Under CSX's share-based compensation plans, awards consist of performance units, stock options, and restricted stock units for management and stock grants for directors. Awards granted under the various programs are determined and approved by the Compensation and Talent Management Committee of the Board of Directors. Awards to the Chief Executive Officer are approved by the full Board and awards to senior executives are approved by the Compensation and Talent Management Committee. In certain circumstances, the Chief Executive Officer or delegate approves awards to management employees other than senior executives. The Board of Directors approves awards granted to CSX's non-management directors upon recommendation of the Governance and Sustainability Committee.

Share-based compensation expense for awards under share-based compensation plans and purchases made as part of the employee stock purchase plan is measured using the fair value of the award on the grant date and is recognized on a straight-line basis over the service period of the respective award. Alternatively, expense is recognized upon death or over an accelerated service period for employees whose agreements allow for continued vesting upon retirement or separation. Forfeitures are recognized as they occur. Total pre-tax expense and income tax benefits associated with share-based compensation are shown in the table below. Income tax benefits include impacts from option exercises and the vesting of other equity awards.


	Years Ended
(Dollars in Millions)	2024		2023		2022
Share-Based Compensation Expense
Restricted Stock Units	$	28	$	19	$	15
Stock Options	12		12		17
Employee Stock Purchase Plans	8		7		5
Stock Awards for Directors	2		2		2
Performance Units	(10)		20		35
Total Share-based Compensation Expense	$	40	$	60	$	74
Income Tax Benefit	$	13	$	14	$	17

The objective of the CSX Long-term Incentive Plans (“LTIP”) is to motivate and reward certain employees for achieving and exceeding certain financial goals. The 2024-2026, 2023-2025, and 2022-2024 LTIPs were adopted under the 2019 Stock and Incentive Award Plan. 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 most participants will be between 0% and 200% of the target awards depending on Company performance against predetermined goals for each three-year cycle.

In 2024, 2023 and 2022, target performance units were granted to certain employees under three separate LTIP plans covering three-year cycles: the 2024-2026 ("2024-2026 LTIP"), the 2023-2025 ("2023-2025 LTIP"), and the 2022-2024 ("2022-2024 LTIP"). Payouts of performance units for the plans will be based on the achievement of certain goals, in each case excluding non-recurring items as disclosed in the Company’s financial statements.

For the 2024-2026, 2023-2025 and 2022-2024 LTIP plan, the average annual operating income growth percentage and Economic Profit (CSX Cash Earnings or CCE), in each case excluding non-recurring items as defined in the plan, will each comprise 50% of the payout and will be measured independently of the other. Participants will receive stock dividend equivalents declared over the performance period based on the number of performance units paid upon vesting. As defined under the plan, Economic Profit incentivizes strategic investments earning more than management's desired minimum required return and is calculated as CSX’s gross cash earnings minus the capital charge on gross operating assets.

For these plans, payouts for certain executive officers are subject to formulaic upward or downward adjustment by up to 25%, capped at an overall payout of 250%, based upon the Company’s total shareholder return relative to specified comparable groups over the performance period.

The fair values of the performance units granted during the years ended December 2024, 2023 and 2022 for awards with total shareholder return components were calculated primarily using a Monte-Carlo simulation model with the following weighted-average assumptions:


	Years Ended
Weighted-Average Assumptions Used:	2024		2023		2022

Risk-free Interest Rate	4.4	%	4.4	%	2.3	%
Annualized Volatility	23.3	%	33.2	%	33.0	%
Expected Life (in years)	2.9		2.8		2.7

The risk-free interest rate assumptions reflect the U.S. Treasury yield curve in effect at the time of grant. The annualized volatility is based on observed historical volatility of daily stock returns for the three-year period preceding the grant date. The expected life is calculated using the remainder of the performance period.


	Performance Units Outstanding (in Thousands)	Weighted-Average Fair Value at Grant Date
Unvested at December 31, 2023	1,321	$	32.65
Granted	615	38.66
Forfeited	(30)	33.95
Vested	(627)	35.33
Unvested at December 31, 2024	1,279	$	35.47

As of December 2024, there was $13 million of total unrecognized compensation cost related to performance units that is expected to be recognized over a weighted-average period of approximately two years.

