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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14

(Rule 14a-101)

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.     )

Filed by the Registrant  þ                            

Filed by a Party other than the Registrant  ¨

Check the appropriate box:

Kansas City Southern

(Name of Registrant as Specified In Its Charter)

Not Applicable

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

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Kansas City Southern

Notice of 2015 Annual Meeting of Stockholders

and Proxy Statement

May 7, 2015

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Notice of Annual Meeting of Stockholders

Items of business:

1. Election of two directors;

3. An advisory vote to approve the 2014 compensation of our named executive officers;

5. Such other matters as may properly come before the Annual Meeting or any adjournment thereof.

Only stockholders of record at the close of business on March 9, 2015 are entitled to notice of and to vote at the Annual Meeting or any adjournment thereof.

By Order of the Board of Directors,

Adam J. Godderz

Associate General Counsel &

Corporate Secretary

The date of this Notice is April 6, 2015.

Please date, sign and promptly return the enclosed proxy card, regardless of the number of shares you may own and whether or not you plan to attend the meeting in person. Alternatively, you may cast your votes by telephone or through the Internet as described on the proxy card. You may revoke your proxy and vote your shares in person in accordance with the procedures described in this Notice and Proxy Statement. Please also indicate on your proxy card whether you plan to attend the Annual Meeting.

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Proxy Statement Summary

This summary highlights information contained in this Proxy Statement. Please read the entire Proxy Statement before voting.

A-Audit    C-Compensation & Organization    E-Executive    F-Finance    N-Nominating & Corporate Governance

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Questions and Answers about Voting and Annual Meeting

We will pay for the Annual Meeting, including the cost of mailing the proxy materials and any supplemental materials. Directors, officers and employees of KCS may, either in person, by telephone or otherwise, solicit proxy cards. They have not been specifically engaged for that purpose, however, nor will they be compensated for their efforts. We have engaged Morrow & Co., LLC, 470 West Avenue, Stamford, Connecticut 06902, to assist in the solicitation of proxies and provide related informational support, for a service fee and the reimbursement of customary disbursements that are not expected to exceed $25,000 in the aggregate. We will pay these fees and expenses. In addition, we may reimburse brokerage firms and other persons representing beneficial owners of our shares for their expenses in forwarding this Proxy Statement, the Annual Report and other soliciting materials to the beneficial owners.

Brokers, dealers, banks, voting trustees, other custodians and their nominees are asked to forward this Notice and Proxy Statement, the proxy card and the Annual Report to the beneficial owners of our stock held of record by them. Upon request, we will reimburse them for their reasonable expenses in mailing these materials to beneficial owners of our stock.

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•            By Internet:    Access our Internet voting site at www.envisionreports.com/ksu or by scanning the QR code on the proxy card with your smartphone and follow the instructions on the screen, prior to 1:00 a.m., Eastern Time, on May 7, 2015 (May 4, 2015 for participants in certain employee benefit plans discussed below).

•            By Telephone:    Using a touch-tone telephone, call toll-free at 1-800-652-VOTE (8683) and follow the voice instructions, prior to 1:00 a.m., Eastern Time, on May 7, 2015 (May 4, 2015 for participants in certain employee benefit plans discussed below).

•            By Mail:    Mark, sign, date and return the enclosed proxy or instruction card so it is received before the Annual Meeting (May 4, 2015 for participants in certain employee benefit plans discussed below).

If you are the beneficial owner of your shares, please refer to your voting form for specific voting procedures from your broker.

Stockholders owning at least a majority of the shares of Voting Stock entitled to vote must be present in person or represented by proxy to constitute a quorum for the transaction of business at the Annual Meeting. The shares of a stockholder who is present and entitled to vote at the Annual Meeting, either in person or by proxy, are counted for purposes of determining whether there is a quorum, regardless of whether the stockholder votes the shares. Abstentions and broker non-votes (defined below) are counted as present and entitled to vote for purposes of determining a quorum.

We have described the vote necessary for each Proposal in the description for that Proposal.

Voting ceases when the chairman of the Annual Meeting closes the polls. The votes are counted and certified by three inspectors appointed by the Board of Directors in advance of the Annual Meeting. In determining whether a majority of shares of Voting Stock present have been affirmatively voted for a particular proposal, except in the election of directors, the affirmative votes for the proposal are measured against the votes for and against the proposal plus the abstentions from voting on the proposal. You may abstain from voting on any proposal. Except in the election of directors, abstentions from voting are not considered as votes affirmatively cast and therefore will have the effect of a vote against a proposal. With regard to the election of directors, abstentions will be excluded entirely from the vote and will have no effect.

