Ladies and gentlemen, thank you for standing by, and welcome to the Norfolk Southern Corporation annual meeting. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session via the telephone, you will need to press star one. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Chairman, President, and CEO, Mr. Jim Squires. Thank you. Please go ahead, sir.
Good morning. I'm Jim Squires, Chairman, President, and Chief Executive Officer of Norfolk Southern Corporation. It's 8:30 A.M. Eastern Daylight Time on May 14th. I now call to order the 2020 annual meeting of shareholders. Thank you for joining us today. In light of COVID-19 concerns, we're hosting our 38th annual meeting virtually for the safety of our shareholders, directors, and employees. We hope that this change has allowed a greater number of our shareholders to join us. I'll talk more in a few moments about how our company has responded to the challenges of the COVID-19 pandemic. Let me just say that I'm as proud as I've ever been to be a member of the Norfolk Southern team. We play a vital role in the nation's supply chain.
Our employees have risen to the challenge of keeping the freight moving, and our leadership team has risen to the challenge with extensive measures to protect the health and safety of our employees. We tested our virtual platform this morning, and I can see that we have a large number of shareholders and guests joining us for today's meeting. As is our custom, we will conduct the business portion of our meeting first and answer questions at the end of the meeting. Though we may not be able to answer every question, we'll do our best to provide a response to as many questions as possible in the time we've allotted. In the event we have to interrupt our meeting for an emergency in our broadcasting location or connectivity issues, we will recess for 30 minutes and ask shareholders to rejoin after the recess.
First, I want to extend a heartfelt thank you to a director who's not standing for re-election. Mr. Daniel Carp, former Chairman of the Board and Chief Executive Officer of Eastman Kodak Company, has served on our board of directors since 2006. Mr. Carp has worked to help steer our company through both rewarding and challenging times, chaired our compensation committee, provided oversight of our strategic plan, and helped align our compensation program with our strategic plan goals. He's offered us his wisdom, judgment, and strategic guidance for 14 years, and he will be missed. It's now my pleasure to present the members of our board of directors, who with me, are standing for election at this meeting for a term expiring at the date of the 2021 annual meeting. Thomas D. Bell Jr., Chairman of Mesa Capital Partners. Mitchell E.
Daniels Jr., President of Purdue University and former Governor of Indiana. Marcela E. Donadio, former Ernst & Young partner and oil and gas sector leader. John C. Huffard Jr., co-founder of Tenable Network Security and Tenable Holdings, Inc. Christopher T. Jones, former President of the technology services sector of Northrop Grumman Corporation. Thomas C. Kelleher, former President of Morgan Stanley. Steven F. Leer, former Chief Executive Officer and Chairman of Arch Coal, Inc. Michael D. Lockhart, former Chairman of the Board, President, and Chief Executive Officer of Armstrong World Industries, Inc. Amy E. Miles, former Chair of the Board and Chief Executive Officer of Regal Entertainment Group. Claude Mongeau, former President, Chief Executive Officer, and Director of Canadian National Railway Company. Jennifer F. Scanlon, President, Chief Executive Officer, and Director of UL, and John R. Thompson, retired Senior Vice President and General Manager of BestBuy.com LLC.
All of these directors are attending online today. These hardworking directors consistently devote substantial time and effort to advancing the best interests of Norfolk Southern and you, our shareholders. They're a great board. We also have with us our executive management team. They are Ann A. Adams, Executive Vice President and Chief Transformation Officer. Mark R. George, Executive Vice President and Chief Financial Officer. John M. Scheib, Executive Vice President and Chief Strategy Officer. Alan H. Shaw, Executive Vice President and Chief Marketing Officer. Vanessa Allen Sutherland, Executive Vice President and Chief Legal Officer. Michael J. Wheeler, Executive Vice President and Chief Operating Officer, and Michael A. Farrell, Senior Vice President, Operations and Mechanical. I feel fortunate to have such a talented and outstanding executive management team, and I thank them for their leadership. We're also joined here today by our independent auditors.
Representing KPMG LLP are Scott Flynn, Stan Beaver, and Paul Benedict. They will also be available to respond to appropriate questions during the general question and answer period following adjournment of this meeting. The corporation has appointed Broadridge Financial Solutions to act as Inspector of Election. Belinda Massafra from Broadridge is with us today and has taken the oath of Inspector of Election required under Virginia law. The inspector has informed me that a majority of the shares entitled to vote is represented and that a quorum, therefore, is present for the conduct of business. After the formal meeting has adjourned, we will provide 30 minutes for general questions. Only validated shareholders may ask questions in the designated field on the web portal. Out of consideration for others, please limit yourself to one question. Please note that this meeting is being recorded by Norfolk Southern.
However, no one attending via the webcast or telephone is permitted to use any type of recording device. In accordance with the bylaws and notice of this meeting, there are five matters to be acted on today, which I and one of our shareholders will present. Please note that we will give shareholders an opportunity to comment on the items themselves after all proposals have been presented. Please feel free to submit questions at any time. However, we will not respond to questions that relate to matters other than those to be voted on until the designated question and answer period following the meeting. Item one is the election of 13 directors named in the proxy statement for a one-year term. The board recommends a vote for the election of each of the nominees.
Because no other nominations have been received from shareholders during the time period prescribed in the company's bylaws, I declare that the nominations are closed, and we will vote later in the meeting. The second item is the approval of three proposed amendments to the corporation's amended and restated articles of incorporation. Specifically, an amendment of the voting standard required to amend the articles, approval of a simple majority voting standard to approve a merger, share exchange, conversion, sale, or dissolution of the corporation, and approval of a majority-of-votes-cast standard to approve re-domestication of the corporation and affiliated transactions. The board recommends a vote for the proposed amendments to the corporation's amended and restated articles of incorporation. The third item of business is ratification of the audit committee's appointment of KPMG LLP, independent registered public accounting firm, as our independent auditors for 2020.
The board recommends a vote for the ratification of the appointment of KPMG LLP. The fourth item is an advisory vote by shareholders to approve the compensation of our named executive officers as disclosed in the proxy statement for this annual meeting. The board recommends a vote for the advisory resolution approving the executive compensation of our named executive officers as set out in the proxy statement. The fifth item is a shareholder proposal regarding the right to act by written consent if properly presented at this meeting. The board recommends a vote against the proposal. Under Norfolk Southern's bylaws, no other matter may come before this meeting for a vote. At this time, Ms. Kam Franklin will present the shareholder proposal regarding the right to act by written consent on behalf of John Chevedden.
As a reminder, Ms. Franklin, you'll have two minutes to present your proposal. I ask that you limit your remarks to reading the proposal. Operator, please open Ms. Franklin's line to allow her to present the proposal.
Good morning. Proposal 5, right to act by written consent, John Chevedden sponsor. Shareholders request that the board of directors take the steps necessary to permit written consent by the shareholders entitled to cast the minimum number of votes that would be necessary to authorize an action at a meeting at which all shareholders entitled to vote thereon were present and voting. Norfolk Southern requires 20% of shares to combine their holdings to call a special meeting, a higher level than the 10% of shares permitted by many states of incorporation. Dozens of Fortune 500 companies provide for both shareholder rights to act by written consent and to call a special meeting. The higher 20% threshold for shareholders to call a special meeting is one more reason that shareholders should have the right to act by written consent.
The higher 20% threshold has bureaucratic pitfalls that trigger minor shareholder errors that could mean that 40% of shares would need to ask for a special meeting in order to be sure of obtaining the threshold of 20% of the request without errors. One can be sure that management will have a sharp eye to spot any errors. Taking action by written consent in place of a meeting is a means shareholders can use to raise important matters outside the normal annual meeting cycle, like the election of a new director. This is important to consider after our combined Chairman, CEO, James Squires, received the highest negative votes of any director in 2019. A lead director received the second highest negative votes. With long tenure of 20 years, lead director Steven Leer may not be considered independent.
The right for shareholders to act by written consent is gaining acceptance as a more important right than the right to call a special meeting. This seems to be the conclusion of the Intel Corporation shareholder vote at the 2019 Intel annual meeting. The directors at Intel apparently thought they could divert shareholder attention away from written consent by making it less difficult for shareholders to call a special meeting. However, Intel shareholders responded with greater support for written consent in 2019 compared to 2018. A shareholder right to act by written consent will enable shareholders to engage with management more effectively since shareholders will have a solid plan B if management just wants to go through the motions of shareholder engagement. In the statement next to this proposal, management claims it is in favor of transparency.
If management was really in favor of transparency, it would recommend that shareholders obtain independent proxy voting advice. Please vote yes, right to act by written consent, proposal number five. Thank you very much.
Thank you, Ms. Franklin. I'll now pause to allow shareholders who would like to ask a question about these balloted items to submit their question through the web portal.
Jim, we have no questions related to the balloting item.