Stock options in 2024, 2023 and 2022 were primarily granted along with the corresponding LTIP plans. With these grants, an employee receives an award that provides the opportunity in the future to purchase CSX shares at the closing market price of the stock on the date the award is granted (the strike price). Options granted become exercisable in equal installments on the anniversary of the grant date over a vesting period (three-year graded). All options expire 10 years from the grant date if they are not exercised.

The fair value of stock options granted was estimated as of the dates of grant using the Black-Scholes option valuation model, which uses the following assumptions: dividend yield, risk-free interest rate, annualized volatility and expected life. The annual dividend yield is based on the most recent quarterly CSX dividend payment annualized. The risk-free interest rate is based on U.S. Treasury yield curve in effect at the time of grant. The annualized volatility is based on historical volatility of daily CSX stock price returns over a 6.0 year look-back period ending on the grant date. The expected life is calculated using the safe harbor approach due to lack of historical data on CSX options, which is the midpoint between the vesting schedule and contractual term (10 years).


	Years Ended
	2024			2023			2022
Weighted-Average Fair Value of Units Granted	$	11.58		$	9.82		$	10.12


Stock Options Valuation Assumptions:
Annual Dividend Yield	1.3		%	1.4		%	1.1		%
Risk-free Interest Rate	4.2		%	3.8		%	2.0		%
Annualized Volatility	28.7		%	29.6		%	30.1		%
Expected Life (in Years)	6.0			6.0			6.0
Other Pricing Model Inputs:
Weighted-average Grant-date Market Price of CSX Stock (Strike Price)	$	36.73		$	31.54		$	35.12


	Stock Options Outstanding (in Thousands)	Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Life (in Years)	Aggregate Intrinsic Value (in Millions)
Outstanding at December 31, 2023	12,094	$	25.04
Granted	1,068	36.73
Forfeited	(74)	24.49
Exercised	(3,557)	22.33
Outstanding at December 31, 2024	9,531	$	27.40	5.8	$	56
Exercisable at December 31, 2024	7,161	$	25.00	4.9	$	55

Unrecognized compensation expense related to stock options as of December 2024 was $11 million and is expected to be recognized over a weighted-average period of approximately two years. The Company issues new shares upon stock option exercises. Additional information on stock option exercises is summarized as follows:

Restricted stock units are equivalent to one share of CSX stock and are primarily issued along with corresponding LTIP plans and vest three years after the date of grant (three-year cliff) or on the annual anniversary of the grant date over a vesting period (three-year graded). These awards are time-based and not based upon CSX’s attainment of operational targets. Participants receive stock dividend equivalents on these shares. Restricted stock unit grant and vesting information is summarized as follows:


	Restricted Stock Units Outstanding (in Thousands)	Weighted-Average Fair Value at Grant Date
Unvested at December 31, 2023	2,029	$	31.70
Granted	748	36.86
Forfeited	(43)	34.01
Vested	(744)	30.58
Unvested at December 31, 2024	1,990	$	34.01

As of December 2024, unrecognized compensation expense for restricted stock units was approximately $26 million, which will be expensed over a weighted-average remaining period of two years.

CSX’s non-management directors receive a base annual retainer of $130,000 to be paid quarterly in cash, unless the director chooses to defer the retainer in the form of cash or CSX common stock. Additionally, non-management directors receive an annual grant of common stock in the amount of approximately $180,000 and the independent non-executive Chairman also receives an annual grant of common stock in the amount of approximately $250,000. These awards are evaluated periodically by the Board of Directors.

In May 2018, shareholders approved the 2018 CSX Employee Stock Purchase Plan (“ESPP”) for the benefit of Company employees. The Company registered 12 million shares of common stock that may be issued pursuant to this plan. Under the ESPP, employees may contribute between 1% and 10% of base compensation, after-tax, to purchase up to $25,000 of market value CSX common stock per year at 85% of the closing market price on either the grant date or the last day of the six-month offering period, whichever is lower. During 2024, 2023 and 2022, the Company issued the following shares under this program: