Share-Based Compensation

9 Months Ended

Sep. 30, 2011

Share-based Compensation [Abstract]

Share-Based Compensation

Share-Based Compensation

Under CSX's share-based compensation plans, awards primarily consist of performance grants, restricted stock awards, restricted stock units, stock options and stock grants for directors. CSX has not granted stock options since 2003. Awards granted under the various programs are determined and approved by the Compensation Committee of the Board of Directors or, in certain circumstances, by the Chief Executive Officer for awards to management employees other than senior executives. The Board of Directors approves awards granted to the Company's non-management directors upon recommendation of the Governance Committee.

    In May 2011, approximately 1.1 million performance units (post-split) were granted to key members of management under a new long-term incentive plan ("LTIP") adopted under the CSX Stock and Incentive Award Plan.  This LTIP provides for a three-year cycle ending in fiscal year 2013.  Similar to the two existing plans, the financial target upon which payments are based is operating ratio, which is defined as operating expenses divided by operating revenue and is calculated excluding certain non-recurring items.  Grants were made in performance units, with each unit being equivalent to one share of CSX common stock, and payouts will be made in CSX common stock.  The payout range for participants will be between 0% and 200% of the original grant based upon CSX's attainment of pre-established operating ratio targets for fiscal year 2013.  Payouts to certain senior executive officers are subject to a reduction of up to 30% at the discretion of the Compensation Committee of the Board of Directors based upon Company performance against certain CSX strategic initiatives.

Additionally, as part of the 2011 long-term incentive compensation program, the Company granted approximately 360 thousand time-based restricted stock units (post-split) to key members of management.  The restricted stock units vest three years after the date of grant and participants receive cash dividend equivalents on the unvested shares during the restriction period.  These awards are time-based and support retention objectives.

     For information related to the Company's other outstanding long-term incentive compensation, see CSX's most recent annual report on Form 10-K.

Total pre-tax expense associated with all share-based compensation and its related income tax benefit is as follows:

	Third Quarters				Nine Months
(Dollars in millions)	2011		2010		2011		2010
Share-Based Compensation Expense	$	7	$	13	$	30	$	46
Income Tax Benefit	3		5		11		17

NOTE 3. Share-Based Compensation, continued

The following table provides information about stock options exercised and expired.

	Third Quarters		Nine Months
(In thousands)	2011	2010	2011	2010
Number of Stock Options Exercised	589	280	4,543	1,193
Number of Stock Options Expired	6	—	27	—

As of December 2009, all outstanding options were vested, and therefore, there will be no future expense related to these options.  As of the end of third quarter 2011, CSX had approximately 5 million stock options outstanding.