A “broker non-vote” occurs when a broker holding shares of Voting Stock for a beneficial owner does not vote on a particular proposal because the broker does not have discretionary voting authority for that proposal and has not received instructions from the beneficial owner (customer

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directed abstentions are not broker non-votes). Broker non-votes generally do not affect the determination of whether a quorum is present at the Annual Meeting because, in most cases, some of the shares held in the broker’s name have been voted, and, therefore, all of those shares are considered present at the Annual Meeting. A broker may vote without direction only on Proposal 2. A broker non-vote will not be considered present and entitled to vote on non-discretionary items and will have no effect on the vote.

The Proxy Committee will vote the shares of Voting Stock covered by a proxy in accordance with the instructions given by the stockholder(s) executing the proxy or authorizing the proxy and voting via the Internet or telephone. If a properly executed or authorized and unrevoked proxy does not specify how the shares represented thereby are to be voted, the Proxy Committee intends to vote the shares as recommended by the Board for each Proposal and in accordance with their discretion upon such other matters as may properly come before the Annual Meeting.

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NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIALS

The Proxy Statement and Annual Report are available at www.edocumentview.com/ksu

Stockholders that wish to attend the meeting may obtain directions to the Annual Meeting by sending a written request directed to our Corporate Secretary, P.O. Box 219335, Kansas City, Missouri 64121-9335 (or if by express delivery to 427 West 12th Street, Kansas City, Missouri 64105), or by calling (888) 800-3690.

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Proposals for 2015 Annual Meeting

The Board of Directors of KCS (the “Board”) is currently divided into three classes with nine total members. Prior to this year, the members of each class served staggered three-year terms of office. As a result of the stockholder proposal that was approved at the 2014 annual meeting of stockholders, KCS is de-classifying its Board over the next three years, starting with this year’s Annual Meeting. Going forward, each director will therefore be elected for a one-year term. The term of office for the two directors elected at this Annual Meeting will expire in 2016 or when their successors are elected and qualified, if earlier, or their earlier resignation or removal. Any directors who are currently serving a three-year term will continue to serve out the remainder of their term.

Lu M. Córdova and Thomas A. McDonnell are being nominated by the Board for election as directors at the Annual Meeting. Their biographies are set forth below. Both have indicated they are willing and able to serve as directors if re-elected and have consented to being named as nominees in this Proxy Statement. If any nominee should become unable or unwilling to serve, the Proxy Committee intends to vote for one or more substitute nominees chosen by the Board in their sole discretion. Mr. Haverty, whose term expires at this Annual Meeting, is not eligible to stand for re-election. Immediately after the Annual Meeting, the Board intends to reduce the number of directors to eight.

The biography of each nominee contains information regarding the person’s service as a director, business experience, director positions held currently or at any time during the last five years and experiences, qualifications, attributes or skills that led the Nominating and Corporate Governance Committee (the “Nominating Committee”) and the Board to conclude that the person should serve as a director for the Company as of the time that this proxy statement was filed with the SEC.

Biographies of Nominees

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Vote Required for Approval

Pursuant to the Company’s Bylaws, only directors that receive the affirmative vote of a majority of the votes cast for or against such director by the holders of the outstanding shares of Voting Stock entitled to vote for the election of directors will be elected. Any nominee for re-election in an uncontested election who does not receive votes for his or her election equal to a simple majority of the votes cast must submit an offer to resign from the Board. The Board will then consider the resignation offer and may either (i) accept the resignation offer or (ii) reject the resignation offer and seek to address the underlying cause(s) of the “against” votes. The Board is required to make its determination within 90 days following the certification of the stockholder vote and make a public announcement of its decision, including a statement regarding the reasons for its decision if the Board rejects the resignation offer.

Under the rules of the NYSE, brokers are prohibited from giving proxies to vote on the election of directors unless the beneficial owner has given voting instructions as to each director. This means that if your broker is the record holder of your shares you must give voting instructions to your broker if you want your broker to vote your shares for the election of directors.