Thank you. I'll now proceed. The polls are now open. Any shareholder who hasn't yet voted or wishes to change their vote may do so by clicking on the voting button on the web portal and following the instructions there. Shareholders who have sent in proxies or voted via telephone or internet, and do not want to change their vote, do not need to take any further action. Now that everyone has had the opportunity to vote, I declare the polls for the 2020 annual shareholder meeting closed. I now ask the Inspector of Election to provide a preliminary vote report. Operator, please open Ms. Massafra's phone line.
The nominees for election to the board have been duly elected. The three proposed to the corporation's amended and restated articles of incorporation have been approved. The ratification of the appointment of KPMG LLP as the independent auditors for 2020 has been approved, and the compensation of the named executive officers has been approved by advisory vote. Proposal regarding right to act by written consent has not been approved. I now ask the operator to turn the meeting back to the chairman.
Thank you. We will be reporting the final vote results for today's meeting in a Form 8-K to be filed within four business days. There being no further business to come before the meeting, the 2020 annual meeting of shareholders of Norfolk Southern Corporation is adjourned. I'll make a few remarks at the conclusion of the following video. I'll begin with a few questions we received earlier during the meeting, and then we'll take shareholders' questions that are being entered now. Please note, we will attempt to answer as many questions as time allows, but only questions that are germane to the meeting will be addressed. I ask each shareholder to limit yourself to one question.
Our first question, of what value is Conrail to Norfolk Southern? Note six and Note eight of the annual report show many expenses, including $264 million in 2019. What income loss do we get from our ownership of Conrail? If not a net gain, why should we keep Conrail?
Thank you for the question. I'd like to take you back to the late '90s and early 2000s when Conrail, as we know it today, was created. Recall that Conrail was the primary Class I freight rail operator in the Northeast. In the late '90s, Norfolk Southern and CSX agreed to jointly acquire Conrail and divide its operations. Remaining Conrail serves so-called shared assets areas in the Northeast and the Detroit, Michigan area, and it provides competitive access to both NS and CSX in those regions. The modern Conrail was never intended to create significant gains or losses for its joint venture parents. Although we do see from time to time equity ups and downs as a result of Conrail earnings, we don't see material effects on Norfolk Southern's bottom line from the Conrail subsidiary.
If you have any other questions about Conrail, how it appears on our balance sheet or income statement, I would certainly invite you to contact shareholder services, and they will put you in touch with a member of our accounting department.
Thank you. Next question. What is management doing to ensure that the approximately 34 Amtrak trains which operate over Norfolk Southern ROW daily are dispatched and arrive on time?
Norfolk Southern has a close working relationship with Conrail. We interact with Conrail every day to manage the flow of their passenger trains on our lines. We are committed to Amtrak's success while we continue to serve as well the interests of our freight customers and their service to business and the economy all across our territory.
Next question. I see that in 2019, Norfolk Southern purchased over $2 billion in common stock but took in over $1 billion in additional debt to do so. Can you explain the economics of this exchange of stock for debt in 2019, and do you intend to continue the stock buyback program in 2020 if it requires taking on more debt?
Share repurchases are part of our capital allocation strategy. The other components of our strategy include capital expenditures, reinvestment in our business at a level that will ensure safety, efficiency, and future growth opportunities. In addition, we employ, as part of our capital allocation strategy, payment of a regular dividend. We have continued to repurchase our shares this year with available cash flow. Our borrowings this year have been, for the most part, for the sake of adding additional liquidity during these uncertain times.
Thank you. Our next question: tank containers are becoming more widely used as shippers convert to intermodal to transport freight by rail. Will Norfolk Southern be employing double-stacked tank cars?
I'd like to refer that question to my colleague, Mike Wheeler, our Chief Operating Officer. Mike?
Yeah, Jim, we do ship intermodal containers that are tanks on our freight currently, and it's a viable part of our business, and we have customers that we work with them on that and are currently doing that.
Thank you. The next question: I'm interested in learning more about the conversion of the older GE-9 and EMD SD70 models from DC to AC traction. Altoona's reputation for stripping a locomotive down to the bare frame and completely rebuilding it in under a week is impressive. Completing a locomotive conversion efficiently should set Norfolk Southern apart from other railroads. I'd like to visit Norfolk Southern's Juniata locomotive shop in Altoona, Pennsylvania, later this summer. I've already visited Progress Rail's locomotive manufacturing plant in Muncie, Indiana, where some Norfolk Southern SD70ACe-T4 locomotives were built.
