plans, and audits of subsidiary companies.
Tax Fees. Tax fees included fees for corporate tax planning and consultation services and work performed for international tax compliance.
All Other Fees. No other services were provided to the Company by Deloitte & Touche LLP during the years ended December 31, 2020 and 2019.
Pre-Approval of Audit and Non-Audit Services Policy
The Audit Committee’s charter requires the Committee to approve in advance all audit engagement fees and the terms of all audit services to be provided by the independent registered public accounting firm. By approving the engagement, which is performed in conjunction with the first Board meeting of each year, the audit services are deemed pre-approved. As part of its pre-approval policy, the Committee considers whether the provision of any proposed non-audit services is consistent with auditor independence. With respect to non-audit services provided by the independent registered accounting firm, the Audit Committee adopted and observes procedures that require the independent registered public accounting firm to present a budget for the three categories of non-audit services: (i) audit-related services, (ii) tax services and (iii) other services. The budget is detailed as to the particular services to be provided so that the Committee knows what services it is being requested to pre-approve in order to facilitate a well-reasoned assessment of the impact of the services on the auditor’s independence. After review and approval of the annual budget by the Committee, no further approval by the Committee is required to undertake specific projects within the three categories of non-audit services.
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Audit Committee Report
The Audit Committee has reviewed and discussed with management the Company’s audited consolidated financial statements for the year ended December 31, 2020. The Committee has discussed with the Company’s independent registered public accounting firm, Deloitte & Touche LLP, the matters required to be discussed with the Audit Committee under applicable Public Company Accounting Oversight Board (PCAOB) standards and SEC Rule 2-07 of Regulation S-X. The Committee also has received the written disclosure and correspondence from Deloitte & Touche LLP required by applicable requirements of the PCAOB regarding Deloitte & Touche LLP communications with the Committee concerning independence and has discussed their independence with them. Based on the foregoing reviews and discussions, the Committee recommended to the Board that the audited financial statements referred to above be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, for filing with the SEC.
The Audit Committee
David B. Dillon, Chair
William J. DeLaney
Deborah C. Hopkins
Jane H. Lute
Christopher J. Williams
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PROPOSAL NUMBER 3 − Advisory Vote to Approve Executive Compensation
The Board of Directors asks shareholders to support a non-binding, advisory resolution approving the Company’s executive compensation as reported in this Proxy Statement.
We design our executive compensation programs to support the Company’s long-term success. As described below in the Compensation Discussion and Analysis section of this Proxy Statement, the Compensation and Benefits Committee has structured the Company’s executive compensation programs to achieve key Company goals and objectives. We believe our compensation philosophy allows us to link realized pay to performance measures and reward management efforts that produce consistent, long-term performance accompanied with effective risk management and execution of the Company’s strategy.
The year 2020 was marked with uncertainty and challenge. The COVID-19 pandemic impacted our country and its economy and our Company’s business. Our freight revenues decreased 10% year-over-year driven primarily by a volume decline of 7%. Although the environment we operated in changed due to COVID-19, we continued our operational transformation. This was evident as our key performance indicators improved substantially year-over-year. Highlights of the Company’s 2020 operational and financial performance include:
For the full year 2020, net income was $5.3 billion or $7.88 per diluted share. Excluding the effects of the $278 million one-time non-cash impairment charge related to the Company’s Brazos yard investment, adjusted full year net income was $5.6 billion, or $8.19 per diluted share compared to $5.9 billion, or $8.38 per diluted share, in 2019*;
Despite the challenges presented by COVID-19, our operational transformation produced a full-year operating ratio of 59.9%, and when adjusted for the one-time non-cash impairment charge was a best-ever 58.5%*; and
Substantial improvement in key performance indicators year-over-year. For example, transportation plan changes to eliminate switches and improved terminal processes drove an 8% improvement in freight car terminal dwell. Improved dwell coupled with 3% faster average train speed led to a 6% improvement in freight car velocity. We also saw a 14% improvement in locomotive productivity and 11% improvement in work force productivity.
The Board urges shareholders to read the Compensation Discussion and Analysis, beginning on page 54 of this Proxy Statement, which describes in more detail how our executive compensation policies and procedures, including many best practices, operate and are designed to align compensation with our Company strategy, goals and objectives. Shareholders should also review the Summary Compensation Table and related compensation tables and narrative, appearing on pages 72 through 87, which provide detailed information regarding the compensation of our Named Executive Officers. The Compensation and Benefits Committee and the Board of Directors believe that the policies and procedures articulated in the Compensation Discussion and Analysis create effective incentives for achieving Company goals, including returns to shareholders, and that the compensation of our Named Executive Officers reported in this Proxy Statement has supported and directly contributed to the Company’s performance and success.
In accordance with Section 14A of the Securities Exchange Act of 1934, and as a matter of good corporate governance, the Board asks shareholders to approve the following advisory resolution at the Annual Meeting:
RESOLVED, that the shareholders of Union Pacific Corporation (the Company) approve, on an advisory basis, the compensation of the Company’s Named Executive Officers disclosed in the Compensation Discussion and Analysis, the Summary Compensation Table and the related compensation tables and narrative in the Proxy Statement for the Company’s 2021 Annual Meeting of Shareholders.
This advisory resolution, commonly referred to as a “say on pay” resolution, is non-binding on the Board of Directors. Although non-binding, the Board and the Compensation and Benefits Committee will review and consider the voting results when evaluating the Company’s executive compensation programs.
The Company currently holds an advisory vote on the compensation of the Company’s NEOs on an annual basis (in accordance with results of the advisory vote held at the Company’s 2017 Annual Meeting to determine the frequency of an advisory vote on NEO compensation), and will continue to hold the vote annually until the next frequency vote is held (which is not required until 2023).
The Board of Directors recommends a vote FOR the advisory resolution to approve executive compensation.
*
2020 adjusted to exclude the impact of the Brazos one-time non-cash impairment charge. See Appendix A for a reconciliation to GAAP.
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PROPOSAL NUMBER 4 – Adoption of Union Pacific Corporation 2021 Stock Incentive Plan
Introduction
On March 25, 2021, the Board of Directors approved and recommended for submission to the shareholders for their adoption the Union Pacific Corporation 2021 Stock Incentive Plan (the Incentive Plan). The approval by an affirmative vote of a majority of the votes cast on the proposal (either in person or by proxy) is required for adoption.
The Board of Directors believes that the adoption of the Incentive Plan is desirable because it will promote and closely align the interests of employees of the Company and its shareholders by providing the ability for the Company to award to employees stock-based compensation and other performance-based compensation. The Board of Directors believes the Incentive Plan promotes the Company’s ability to drive performance, which the Board of Directors believes enhances long-term shareholder value; increases employee stock ownership; and enables the Company to attract and retain an outstanding employee and executive team. If our shareholders approve the adoption of the Incentive Plan, no new awards may be granted under the Prior Plans (as described below), although outstanding awards under the Prior Plans will continue to be administered pursuant to their terms.
A maximum of 23,000,000 shares plus
any shares subject to outstanding awards under any Prior Plans (as described below) as of December 31, 2020 that after such date cease for any reason to be subject to such awards (other than by reason of exercise or settlement of the awards to the extent they are exercised for or settled in vested and nonforfeitable shares), less
any shares subject to awards made under the Prior Plans made after December 31, 2020 (subject to adjustments as described below)
will be available for grants of stock options and stock awards under the Incentive Plan. The approval of the Incentive Plan represents a net reduction in the shares available for grant. None of the 68,497,205 from the 2013 Stock Incentive Plan will be available under the new Incentive Plan.
The Board of Directors believes that this number of shares represents a reasonable amount of potential equity dilution in light of the purposes of the Incentive Plan as described above. The 23,000,000 shares available under the Incentive Plan would represent approximately 3.4% of fully diluted common stock outstanding as of December 31, 2020.
The following summary of the Incentive Plan is qualified in its entirety by reference to the complete text of the Incentive Plan as set forth in Appendix B to this Proxy Statement. You should read the complete text of the Incentive Plan for more details regarding the operation of the Incentive Plan.
Information Regarding Grants Made Under Prior Plans
The Company has historically granted equity awards under various plans, including most recently the 2013 Stock Incentive Plan and the 2004 Stock Incentive Plan (together, the Prior Plans). If the Incentive Plan is approved by the Company’s shareholders as proposed, no further awards will be made under the 2013 Stock Incentive Plan, and no awards have been made under the 2004 Stock Incentive Plan since the approval of the 2013 Stock Incentive Plan. We also have awards outstanding under the 2000 Directors Plan.
Information as of December 31, 2020, regarding overhang from awards outstanding under the Prior Plans and the 2000 Directors Plan is summarized in the following table:
Award
Number Outstanding
Weighted Average
Exercise Price
Weighted Average
Remaining Term
Options
2,568,542    
$132.47
​6.4 years
Full Value Awards (1)
2,281,201 (1)
N/A
​N/A
Total Overhang
    10.0% (2)
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(1)
Full-Value Awards are awards other than stock options and stock appreciation rights. Includes performance stock units granted at the maximum amount to be achieved. Includes 1,359,165 retention shares already issued and outstanding. Includes 32,000 shares already issued and outstanding under the 2000 Directors Plan.
(2)
After the 2013 Stock Incentive Plan is no longer in effect, total overhang is only 5.5% assuming the approval of 23 million shares under the 2021 Stock Incentive Plan and 10 million shares under the 2021 Employee Stock Purchase Plan.
One means of evaluating the long-term dilution from equity compensation plans is to monitor the number of equity awards granted annually, commonly referred to as “burn rate.” As shown in the following table, the Company’s three-year average annual burn rate calculated using Institutional Shareholder Services (ISS) methodology has been .32%, which is below the ISS burn rate benchmark of 2.0% applied to our industry.
Fiscal Year
Options
Granted
Total Full-
Value Awards
Time-based
Full-Value
Awards granted (1)
Perf-based
Full-Value
Awards earned
Weighted
Avg. CSO
Burn
Rate
2020
558,000
654,000
315,000
339,000
677,300,000
0.32%
2019
573,000
653,000
384,000
269,000
703,500,000
0.31%
2018
800,000
637,000
542,000
95,000
750,900,000
0.32%
(1)
Total Granted calculation is based on the ISS methodology of weighing performance stock units and retention stock awards more heavily than options, using a 2.5:1 ratio.
Key Features of the Incentive Plan
Limitation on shares requested. The maximum number of shares available for grant under the Incentive Plan is 23,000,000 shares, plus any shares that are subject to outstanding awards under the Prior Plans as of May 13, 2021 that after such date are canceled, expired, forfeited or otherwise not issued under the Prior Plans or settled in cash, minus any shares that are subject to awards granted after December 31, 2020 under the Prior Plans, in each case adjusted as described in the Incentive Plan. If our shareholders approve the adoption of the Incentive Plan, no new awards may be granted under the Prior Plans, although outstanding awards under the Prior Plans will continue to be administered pursuant to their terms.
Limitation on term of stock option grants. The term of each stock option will not exceed ten years.
Fungible share counting formula. Shares issued pursuant to stock options and stock appreciation rights (SARs) will count against the number of shares available for issuance under the Incentive Plan on a one-for-one basis, whereas each share issued pursuant to all other awards will count against the number of shares available for issuance under the Incentive Plan as 2 shares.
Limitation on share recycling. Shares surrendered for the payment of the exercise price or withholding taxes under stock options or SARs, shares subject to SARs not issued upon net settlement of such awards, and shares repurchased in the open market with the proceeds of an option exercise, may not again be made available for issuance under the Incentive Plan.
No repricing or grant of discounted stock options. The Incentive Plan prohibits the repricing of options or SARs without shareholder approval by reducing the exercise price or cancelling and re-granting or exchanging the option or SAR for cash or a new award with a lower (or no) exercise price. The Incentive Plan also prohibits the granting of stock options or SARs with an exercise price less than the fair market value of the Company’s stock on the date of grant.
No reload stock options. Stock options under the Incentive Plan will not be granted in consideration for and will not be conditioned upon the delivery of shares to the Company in payment of the exercise price or tax withholding obligation under any other stock option.
No evergreen provision. There is no “evergreen” feature pursuant to which the shares authorized for issuance under the Incentive Plan can be increased automatically without shareholder approval.
Description of the Incentive Plan
Eligibility. The officers, executives, and other employees of the Company and its subsidiaries will be eligible to participate in the Incentive Plan. The Company’s non-employee directors will not be eligible to participate in the Incentive Plan.
Administration. The Incentive Plan will be administered by the Compensation and Benefits Committee or such other committee as designated by the Board of Directors (the Committee). The Committee may grant awards
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to eligible persons and, to the extent permitted by applicable law, may delegate to (i) one or more subcommittees consisting of one or more directors and/or officers of the Company any of the authority of the Committee under the Incentive Plan or (ii) one or more officers, the right to grant awards in accordance with the terms of the Incentive Plan. The Committee may further designate or delegate to one or more additional officers or employees of the Company or any subsidiary, and/or to one or more agents, authority to assist the Committee in any or all aspects of the day-to-day administration of the Incentive Plan and/or of the awards granted under the Incentive Plan. The Committee has broad authority, as stated in the Incentive Plan, to interpret and administer the Incentive Plan and related agreements and documents and to take various other actions with respect thereto.
Shares Available Under the Incentive Plan
Subject to adjustment as provided for in the Incentive Plan, the number of shares of the Company’s common stock subject to grants under the Incentive Plan will not exceed in the aggregate:
23,000,000 shares, plus
any shares that were subject to outstanding awards under the Prior Plans as of May 13, 2021 that are subsequently canceled, expired, forfeited or otherwise not issued under a Prior Plan or are settled in cash (such shares to be added to the number of shares issuable under the Incentive Plan as one share of stock if such shares were subject to options or SARs under the Prior Plans and as 2 shares of stock if such shares were subject to awards other than options or SARs under the Prior Plans), minus
any shares subject to awards made under the Prior Plans after May 13, 2021.
These share authorizations are affected by various provisions in the Incentive Plan, as discussed below under “Share Counting” and “Other Provisions—Adjustments.” The shares may be authorized and unissued shares or shares that were reacquired by the Company, including shares purchased in the open market, or a combination of the foregoing. After the effective date of the Incentive Plan, no awards may be granted under the Prior Plans, although outstanding awards under the Prior Plan will continue to be administered pursuant to their terms.
Share Counting
Under the Incentive Plan, each share of the Company’s common stock that is subject to a stock option or SAR counts against the aggregate Incentive Plan limit as one share, and each share of the Company’s common stock that is subject to an award other than a stock option or SAR under the Incentive Plan counts against the aggregate Incentive Plan limit as 2 shares. However, for each share subject to an award that is forfeited, expires or is settled for cash (in whole or in part) under the Incentive Plan, or after the effective date under the Prior Plans, one share will be added back to the aggregate Incentive Plan limit for such share subject to a stock option or SAR, and 2 shares will be added back to the aggregate Incentive Plan limit for such share subject to an award other than a stock option or SAR. The number of shares available for grant under the Incentive Plan will not be increased by the following:
any shares of the Company’s common stock tendered by a participant or withheld by the Company in full or partial payment of the exercise price of stock options or the full or partial satisfaction of a tax withholding obligation on any stock option or SAR under either the Incentive Plan or the Prior Plans;
any shares of the Company’s common stock subject to a SAR granted under either the Incentive Plan or the Prior Plans that is not issued when the SAR is exercised and settled in the Company’s common stock; and
any shares of the Company’s common stock reacquired by the Company on the open market or otherwise using cash proceeds from the exercise of stock options granted either under the Incentive Plan or the Prior Plans.
Shares of the Company’s common stock issued as substitution awards (as defined in the Incentive Plan) in connection with any merger with or acquisition of a company will not decrease the number of shares available for grant under the Incentive Plan, but shares of the Company’s common stock subject to substitution awards will not be available for further awards under the Incentive Plan if the substitution awards are forfeited, expire or settled in cash. The Company may use shares under a pre-existing, shareholder-approved plan of a company acquired by the Company for awards under the Incentive Plan, which shares will not decrease the
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number of shares available for grant under the Incentive Plan, but consistent with New York Stock Exchange rules, such shares may only be used for grants of awards made prior to the expiration of the pre-existing plan and to persons who were not employees or directors of the Company or any subsidiary prior to such acquisition.
Repricing Prohibited
The Committee may not, without the approval of the Company’s shareholders, authorize the amendment of any outstanding stock option or SAR to reduce the exercise or base price, and no outstanding stock option or SAR may be cancelled in exchange for stock options, SARs or other awards having a lower (or no) exercise or base price, or cancelled in exchange for cash. However, the foregoing provision does not apply in connection with an adjustment involving a corporate transaction or event as provided in the Incentive Plan.
Types of Awards Authorized Under the Incentive Plan
Stock Options and Stock Appreciation Rights. The Committee may award stock options in the form of nonqualified stock options or incentive stock options, and SARs, each with a maximum term of ten years. The Committee will establish the vesting schedule for stock options and SARs and the method of payment for the exercise price, which may include cash, shares, or other awards.
Retention Shares and Stock Units. The Committee may award retention shares and stock units and establish the applicable restrictions thereon (which may include performance criteria and level of achievement versus these criteria), including any limitation on voting rights or the receipt of dividends or dividend equivalents. The Committee will establish the manner and timing under which restrictions may lapse. The Committee may decide to include dividends or dividend equivalents as part of an award of retention shares or stock units and may accrue dividends or dividend equivalents, as applicable, with or without interest, until the award is paid. However, in no event will dividends or dividend equivalents be paid during the performance period with respect to retention share or stock unit awards that are subject to performance-based vesting criteria.
Incentive Bonuses. The Committee may establish performance criteria and level of achievement versus these criteria that shall determine the amount payable under an incentive bonus. Payment of the amount due under an incentive bonus may be denominated in cash or shares as determined by the Committee. Performance criteria mean any measures, as determined by the Committee, which may be used to measure the level of performance of the Company or a participant during a performance period.
Other Provisions
Limitations on Transfer. Awards are not transferable other than by will or the laws of descent and distribution unless determined otherwise by the Committee. Awards may not be pledged or otherwise encumbered.
Amendments. The Board of Directors may alter, amend, suspend or terminate the Incentive Plan from time to time subject to approval by the Company’s shareholders if required by applicable law, including the rules and regulations of the principal U.S. national securities exchange on which shares of the Company’s common stock are traded. The Committee may waive conditions or amend the term of awards, or otherwise amend or suspend awards already granted subject to certain conditions.
Adjustments. In the event of certain corporate transaction or events affecting the number or type of outstanding common shares of the Company, including, for example, a dividend or other distribution (whether in cash or stock), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of shares or issuance of warrants, the Committee will make adjustments as it deems appropriate. These adjustments include changing the number and type of shares to be issued under the Incentive Plan and outstanding awards; changing the per-participant limitations on awards and the grant, purchase or exercise price of outstanding awards; and changing the limitations on the total amount of retention shares, stock units, performance awards or other stock-based award that may be granted. The Committee may also make adjustments in the terms of awards in connection with certain acquisitions, and make adjustments in performance award criteria or in the terms and conditions of other awards in recognition of unusual or nonrecurring events affecting the company or its financial statements or of changes in applicable laws, regulations, or accounting principles.
Treatment upon a Change in Control. Unless otherwise expressly provided for in an award agreement or another contract, including an employment agreement, severance agreement or severance plan, or under the
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terms of a transaction constituting a Change in Control (as defined in the Incentive Plan), in the event of an involuntary termination (i.e., other than termination as a result of disability, cause or gross misconduct) within 24 months following a Change in Control, the following shall occur: (i) outstanding stock options and stock appreciation rights shall become fully vested and may be exercised for a period of three years following such termination; (ii) outstanding awards subject to qualifying performance criteria, as described above, shall be converted into the right to receive a payment based on performance through a date determined by the Committee prior to the Change in Control (unless such performance cannot be determined, in which case the grantee shall have the right to receive a payment equal to the target amount payable), and (iii) outstanding retention shares and/or stock units shall become fully vested. In the event of a Change in Control in which the acquiring or surviving company in the transaction does not assume or continue outstanding awards upon the Change in Control, immediately prior to the Change in Control, all awards that are not assumed or continued shall be treated as follows effective immediately prior to the Change in Control: (i) outstanding options or stock appreciation rights shall become fully vested and exercisable; (ii) outstanding awards subject to qualifying performance criteria, as described above, shall be converted into the right to receive a payment based on performance through a date determined by the Committee prior to the Change in Control (unless such performance cannot be determined, in which case the grantee shall have the right to receive a payment equal to the target amount payable); and (iii) outstanding retention shares and/or stock units shall become fully vested.
Federal Income Tax Consequences
This general discussion of the U.S. federal income tax consequences of stock options that may be awarded under the Incentive Plan is intended for the information of shareholders considering how to vote with respect to this proposal and not as tax guidance to participants in the Incentive Plan. Different tax rules may apply to specific participants and transactions under the Incentive Plan, particularly in jurisdictions outside the United States. In addition, this discussion does not address other federal or state tax issues that may be implicated by awards that may be granted under the Incentive Plan.
The grant of an option or stock appreciation right will create no U.S. federal income tax consequences for the participant or the Company. A participant will have no taxable income upon exercise of an incentive stock option, except that the alternative minimum tax may apply. Upon exercise of an option other than an incentive stock option, a participant generally must recognize ordinary income equal to the fair market value of the shares acquired minus the exercise price. Upon a disposition of shares acquired by exercise of an incentive stock option before the end of the applicable incentive stock option holding periods, the participant generally must recognize ordinary income equal to the lesser of (i) the fair market value of the shares at the date of exercise minus the exercise price or (ii) the amount realized upon the disposition of the incentive stock option shares minus the exercise price. Otherwise, a participant’s disposition of shares acquired upon the exercise of an option (including an incentive stock option for which the incentive stock option holding periods are met) generally will result in only capital gain or loss.
Other awards under the Incentive Plan, including non-qualified options and stock appreciation rights, generally will result in ordinary income to the participant at the later of the time of delivery of cash, shares, or other awards, or the time that either the risk of forfeiture or restriction on transferability lapses on previously delivered cash, shares, or other awards.
The Company generally will be entitled to a tax deduction equal to the amount recognized as ordinary income by the participant in connection with an option, stock appreciation rights, or other award, but will be entitled to no tax deduction relating to amounts that represent a capital gain to a participant. Thus, the Company will not be entitled to any tax deduction with respect to an incentive stock option if the participant holds the shares for the incentive stock option holding periods. Under Section 162(m) of the Code, the annual compensation paid to certain current or former executive officers generally will be deductible only to the extent that it does not exceed $1.0 million.
New Plan Benefits
The benefits that will be awarded or paid under the Incentive Plan are not currently determinable. Such awards are within the discretion of the Committee, and the Committee has not determined future awards or who might receive them.
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Equity Compensation Plan Information
The following table summarizes the equity compensation plans under which UPC common stock may be issued as of December 31, 2020 under the 2013 Stock Incentive Plan and the 2000 Directors Plan:
 
Column (a)
Column (b)
Column (c)
Plan Category
Number of securities
to be issued upon
exercise of
outstanding options,
warrants and rights
Weighted-average
exercise price of
outstanding options,
warrants and rights
Number of securities remaining
available for future issuance
under equity compensation
plans (excluding securities
reflected in column (a))
Equity compensation plans approved by security holders
 3,230,585  (1)
​$132.49  (2)
 69,867,405  (3)
Total
3,230,585
​$132.49
69,867,405
(1)
Includes 662,043 retention units that do not have an exercise price. Includes 32,000 shares subject to director awards that have been fully expensed. Does not include 1,359,165 retention shares that have been issued and are outstanding.
(2)
Does not include the retention units, director awards or retention shares described above in footnote 1.
(3)
Includes 68,497,205 shares available for issuance under the 2013 Stock Incentive Plan and 1,370,200 shares available for issuance under the 2000 Directors Plan. If the Incentive Plan is approved by the Company’s shareholders as proposed, no further awards will be made under the 2013 Stock Incentive Plan.
The Board of Directors recommends a vote FOR the proposal to approve the 2021 Stock Incentive Plan.
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PROPOSAL NUMBER 5 – Adoption of Union Pacific Corporation 2021 Employee Stock Purchase Plan
Introduction
On March 25, 2021, the Board of Directors approved and recommended for submission to the shareholders for their adoption the Union Pacific Corporation 2021 Employee Stock Purchase Plan (the ESPP). The approval by an affirmative vote of a majority of the votes cast on the proposal (either in person or by proxy) is required for adoption.
Union Pacific has a large workforce of unionized employees and the ESPP offers a straightforward method that enables employees to participate in the future success of the Company by purchasing shares of Union Pacific Corporation common stock. The ESPP is also intended to align their interests with the Company and our shareholders. The Board of Directors believes that the adoption of the ESPP is desirable because it will secure for the Company and its shareholders the benefits of the incentive inherent in ownership of common stock by present and future employees of the Company and its subsidiaries and affiliates.
A maximum of 10,000,000 shares will be available for issuance under the ESPP. The Board of Directors believes that this number of shares represents a reasonable amount of potential equity dilution in light of the purposes of the ESPP as described above. The 10,000,000 shares available under the ESPP would represent approximately 1.5% of fully diluted common stock outstanding as of December 31, 2020. Shares issued under the ESPP may consist of newly issued shares, shares acquired from treasury held by the Company, or shares purchased on the open market.
The following summary of the ESPP is qualified in its entirety by reference to the complete text of the ESPP as set forth in Appendix C to this Proxy Statement. You should read the complete text of the ESPP for more details regarding the operation of the ESPP.
Description of the ESPP
Eligibility. All individuals who are actively employed by the Company and its subsidiaries and, to the extent designated by the Committee, affiliates and are customarily paid through the Company’s regular payroll are eligible to participate in the ESPP, which excludes non-employee directors, independent contractors, leased employees, and student or interns hired to work on a short-term basis.
Administration. The ESPP will be administered by the Compensation and Benefits Committee or such other committee (including one or more officers of the Company) as designated by the Board of Directors (the Committee). The Committee has the authority to take any and all actions necessary to implement the ESPP and to interpret the ESPP, to prescribe, amend and rescind rules and regulations relating to the ESPP, and to make all other determinations necessary or advisable in administering the ESPP. All of such actions, interpretations and determinations shall be final and binding upon all persons.
Purchase of Shares. Each eligible employee may elect regular payroll deductions up to any maximum determined by the Committee to be used to purchase shares of common stock at monthly intervals (or at such other times as determined by the plan administrator). The total amount of payroll deductions for a participating employee may not exceed $15,000 in any calendar year (or such other limit determined by the Committee). A participating employee may elect at any time to increase, decrease, or eliminate his or her regular payroll deduction. Shares of common stock are purchased under the ESPP on the 15th day of each month (or the most recent business day) (aninvestment date”), or at such other times as determined by the Committee.
Matching Contribution; Purchase Price. Each employee who participates in the ESPP will receive a matching contribution from the Company equal to 40% of the amount of such employee’s contributions to the ESPP for the first 5% of the participating employee’s base compensation in each payroll period that is contributed. This matching contribution is combined with the participating employee’s contributions and used to purchase common stock under the ESPP at a purchase price equal to the fair market value of the common stock on the applicable investment date.
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Holding Requirement. All shares purchased under the ESPP may not be sold or transferred by the participant until the first to occur of (i) the participant’s termination of employment for any reason or (ii) the first anniversary of the investment date.
Effect of Termination of Employment. If an eligible employee’s employment is terminated for any reason (including death), any amount withheld prior to such termination will be used to purchase shares on the next investment date, unless the participating employee (or beneficiary) elects to receive such amount in cash.
Change in Capital Structure. In the event of a stock dividend, spin-off, stock split or combination of shares, recapitalization or merger in which the Company is the surviving corporation or other change in the common stock (including, but not limited to, the creation or issuance to shareholders generally of rights, options or warrants for the purchase of common stock or preferred stock of the Company), the number and kind of shares of stock or securities of the Company to be subject to the ESPP, the maximum number of shares or securities that may be delivered under the ESPP, the purchase price and other relevant provisions shall be appropriately adjusted by the Committee, whose determination shall be binding on all persons.
Amendment and Termination. The Board of Directors in its sole discretion may at any time amend the ESPP in any respect provided that such amendment is in compliance with all applicable laws and regulations and the requirements of any national securities exchange on which shares of common stock are then traded. The ESPP will terminate on the investment date that participants become entitled to purchase a number of shares greater than the number of reserved share remaining available for purchase or at any earlier date determined by the Board of Directors.
Federal Income Tax Consequences
The ESPP is not a tax-qualified employee stock purchase plan under Internal Revenue Code section 423.
This general discussion of the U.S. federal income tax consequences of participation in the ESPP is intended for the information of shareholders considering how to vote with respect to this proposal and not as tax guidance to participants in the ESPP. Different tax rules may apply to specific participants and transactions under the ESPP, particularly in jurisdictions outside the United States. In addition, this discussion does not address other federal or state tax issues that may be implicated by participation in the ESPP.
On the date of each payroll contribution, a participant will have ordinary income equal to amount of the Company-paid match described above. The employee’s tax capital gains holding period will commence on the investment date. The Company is entitled to a deduction for amounts taxed as ordinary income to an employee.
New Plan Benefits
Future benefits available under the ESPP are subject to the participation level of the employees and to the Company’s stock price at the time of any purchases and therefore are not determinable at this time.
The Board of Directors recommends a vote FOR the proposal to approve the 2021 Employee Stock Purchase Plan.
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A LETTER FROM OUR COMPENSATION AND BENEFITS COMMITTEE
Dear Fellow Union Pacific Shareholder:
We thank you for your continued support of Union Pacific. As directors and members of the Compensation and Benefits Committee, we are committed to implementing compensation programs that pay for performance, that attract and retain key executives critical to the success of our business, and that align our management team with the Company’s strategic goals and our shareholders’ long-term interests. We remain committed to this compensation philosophy in times of economic downturn or market disruption.
Over the past year, the COVID-19 pandemic has challenged companies, including Union Pacific, and has tested the quality of the Company’s management team and revealed how quickly they must, and indeed did, adapt in order for the Company to emerge stronger and more resilient from the current pandemic. During this time, the management team has demonstrated its ability to prioritize the safety of employees, customers and communities the Company serves and to communicate frequently and transparently with employees and customers while operating a resilient and essential enterprise.
As a Committee, we are focused on retaining and recognizing this critical team through compensation programs that continue to incentivize performance and align with the Company’s strategic goals and shareholders’ long-term interests.
COVID-19 & 2020 Results
The year 2020 was marked by uncertainty as the COVID-19 pandemic impacted our country, our economy and Union Pacific. The pandemic caused a dramatic economic slowdown as businesses transformed their operations to protect the health and safety of their employees, customers, and communities. The Company was also affected by the temporary suspension of automotive production and disruption of supply chains between Asia and the United States driving declines in intermodal shipments. While the second quarter was impacted the most, and volumes improved sequentially from that quarter, some market segments continued to lag and freight revenues decreased 10% year-over-year driven primarily by a volume decline of 7%.
Despite all of these challenges presented by the pandemic, the Company continued to deliver solid financial performance. For the full year 2020, net income was $5.3 billion or $7.88 per diluted share. Excluding the effects of the $278 million one-time non-cash impairment charge related to the Company’s Brazos yard investment, adjusted full year net income was $5.6 billion or $8.19 per diluted share, compared to $5.9 billion or $8.38 per diluted share in 2019.* The full year operating ratio of 59.9% when adjusted for the impairment charge was a best-ever 58.5%.* Additionally, through the continued implementation of precision scheduled railroading principles, the Company made year-over-year improvements in all operating key performance indicators.
In 2020, Union Pacific returned $6.3 billion to its shareholders in the form of dividends and share repurchases.
Our Fiscal 2020 Compensation Decisions
In response to declining volumes as a result of the COVID-19 pandemic, on April 17, 2020, our Board approved a 25% reduction in base salary for each of the Named Executive Officers (NEOs) for the months of May, June, July and August 2020. As freight traffic began to rebound in the third quarter of 2020, the Board discontinued the 25% reduction to base salary for each of the NEOS, except for Mr. Fritz, for the month of August.
For 2020, the NEOs’ formula-based incentive cash program (the 2020 Annual Incentive Plan) was similar to 2019 with eighty percent (80%) of the target annual incentive cash bonus based on two equally weighted key performance metrics: operating income and operating ratio. The remaining 20% of an executive’s target incentive cash bonus was based on the Committee’s evaluation of the Company’s performance against pre-established business objectives and individual executive performance in the key areas identified in the Company’s strategy wheel set forth on page 65 of the Compensation Discussion & Analysis (CD&A).
After thorough deliberation and consideration, including discussions with the Committee’s compensation consultant, the Committee made three adjustments to the Company’s 2020 Annual incentive Plan:
*
2020 adjusted to exclude the impact of the Brazos one-time non-cash impairment charge. See Appendix A for a reconciliation to GAAP.
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(i) exclusion of the second quarter, which was the most heavily disrupted by the COVID-19 pandemic, including pro-rating the results for the remaining periods to reflect the exclusion, (ii) exclusion of the one-time non-cash impairment charge related to the Company’s Brazos yard investment, and (iii) exclusion of insurance proceeds received in 2020 as a result of 2019 weather events.
These adjustments to the calculation of our formulaic bonus program under the Company’s 2020 Annual Incentive Plan are detailed beginning on page 62 of the CD&A. The Committee believes that the exclusion of the second quarter appropriately recognizes how the management team adapted to the COVID-19 pandemic, protected the Company’s employees, customers and communities it serves, and continued to make significant productivity and operational improvements even in the face of the sudden and unprecedented decline in freight volumes and market disruption as a result of the pandemic. Additionally, the Committee reviewed the one-time non-cash impairment charge, and determined it was appropriate to exclude, because it related solely to a change in strategic direction for the Company as a result of the implementation of Unified Plan 2020. The Committee also excluded the weather related insurance proceeds the Company received in 2020, since it had excluded the effect the extraordinary weather events when calculating annual incentive plan results for 2019. These adjustments resulted in annual incentive bonus payouts for 2020 at 75% of target for Mr. Fritz and Mr. Rocker, 78% of target for Ms. Hamann, and 80% of target for Ms. Whited.
As described on page 58 of the CD&A, due to Mr. Vena’s critical role in the implementation of Unified Plan 2020, the Committee recommended, and the Board approved, a second $4 million performance-based long-term incentive grant in March of 2020. The 2020 grant consisted of 40% stock options and 60% performance stock units, with a two year vesting period, and the number of performance stock units payable based on the Company’s 2020 operating ratio. The Committee also recommended, and the Board approved, an annual incentive bonus for 2020 for Mr. Vena at 100% of target, vesting of the second tranche of his 2019 performance stock unit award at 100% of target, and vesting of the first tranche of his 2020 performance stock unit award at 100% of target. We are proud of the progress that the Company made under Mr. Vena’s operational leadership and thank him for his contributions in establishing and integrating precision scheduled railroading principles in our operations. As we previously announced, Mr. Vena transitioned to Senior Advisor to the Chairman effective January 1, 2021, and will remain at the Company through June 30, 2021.
Long-term equity incentives remain an integral part of our compensation program, as we believe they support alignment of our executives’ interests with the interests of our shareholders. The 2020 equity grants for the NEOs consisted of 60% performance stock units (PSUs) and stock options constituted the remaining 40% of award values. The performance period for the 2018 PSUs ended in 2020, and participating executives earned 95% of the target number of stock units.
Further detail on our compensation program is included in the CD&A that follows.
Diversity and Our Workforce
We support the Company’s commitment to attracting and maintaining a diverse workforce necessary to foster innovative ideas and business growth and to improving and strengthening employee performance through an inclusive workforce that reflects the diverse markets and communities the Company serves. We endorse the Company’s goal to improve to 40% minority and 11% female representation in total for the Company by 2030.
Ongoing Commitment to Shareholder Engagement
The Committee values the perspectives of the Company’s shareholders and the importance of shareholder feedback, as demonstrated by the continued evolution of our compensation program. We appreciate the strong support from shareholders on our 2020 say-on-pay vote on executive compensation. We remain committed to maintaining a compensation structure that aligns pay with performance, drives long-term value creation and reflects the perspectives of our shareholders.
Thank you for your continued support and investment in Union Pacific.
Respectfully,

The Compensation and Benefits Committee
William J. DeLaney, Chair
Andrew H. Card, Jr.
David B. Dillon
Bhavesh V. Patel
Jose H. Villarreal
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2020 Business Highlights
Union Pacific Railroad Company is the principal operating company of Union Pacific Corporation. One of America's most recognized companies, Union Pacific Railroad Company connects 23 states in the western two-thirds of the country by rail, providing a critical link in the global supply chain. We serve many of the fastest-growing U.S. population centers, operate from all major West Coast and Gulf Coast ports to eastern gateways, connect with Canada’s rail systems and is the only railroad serving all six major Mexico gateways. The Railroad’s diversified business mix includes Bulk, Industrial, and Premium. Bulk traffic consists of grain and grain products, fertilizer, food and refrigerated, and coal and renewables. The Industrial group consists of several categories, including construction, industrial chemicals, plastics, forest products, specialized products (primarily waste, salt, roofing, and government), metals and ores, petroleum, liquid petroleum gases (LPG), and soda ash. The transportation of finished vehicles, auto parts, and merchandise in intermodal containers both domestic and international are included as part of our premium business. The Railroad provides value to its roughly 10,000 customers by delivering products in a safe, reliable, fuel-efficient and environmentally responsible manner.
Union Pacific’s strategy is predicated on being the best freight railroad in North America, which is established through safety, service, reliability, and efficiency. That sets the foundation for growth, which, combined with increasing margins, creates long term enterprise value. We expect to generate growth in three ways – increasing profitable carloads that fit our network and transportation plan; providing more products and services to our customers; and increasing the geographic reach of our franchise.
To assist us in accomplishing our goal of being the best freight railroad in North America, we announced our efficiency and business growth initiative of G55+0 (grow to an operating ratio of 55 with zero injuries), which was launched in late 2015. Additionally, beginning in October 2018, we began conversion to precision scheduled railroading (PSR) in an effort to streamline operations with four principles:
1.
Shift the focus of operations from moving trains to moving cars.
2.
Minimize car dwell, car classification events, and locomotive power requirements.
3.
Utilize general-purpose trains by blending existing train service.
4.
Balance train movements to improve the utilization of crews and rail assets.
We want to move cars faster, reducing the number of times each is touched, resulting in terminal consolidation opportunities, improved asset utilization, and fewer car classifications, allowing product to get to the market quicker and more reliably. The end result is we are delivering a better customer experience, which will enable us to grow our market share.
Coronavirus Pandemic (COVID-19) – 2020 was a year of great uncertainty as COVID-19 spread across the globe. The pandemic caused a dramatic slowdown of the economy as government intervention forced closures and changed individual behaviors, and businesses transformed their operations to protect the health and safety of their employees, customers, and communities. The varying levels of mitigation across different industries had a significant impact on the demand to ship freight in certain market segments. The most notable impact on our revenue was the temporary suspension of automotive production and the corollary effect it had on products used for auto manufacturing. Other reductions in production drove volume declines in a number of other markets as well. The pandemic also disrupted supply chains between Asia and the United States driving declines in intermodal shipments. While second quarter was the hardest hit and volumes have improved sequentially from that quarter, some market segments are still lagging as year-over-year volumes are down.
Safety – The health and well-being of our employees was top of mind in 2020 as we navigated the continually changing environment due to COVID-19. We have and are continuing to adapt to protect the safety of our employees, our customers, and the communities we serve. Enhanced safety procedures were implemented across the system, including new procedures and policies based on Centers for Disease Control and Prevention (CDC) guidelines.
We continued our focus on safety to reduce risk and eliminate incidents for our employees, our customers, and the public. While we have implemented new practices, which drove a 17% improvement in our reportable equipment incident rate per million train miles, we have significant opportunity for improvement remaining. Our reportable personal injury incidents per 200,000 employee-hours of 0.90 was flat with last year. We
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continued to use Total Safety Culture, Courage to Care, and COMMIT (Coaching, Observing, Mentoring and Motivating with Integrity and Trust) throughout our operations. We remained focused on identifying and managing risks and training our employees as their work environment changes.
Network Operations – While the pandemic resulted in significant swings in volume, we were able to adjust our demand-driven resources to reflect these fluctuations with minimal disruptions to our customers. Both our Intermodal and Manifest/Automotive car trip plan compliance improved 6 points in 2020, showing our dedication to providing the customer with a service product that delivers value. Although the environment we operated in changed due to COVID-19, we continued our operational transformation. This was evident as our key performance indicators have improved substantially year-over-year. Transportation plan changes to eliminate switches and improved terminal processes drove an 8% improvement in freight car terminal dwell. Improved dwell coupled with 3% faster average train speed led to a 6% improvement in freight car velocity. We also saw 14% improvement in locomotive productivity and 11% improvement in workforce productivity.
Financial Results* – In 2020, the Company generated adjusted operating income of $8.1 billion, 5% below 2019, driven by the impacts of COVID-19. Productivity initiatives, lower volumes, and lower fuel prices drove adjusted operating expenses down 13% from 2019. These factors coupled with improved pricing were not enough to offset the impact of the revenue decline. Adjusted net income of $5.6 billion translated into adjusted earnings of $8.19 per diluted share, down 2% from last year. Despite the adversity from COVID-19, our operational transformation produced an all-time record 58.5% adjusted operating ratio, improving 2.1 points from 2019.
Our return on invested capital as adjusted** of 13.9% decreased 1.1 points compared to 2019. We maintained our dividend through the economic downturn, resulting in dividends paid totaling $2.6 billion in 2020. In addition, we repurchased 22 million Union Pacific shares, decreasing our full-year average share count by 4 percent. Combining dividends and share repurchases, Union Pacific returned $6.3 billion to our shareholders in 2020.
Please also refer to the Company’s Annual Report on Form 10-K for a complete analysis of the Company’s 2020 financial and operating performance and non-GAAP reconciliation.
*
2020 adjusted to exclude the impact of the Brazos one-time non-cash impairment charge. See Appendix A for a reconciliation to GAAP.
**
A non-GAAP measure. See Appendix A for a reconciliation to GAAP.
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COMPENSATION DISCUSSION AND ANALYSIS
Executive Compensation Philosophy and the Compensation-Setting Process
The Company’s executive compensation philosophy is to:
Pay for Performance — We tie pay to performance by aligning a significant portion of the executive’s opportunity for compensation to annual (short-term) and long-term Company strategy. We also integrate the Company’s critical business objectives (safety, service, and financial performance) into the Company’s strategy and compensation programs to reflect individual performance and management effectiveness, along with other qualitative factors, which contribute to the Company’s performance.
Align with Shareholder Interests — We link a substantial portion of executive compensation to both short-term and long-term financial performance that benefits our shareholders and aligns the interests of management with those of our shareholders by providing equity incentives.
Attract and Retain Top Talent — We are able to attract and retain key executives critical to our long-term success by structuring compensation levels to reflect the competitive marketplace for similar positions at other comparable peer group companies.
The Compensation and Benefits Committee believes this compensation philosophy allows us to reward behavior that produces consistent, long-term performance accompanied with effective risk management and execution of the Company’s strategy.
The Committee carefully evaluates and considers a number of factors in connection with its executive compensation decisions, including:

Company performance against objectives;

Guidance from the Committee’s compensation consultant;

Input from the CEO; and

Appropriate peer comparisons.
Company Performance. As described above, under the Company’s annual incentive cash program, the Company measures its performance against a formulaic component based on pre-established operating income and operating ratio targets, as well as a non-formulaic component based on the Committee’s evaluation of certain business objectives related to safety, service and financial performance outlined on pages 64 and 65. The Committee recommends the operating income and operating ratio targets to the Board for approval each February. Management also develops the Company’s overall strategy and the corresponding business objectives and presents them to the Board annually in February. After Board approval, the Committee incorporates the objectives into the compensation program with assistance and advice from the Finance Committee of the Board. The Board monitors the Company’s progress concerning execution of its strategy and its business objectives during the year. At the end of the year, the Board assesses the Company’s achievement of these objectives. In February, subsequent to the performance year, management presents to the Committee the Company’s operating income and operating ratio results, its achievement compared to the business objectives, and its relative performance compared to the Peer Group.
Guidance from Compensation Consultant and Input from CEO. The Committee reviews and recommends the compensation of all NEOs to the Board for its approval. The CEO provides the Committee with his evaluation of the performance of the other NEOs and his recommendations for their compensation. The Committee also receives information and recommendations from its independent compensation consultant (FW Cook) on matters related to the NEOs’ (including the CEO’s) and other executives’ compensation. The Committee then determines (with advice from the Board, and assistance from its consultant) a bonus and equity award for the Company’s CEO.
For more information on the operation of the Committee, including information on its compensation consultant, see pages 30 and 31 of this Proxy Statement.
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Executive Compensation Philosophy and the Compensation-Setting Process
Peer Companies. The Committee benchmarks salary, Target Total Cash Compensation and Target Total Direct Compensation for the NEOs against competitive market information. To assess competitive market information, the Committee looks primarily to pay data from the proxy statements of the Company’s Peer Group. In determining 2020 target pay opportunities for the NEOs, the Committee considered competitive market information gathered in 2019 from the Peer Group.
As further discussed below, the Committee generally seeks to establish base salaries below the median of the Peer Group, reflecting the Committee’s philosophy that a greater proportion of the cash component of the executives’ compensation should be incentive-based. The Committee generally targets a range around the median of the Peer Group for Target Total Cash Compensation and Target Total Direct Compensation. Actual Total Direct Compensation and Actual Total Cash Compensation may be greater or less than targeted percentiles, depending upon whether and to what degree the Company achieves its business objectives (as described above).
Other factors considered in setting target compensation levels may include the individual performance of each NEO and his or her position relative to the Company’s current internal pay structure or changes in personnel or compensation at the Peer Group companies. In addition, the Committee particularly focuses on competitive pay for railroad executives within the Peer Group and the performance of other comparable railroads. In comparing the executive positions with comparable positions at companies within the Peer Group, the Committee and FW Cook review and consider any adjustments that may be required to account for significant differences in tenure or functional responsibilities.
For compensation decisions made in 2020, the Company’s Peer Group consisted of the following 15 companies listed below.
Canadian National
Canadian Pacific
CSX
Deere & Co
Delta Airlines
Exelon
FedEx
Honeywell International
NextEra Energy
Norfolk Southern
Northrop Grumman
Raytheon
Southern Co.
Southwest Airlines
UPS
The Committee selected this Peer Group in 2019 with the assistance of its compensation consultant, FW Cook, after considering U.S. based public companies in the same Global Industry Classification System (GICS) Industry Group with comparable revenues and market capitalization and other U.S.-based public companies with comparable (i) revenues, (ii) operating income, (iii) total assets, (iv) market capitalization and (v) employees, while excluding pharmaceuticals, high-tech, insurance and financial services companies. These comparative financial measures and the number of employees for the Peer Group are summarized below.
 
PEER GROUP
UNION PACIFIC
 
MEDIAN
75TH PERCENTILE
COMPANY DATA
PERCENTILE RANK
Net Revenue
$29,176
$37,971
$21,708
38th
Operating Income
$4,531
$ 5,505
$8,615
100th
Total Assets
$57,857
$71,483
$61,673
61st
Market Capitalization
$ 52,980
$61,801
$119,992
100th
Employees
60,767
90,612
37,483
44th
Dollars in millions. Median/Percentiles determined by FW Cook using Standard & Poor’s Capital IQ Service, Form 8-K filings and Peer Group company information. The financial information provided above is derived from data as of fiscal year ending December 31, 2019, except as of October 2019 for Deere & Co., and November 2019 for FedEx. Market Capitalization is a 12-month average as of December 31, 2019.
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Executive Compensation Philosophy and the Compensation-Setting Process
Compensation Best Practices
We endeavor to maintain strong governance standards in our policies and practices related to executive compensation. Below is a summary of key executive compensation and governance practices in place during 2020.
What We Do
What We Don’t Do
Emphasize Performance-Based Variable Compensation
No Repricing or Back-Dating of Options Allowed
Utilize a Compensation Recoupment Policy
No Individual Supplemental Executive Retirement Plans
Tie Compensation to Short-and-Long-Term Performance
No Tax Gross-Up Payments Allowed for NEOs, including on Change-in-Control
Allow Only Minimal Perquisites
No Employment Agreements with any of our Executive Officers, including NEOs
Utilize Double Trigger Change-in-Control Plan
NEOs are Prohibited from Pledging and Hedging Company Stock
Target Base Salaries Below the Median of our Peer Group
Enforce Stringent Executive Stock Ownership Guidelines
Conduct Annual Compensation Risk Assessment
Require Trading Plans for Executive Officers (as set forth on page 90) and Directors
Effective January 1, 2020, the Company adopted its Policy for Recoupment of Incentive Compensation. This policy allows the Board’s Compensation and Benefits Committee to require Company executives to repay to the Company certain incentive compensation (or if such incentive compensation has not been paid or settled, the Company may cancel such incentive compensation) if the Committee determines either (a) that a financial restatement is required due to the Company’s material non-compliance with financial reporting requirements or if there was a material error in incentive compensation calculations, or (b) if the executive engaged in certain types of detrimental conduct, as more particularly described in the policy. This policy is meant to be consistent with, but also is more expansive than, the proposed “clawback” rules under the Dodd-Frank Wall Street and Consumer Protection Act. While such rules have not yet been finalized, the Company nevertheless implemented this recoupment policy because we believe it is consistent with good corporate governance principles.
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Executive Compensation Philosophy and the Compensation-Setting Process
Named Executive Officers
This Compensation Discussion and Analysis describes the material elements of our executive compensation program, and the corresponding pay decisions for our 2020 Named Executive Officers (NEOs), who are listed below. The amounts in each NEO’s pie chart below reflect the values in the Summary Compensation Table on page 72.
Lance M. Fritz
Chairman, President and Chief Executive Officer


Age: 58
Tenure: 21 years