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The Audit Committee of the Board of Directors has selected KPMG as our independent registered public accounting firm to audit our 2015 consolidated financial statements and provide an attestation report on the effectiveness of our internal control over financial reporting as of December 31, 2015. KPMG served as our independent registered public accounting firm in 2014. We are seeking our stockholders’ ratification of the Audit Committee’s selection of our independent registered public accounting firm even though we are not legally required to do so. If our stockholders ratify the Audit Committee’s selection, the Audit Committee nonetheless may, in its discretion, retain another independent registered public accounting firm at any time during the year if the Audit Committee feels that such change would be in the best interests of KCS and its stockholders. Alternatively, if this proposal is not approved by stockholders, the Audit Committee may re-evaluate its decision. One or more representatives of KPMG are expected to be present at the Annual Meeting and will have the opportunity, if desired, to make a statement and are expected to be available to respond to appropriate questions from stockholders.

Vote Required for Approval

The affirmative vote of a majority of the shares of Voting Stock present at the Annual Meeting in person or by proxy is required to ratify the appointment of KPMG LLP as the Company’s independent registered public accounting firm. Under the rules of the NYSE, brokers may give proxies on Proposal 2 whether or not they receive instructions from the beneficial owners of those shares.

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”), enables our stockholders to vote to approve, on an advisory (non-binding) basis, the compensation of our Named Executive Officers as disclosed in this proxy statement in accordance with the SEC’s rules. The 2013 compensation of our Named Executive Officers was overwhelmingly approved by our stockholders in the advisory vote held at last year’s annual meeting. Accordingly, the Compensation and Organization Committee (referred to in this Proxy Statement as the “Compensation Committee”) continued with its strategy, as described below and in the Compensation Discussion and Analysis.

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companies in order to ensure that our Named Executive Officers are compensated fairly and equitably. Further, our Compensation Committee annually reviews the design of our compensation programs to ensure that they do not encourage excessive risk taking by the Named Executive Officer in order to obtain a short-term personal gain that negatively impacts our long-term value proposition. Our Compensation Committee believes it has implemented compensation programs that are structured in the best manner to support our long-term business strategy and increase stockholder value.

We are asking our stockholders to indicate their support for our executive compensation program as described in this Proxy Statement. This proposal, commonly known as a “say on pay” proposal, gives our stockholders the opportunity to express their views on our Named Executive Officers’ compensation. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our Named Executive Officers and the philosophy, policies and practices described in this Proxy Statement. Accordingly, we ask our stockholders to vote “FOR” the following resolution:

RESOLVED, that the stockholders of the Company, approve, on an advisory basis, the 2014 compensation of the Named Executive Officers as discussed and disclosed in the Company’s Proxy Statement for the 2015 Annual Meeting of Stockholders pursuant to the compensation disclosure rules of the SEC, including the Compensation Discussion and Analysis, the Summary Compensation Table and the other related tables and disclosures.

The say-on-pay vote is advisory, and therefore, not binding on the Company, the Compensation Committee or our Board of Directors. Our Board of Directors and our Compensation Committee value the opinions of our stockholders and to the extent there is any significant vote against the Named Executive Officers’ compensation as disclosed in this Proxy Statement, we will consider our stockholders’ concerns and the Compensation Committee will evaluate whether any actions are necessary to address those concerns.

Vote Required for Approval

The affirmative vote of a majority of the shares of Voting Stock present at the Annual Meeting in person or by proxy is required to approve the resolution. Under the rules of the NYSE, brokers are prohibited from giving proxies to vote on executive compensation matters unless the beneficial owner of such shares has given voting instructions on the matter. This means that if your broker is the record holder of your shares, you must give voting instructions to your broker with respect to Proposal 3 if you want your broker to vote your shares on this matter.

Mr. John Chevedden, on behalf of Mr. James McRitchie and Ms. Myra Young, 9295 Yorkship Court, Elk Grove, CA 95758, who represent that they hold not less than 50 shares of our common stock, has submitted the following proposal for consideration at the Annual Meeting:

Resolved, Shareowners ask our board to take the steps necessary (unilaterally if possible) to amend our bylaws and each appropriate governing document to give holders in the aggregate of 10% of our outstanding common stock the power to call a special shareowner meeting. This proposal does not impact our board’s current power to call a special meeting.

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Delaware law allows 10% of shareholders to call a special meeting and dozens or hundreds of companies have adopted the 10% threshold. Special meetings allow shareowners to vote on important matters, such as electing new directors that can arise between annual meetings. Shareowners input on the timing of shareowner meetings is especially important when events unfold quickly and issues may become moot by the next annual meeting.