Thank you for the question. As the question suggests, we have been actively converting older DC-powered locomotives to AC power in recent years. In fact, this has been at the heart of our locomotive rejuvenation strategy to bring down the average age of our locomotive fleet and to ensure that we have a reliable high-horsepower locomotive fleet at our disposal for operations. Let me again call on Mike Wheeler to provide some additional details on our DC to AC conversion program.
Sure, Jim. We are in a third year of a five-year program to do 100 DC to AC conversions a year on our Dash 9 fleet. The good news about this is we are really pleased with the reliability that we're getting out of these conversions. We are getting very good reliability. In fact, it's one of the most reliable fleets we have out there now. The other item is that we're upgrading these locomotives from DC to AC at a much lower capital cost. Really pleased with the program going forward.
Thank you, Mike. The next question: is the dividend safe?
We intend to continue to pay our dividend going forward. As I mentioned earlier, our regular dividend with periodic increases is one aspect of our strategy of allocating capital to drive shareholder value.
Thank you. Is the company experiencing any problems with liquidity?
No.
Thank you. How has the collapse of oil prices affected traffic, especially in fracking in the Marcellus Shale area?
Declining energy prices have had a widespread impact on our top line in recent months, and we would expect the effect of declining energy prices to continue to have a dampening effect on our revenue for some time. I'd like to turn it over to our Chief Marketing Officer, Alan Shaw, to provide some additional detail on the effects of energy prices on our business.
Operator, please open the line for Mr. Shaw.
Commodities that we haul with respect to coal, frac sand, crude oil, and also ethanol. We have a fairly strong ethanol franchise in which we handle both the outbound product and the inbound corn. It changes some of the competitive dynamics with respect to truck as well. Ultimately, rail has a labor and a fuel cost advantage relative to truck, and we're pretty confident that as the economy recovers and energy prices as well, then we'll be positioned for growth based on the strength of our franchise.
Thank you. Next question. Has any of the items in 2B already been considered, and do you expect these items to be considered more strongly in the future?
Let me turn that question over to our Executive Vice President, Law and Government Relations, Vanessa Allen Sutherland. Vanessa?
Thank you. 2B was the shareholder proposal that we received this year. For those who are following, it was the approval of simple majority standard to approve a merger, share exchange, conversion, sale, or dissolution of the corporation. The critical point here is that the board carefully considered each of the items, including 2B, and tried to balance any action that required us to hear from a majority of all shareholders entitled to vote because of the importance of the matter facing the company with the simple majority and majority of outstanding shares for those items listed in the proxy that may not have had as much of a significant impact. For something as important as a merger, an acquisition, or conversion, we want to make sure that all shareholder voices are heard.
2B was proposed as a majority of shares entitled to vote to make sure that all shareholders, for something as significant in essence of a transaction, would be able to participate in the process. Jim?
Thank you, Vanessa.
Next question: can you tell us the percentages for and against?
Vanessa?
I'm sorry, what was the question, Denise?
Can you tell us the percentages for and against?
Yes. The preliminary vote results, which will, of course, be issued in our forthcoming 8-K, for the proposal, 13% of the votes cast, and against the proposal, 87% of votes cast.
Thank you. Next question: will you consider having a virtual shareholder meeting every year?
This is the first year in which we have conducted a virtual annual meeting of shareholders. We will consider the results of this meeting and our shareholders' feedback from it as we plan next year's annual meeting. We are pleased with our ability to give access to many shareholders through the virtual platform, and we believe that the virtual annual meeting also results in significant cost savings for the benefit of the corporation. We'll determine how it has gone after we complete the meeting this year, and then we will make our plans for next year.
Thank you. The last question is, how may one inspect the list of shareholders? I did get some reports that we may have had a problem with that at the beginning, but the shareholder line is up and the portal and list are available to our shareholders.
Denise, I think you just answered that question. Is there anything else you'd like to add in response to the question?
No, we're good. That's our last question, and I'll turn the meeting back over to you for closing remarks.
Thank you all for your attendance today. Let me end by emphasizing our commitment to doing our best for you, our shareholders. This includes working tirelessly to keep the railroad operating during the COVID-19 pandemic and to achieve the goals set forth in our strategic plan. That plan is driving enhanced operating efficiencies and allowing us to adjust our cost structure in response to the pandemic, and it will drive enhanced profitability and shareholder returns as the economy recovers. We're confident in our ability to deliver long-term value for our shareholders. Thank you, and have a safe day.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.