This is also important because there could be a 15-month span between our annual meetings. This proposal topic won more than 70% support at Edwards Lifesciences and SunEdison in 2013. Vanguard sent letters to 350 of its portfolio companies asking them to consider providing the right for shareholders to call a special meeting.

Delaware law allows 10% of shareholders to call a special meeting without mandating a holding period. However it takes 25% of Kansas City Southern shareholders, from only those shareholders with at least one-year of continuous stock ownership, to call a special meeting.

Thus potentially 50% of Kansas City Southern shareholders could be disenfranchised from having any voice whatsoever in calling a special meeting due to the Kansas City Southern one-year restriction. The average holding period for stock is less than one-year according to “Stock Market Investors Have Become Absurdly Impatient.”

Please vote to enhance shareholder value:

Special Shareowner Meetings – Proposal 4

Board of Directors Statement in Opposition to Proposal 4

The independent Nominating and Governance Committee of our Board of Directors carefully considered the stockholder proposal with the assistance of outside legal counsel. Acting upon the recommendation of that Committee, the Board of Directors decided to oppose the proposal and unanimously recommends that you vote “AGAINST” it for the following reasons:

The Company’s stockholders already have the ability to call a special meeting. The Board believes that adoption of this proposal is unnecessary because the Company’s stockholders already have the ability to call a special meeting. The Company amended its Bylaws in May 2014 to provide that stockholders who have an aggregate “net long position” of at least 25% of the Company’s outstanding shares of common stock may call a special meeting of stockholders upon written request to the Company’s Secretary. At the 2014 Annual Meeting of Stockholders, this amendment was overwhelmingly approved by more than 99% of the votes cast by the Company’s stockholders and is now embodied in Article II, Section 10 of our Bylaws.

The current 25% threshold strikes an appropriate balance. In recommending this Bylaw to stockholders last year, the Board determined after careful consideration that a 25% threshold would strike the appropriate balance between giving stockholders the ability to call a special meeting and protecting against the risk that a small minority of stockholders could trigger the expense and distraction of a special meeting to pursue matters that are not widely viewed as requiring immediate attention. For every special meeting, the Company is required to incur significant expenses, including legal, printing and mailing expenses, and preparation for a meeting requires significant attention of the Company’s directors, officers and employees. The Company holds a regular meeting of stockholders every year. The Board believes that the current 25% threshold helps to ensure that a special meeting will be called only when unusual events or circumstances require that a matter be addressed immediately, rather than waiting for the next annual meeting.

A 10% threshold is not in the best interests of the Company’s stockholders. The Board believes that it is not in the best interests of the stockholders of the Company to give holders of only 10% of our outstanding common stock the ability to call a special meeting of stockholders. A threshold that low could permit a small group of stockholders to use the extraordinary measure of calling a special meeting to serve the group’s

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narrow self-interests at the expense of the vast majority of the stockholders and the Company. For example, event-driven hedge funds or other activists could pursue a special meeting with the goal of disrupting the Company’s business or proposing issues that facilitate their own short-term aims. This concern is heightened if stockholders who may have a perspective substantially different from the majority of the stockholders can borrow shares from other stockholders for the sole purpose of meeting the required threshold necessary to call a special meeting. If this proposal is implemented, any stockholder or ad hoc group holding 10% of the Company’s shares could call a special meeting in its sole discretion, in its own self-interest, at any time, for any reason. Based on our stockholder base over the last several years, a 10% group could have meant just one or two stockholders. The Board believes that if fewer than 25% of the shares desire a special meeting, then the need for a special meeting has not been demonstrated.

The current 25% threshold is well within the mainstream. Among companies in the S&P 500, 25% of outstanding shares is the most common trigger for companies that permit stockholders to call a special meeting. Of U.S.-domiciled companies in the S&P 500 where stockholders are permitted to call a special meeting, 70% set the threshold at 25% or above. Fewer than 5% of companies in the S&P 500 permit stockholders holding just 10% of the outstanding common stock to call special meetings.

The Company is committed to a robust corporate governance regime. Finally, this proposal should be evaluated in the context of the Company’s overall corporate governance profile. The Company is committed to a strong corporate governance regime and has implemented a number of policies and procedures in the past that evidence this commitment, including amending the Company’s Certificate of Incorporation and Bylaws to declassify the Board of Directors. The Board believes in strong and independent directors and, as described elsewhere in this proxy statement, our goal is to have two-thirds of the members of the Board qualify as “independent” within the meaning of the NYSE listing standards. Currently seven of our nine directors are independent within this meaning. Each of our directors in an uncontested election must be elected by a “majority of the votes cast” standard. And the Board recently amended our Bylaws to require an independent Chair of the Board. In light of the Board’s continuing commitment to ensuring effective corporate governance, the Board believes that adoption of this proposal is not necessary and could be disruptive of the Company’s operations and permit the special interests of a small group of stockholders to exert undue influence.

Vote Required for Approval

The affirmative vote of a majority of the shares of Voting Stock present at the Annual Meeting in person or by proxy is required to approval this proposal. Under the rules of the NYSE, brokers are prohibited from giving proxies to vote on this matter unless the beneficial owner of such shares has given voting instructions. This means that if your broker is the record holder of your shares, you must give voting instructions to your broker with respect to Proposal 4 if your want your broker to vote your shares on this matter.

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Company Information

There are currently nine members of the Company’s Board of Directors. Mr. Haverty’s term expires at the Annual Meeting. Pursuant to the Company’s Bylaws, Mr. Haverty is not eligible to be nominated for election to the Board because he previously served as the Company’s Chief Executive Officer. Immediately following the Annual Meeting, the Board intends to reduce the number of directors on the Board to eight. The biographies of the two directors who are standing for re-election to the Board are set forth in Proposal 1. The biographies of the other six directors continuing as directors after the Annual Meeting are set forth below.

The Board met eight times in 2014. The Board meets regularly to review significant developments affecting KCS and to act on matters requiring Board approval. The Board reserves certain powers and functions to itself; in addition, it has requested that the Chief Executive Officer refer certain matters to it. During 2014, all directors attended at least 75% of the aggregate of (1) the total number of meetings of the Board and (2) the total number of meetings held by all committees of the Board on which they served.

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The Board of Directors has established an Audit Committee, a Compensation Committee, a Nominating and Corporate Governance Committee (referred to in this Proxy Statement as the “Nominating Committee”), a Finance Committee and an Executive Committee. Committee members are elected by the Board at the Board’s annual meeting immediately following our Annual Meeting of Stockholders. The Board of Directors has adopted a written charter for the Audit, Compensation, Nominating and Finance Committees detailing all of their responsibilities, a copy of which is available in the “Corporate Governance — Governance Documents” section under the “Investors” tab of our website at www.kcsouthern.com.

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Governance highlights

The Company actively communicates with its major stockholders about various issues concerning the Company, including various corporate governance matters. In recent years, the Company has undertaken a number of corporate governance initiatives in response to feedback it has received from its stockholders, including:

Corporate Governance Guidelines

The Corporate Governance Guidelines of Kansas City Southern (the “Guidelines”) are available for review in the “Corporate Governance — Governance Documents” section under the “Investors” tab of our website at www.kcsouthern.com. In addition, this section of our website makes available all of our corporate governance materials, including our Bylaws (the “Bylaws”), board committee charters, code of business conduct and ethics and our anti-harassment and equal employment opportunity policies. Our Board of Directors regularly reviews corporate governance developments and modifies the Guidelines, committee charters, and key practices as it believes warranted.

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The “Investors” section of our website also includes a copy of the brochure for our United States Speak Up! line in portable document format (i.e., PDF). Our United States Speak Up! line is a means for employees, customers, suppliers, stockholders and other interested parties to submit confidential and anonymous reports of suspected or actual actions they believe may violate our corporate policies or the law. Our United States Speak Up! line is operated by an independent outside vendor 24 hours a day, seven days a week. Any employee, stockholder, or other interested party can call the following toll-free (within the United States) number to submit a report:

1-800-727-2615

We have a similar hotline in Mexico, the KCSM Speak Up! line, to receive confidential and anonymous reports of suspected or actual actions that the reporting party believes may violate our corporate policies or the law. The KCSM Speak Up! line is operated by an independent outside vendor 24 hours a day, seven days a week. Any employee, stockholder or other interested party can call the following toll-free number to submit a report:

Initial Toll Free-Phone Number: 01-800-112-2020

Access Code: 800-727-2615

Code of Business Conduct and Ethics

Our Code of Business Conduct and Ethics is applicable to all directors, officers and employees of KCS and its subsidiaries and embodies our principles and practices relating to the ethical conduct of our business and our commitment to honesty, fair dealing and compliance with applicable laws and regulations. Our Code of Business Conduct and Ethics is available in the “Corporate Governance — Governance Documents” section under the “Investors” tab of our website at www.kcsouthern.com and in print to any stockholder who requests it. Any waiver or amendments to our Code of Business Conduct and Ethics are also made available on our website.

Policy on Director Attendance at Annual Stockholder Meetings

Our directors are encouraged to attend the annual stockholder meetings. Other than Mr. Slater, all directors serving at the time of the 2014 annual stockholder meeting attended that meeting.

Director Qualifications, Qualities and Skills

The Guidelines establish certain qualifications, qualities and skills that directors and nominees must meet to be eligible to serve on our Board of Directors. Under the Guidelines, directors and nominees must be committed to representing the long-term interests of our stockholders and meet, at a minimum, the following qualifications:

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Additionally, it is considered desirable that directors and nominees possess the following qualities and skills:

Director Independence

The Guidelines require that a majority of the Board of Directors must be independent, as determined affirmatively by the Board in accordance with the listing standards of the NYSE, although our goal is to have two-thirds of the members of the Board meet these requirements. We refer to directors who meet the NYSE independence standards as “Independent Directors”. The Independent Directors constitute more than two-thirds of our Board of Directors. The Independent Directors are Messrs. Davis, Druten, Dunn, McDonnell and Secretary Slater, Ambassador Garza and Ms. Córdova. Mr. Haverty does not meet the NYSE independence standard due to his prior relationship with the Company. Our Board has affirmatively determined that each Independent Director has no material relationship with the Company and is independent in accordance with applicable NYSE listing standards. These standards assist the Board in determining that a director or nominee has no material relationship with KCS, either directly or as a partner, shareholder or officer of an organization that has a relationship with KCS.

The Board holds regular executive sessions of the Independent Directors. All Board committees, other than the Executive Committee, are comprised of only Independent Directors. Thus, the Independent Directors directly oversee critical matters such as the compensation of executive management, the selection and evaluation of Board nominees, the integrity of the Company’s financial statements, and the development of corporate governance programs of the Company.

Board Leadership Structure

The Board regularly considers the appropriate leadership structure for the Company and recently revised our Bylaws and our Guidelines to require that the position of Chair of the Board be filled by an Independent Director. The effect of these revisions is to separate the positions of Chief Executive Officer and Chair of the Board. The Board believes this structure ensures appropriate oversight by the Independent Directors. Meetings of the Independent Directors will be presided over by the Chair (currently Mr. Druten) since he or she will also be an Independent Director.

The Board’s Role in Risk Oversight

The Board of Directors is responsible for overseeing the Company’s enterprise risk management process and program. This includes understanding the Company’s philosophy and strategy towards enterprise risk management and mitigation. The Board reviews the Company’s most significant risks and whether management is responding within the Company’s risk management and mitigation strategies. The Board has delegated to the Audit Committee the primary responsibility for reviewing the Company’s risk assessment and risk management policies. Management periodically reports to the Audit Committee on the Company’s risk identification, assessment and mitigation activities. The Company has an enterprise risk management coordinator who supervises the enterprise risk management process. Furthermore, the Company has given its disclosure committee responsibility to review the comparability of the risk factors disclosed in the Company’s Annual Report on Form 10-K with the Company’s enterprise risk profile. The risk oversight structure has no effect on the Board’s leadership structure.

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Director Diversity

The Nominating Committee strives to nominate directors who represent an appropriate mix of backgrounds and experiences to best enhance the functions of the Board. The Nominating Committee considers diversity in the broadest sense, thus including factors such as age, sex, race, ethnicity and geographic location, as well as a variety of experience and educational backgrounds (such as operations, finance, accounting and marketing experience and education) when seeking Board nominees. The Nominating Committee does not have a diversity policy in place.

Stockholder/Interested Person Communication with the Board

Any stockholder or interested person may communicate with the Independent Directors by sending such communication in writing to the office of the Corporate Secretary, Kansas City Southern, P.O. Box 219335, Kansas City, Missouri, 64121-9335, or by express carrier to the Corporate Secretary, Kansas City Southern, 427 West 12th Street, Kansas City, Missouri 64105. In its capacity as the agent for the Independent Directors the office of the Corporate Secretary may review, sort and summarize the communications and, in accordance with the directions provided by and procedures established by the Independent Directors, forward such communications to the Independent Directors as appropriate. To be considered, such communications must be signed by the stockholder or other interested party, with the stockholder’s or other interested party’s name, address and telephone number. The Independent Directors shall review such communication with the Board, or the group addressed in the communication, for the purpose of determining an appropriate response and any appropriate action that should be taken. Any communications received may be shared with management on the instruction of the Independent Directors.

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Beneficial Ownership

The following table contains information concerning the beneficial ownership of our Common Stock as of the Record Date by:

We are not aware of any beneficial owner of more than five percent of the 4% Preferred Stock. None of our directors or executive officers owns any shares of 4% Preferred Stock. No officer or director of KCS owns any equity securities of any subsidiary of KCS. Beneficial ownership is generally defined as either the sole or shared power to vote or dispose of the shares. Except as otherwise noted, the beneficial owners have sole power to vote and dispose.

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Compensation Discussion &

Analysis

This Compensation Discussion and Analysis describes the Company’s executive compensation for 2014 for our Named Executive Officers or “NEOs”, who are listed below and in the Summary Compensation Table in this Proxy Statement.

David R. Ebbrecht, the Company’s former Executive Vice President and Chief Operating Officer, is also included in this proxy statement as a Named Executive Officer. Mr. Ebbrecht’s employment with the Company ended on June 30, 2014.

2014 Say-On-Pay Vote on Executive Compensation

At the 2014 Annual Meeting, stockholders representing 97.6% of the votes cast at the meeting voted in favor of the 2013 compensation of the named executive officers. Supported by the overwhelming approval of the 2013 compensation program for our NEOs, the Compensation Committee decided to maintain the same program for 2014.

Key Features of Executive Compensation Program

The Compensation Committee is responsible for establishing our executive compensation policies and overseeing our executive compensation practices to align compensation with the principles described herein. The Compensation Committee believes our executive compensation program will achieve the following objectives:

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The Compensation Committee seeks to provide base salaries, target total cash and target total direct compensation that are consistent with market median practices, recognizing internal equity and incumbent-specific considerations such as performance, future potential, and tenure with the Company. We define the market as comparably-sized transportation and mature capital intensive companies. Based on the findings of the executive compensation analysis in 2014, the Compensation Committee believes that our targeted executive compensation levels are “competitive” in aggregate, within a +/- 15% of the target market 50th percentile (i.e., 85% to 115% of target market 50th percentile).

		We tie pay to performance. The great majority of executive pay is not guaranteed. We set clear financial goals for corporate performance.
		We seek to mitigate undue risk, including utilizing caps on potential payments and robust Board and management processes to identify risk.
		We have adopted stringent share ownership guidelines, which all Named Executive Officers meet.
		We reward our executives for long-term growth and therefore measure our performance over a three-year cycle.
		We provide only modest perquisites that have a sound benefit to the Company’s business.
		We have reasonable post-employment and change in control provisions in our executive employment agreements.
		Our equity plans under which awards may be granted generally provide for accelerated vesting of future awards after a change in control only if an employee is also terminated (a double-trigger).
		Our Compensation Committee benefits from its utilization of an independent compensation consulting firm.
		The Compensation Committee closely monitors any other services provided to the Company by its compensation consulting firm to ensure they don’t create a potential conflict of interest.
		Pursuant to the claw back provision in our performance share award agreement, participants who engage in gross misconduct must forfeit outstanding awards and repay awards previously paid.

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Primary Elements of Compensation

The primary elements of our 2014 executive officer compensation package are described below. The amount and types of elements differ between our U.S. and Mexico executives as a result of custom, traditions, compensation statutes and tax law differences.

Other Elements of Compensation

We provide certain benefit programs that are designed to be competitive within the marketplace from which we recruit our employees. The majority of employee benefits provided to our Named Executive Officers are offered through broad-based plans available to our management employees generally.

KCS 401(k) and Profit Sharing Plan (the “KCS 401(k) Plan”).    The KCS 401(k) Plan is a qualified defined contribution plan. Eligible U.S. employees may elect to make pre-tax or post-tax deferral contributions, called 401(k) contributions, to the KCS 401(k) Plan of up to 75% of eligible compensation subject to certain limits under the Code. We match contributions to the KCS 401(k) Plan equal to 100% of a participant’s 401(k) contributions and up to the lesser of a maximum of 5% of a participant’s eligible compensation or the statutory limit imposed by the Code. Our matching contributions for the KCS 401(k) Plan vest over five years as follows:

We may also make, in our discretion, annual profit sharing contributions to the KCS 401(k) Plan in an amount not to exceed the maximum allowable deduction for federal income tax purposes and certain limits under the Code. Only employees who have met certain standards as to hours of service are eligible to

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receive profit sharing contributions. No minimum contribution is required. Each eligible participant, subject to maximum allocation limitations under the Code, is allocated the same percentage of the total contribution as the participant’s compensation bears to the total compensation of all participants. Profit sharing contributions are 100% vested when made. No profit sharing contributions were made in 2014.

Participants may direct the investment of their accounts in the KCS 401(k) Plan by selecting from one or more of the diversified investment funds available under the KCS 401(k) Plan.

Executive Plan.    In order to provide executives with competitive retirement and savings plans, we maintain a supplemental benefit plan known as the “Executive Plan” for those U.S. executives who are designated by the President, Chief Executive Officer or Compensation Committee as participants in the plan. Our Executive Plan provides a benefit based on an amount equal to 10% of the excess of (a) the greater of (i) an executive’s base salary times the percentage specified in his or her employment agreement (ranging from 145% to 175%) or, for those executives without employment agreements, 145% (see the “Summary Compensation Table — Narrative to Summary Compensation Table”) or (ii) the sum of the executive’s base salary earned for the year plus any short-term incentive that was earned during the applicable year, over (b) the maximum compensation that can be considered for benefit purposes in a qualified retirement plan. Payments are generally made annually under this plan and executives receive such payments in one year restricted stock, which may be forfeited in the event of termination of employment prior to the end of the twelve-consecutive-month period beginning on the grant date.

Perquisites.    As noted in our Summary Compensation Table, we provide our U.S. Named Executive Officers with certain perquisites consistent with market practice. We do not view perquisites as a significant element of our comprehensive compensation structure for our U.S. Named Executive Officers. For Mr. Zozaya and other executives employed by KCSM, we provide perquisites as required by Mexican law and consistent with Mexican customary practice.

We reimburse financial counseling expense for our Named Executive Officers up to a stated limit in accordance with the KCS Financial Planning Reimbursement Policy. The maximum amount of the annual reimbursement under this policy for our CEO is $8,000. The maximum amount of the annual reimbursement under this policy for our other Named Executive Officers is $5,000. We also pay for three years’ of the administrative fees charged by the Greater Kansas City Community Foundation (“GKCCF”) related to donor advised funds established by our U.S. executives at the GKCCF. These fees are paid out of funds from the Company’s charitable foundation, which is administered by the GKCCF.

Consistent with applicable law and perquisite practices in Mexico generally, we provide the following perquisites to Mr. Zozaya: (1) annual Christmas bonus equal to 30 days of wages or salary (Mexican law requires an annual Christmas bonus equal to at least 15 days of wages or salary), (2) vacation and vacation premium payments of 50% (Mexican law requires a vacation premium of at least 25%), (3) food stipend (up to a maximum of Ps. 2,131 per month), (4) automotive allocations or use of a leased company car (and maintenance for the leased car), (5) gasoline coupons, (6) 100% payment of the employee’s social security fees and (7) a limited reimbursement of expenses for financial planning services in accordance with the KCS Financial Planning Reimbursement Policy. The annual Christmas bonus is a payment in the amount equal to one month’s salary, prorated based on time with the Company. Executives based in Mexico have a number of vacation days as set forth in their respective employment agreements and a corresponding vacation premium equal to 50% of their earned vacation days, generally paid on or around their annual anniversary date, in accordance with the Company’s payroll policy.

The Compensation Committee believes these perquisites are conservative, but reasonable and consistent with our overall compensation program, industry practice and applicable law, and better enable the Company to attract and retain high-performing employees for key positions. The Compensation Committee periodically reviews the levels of perquisites and other personal benefits provided to our Named Executive Officers. The Compensation Committee does not plan to materially increase the perquisites currently provided, subject to, with respect to Mr. Zozaya, requirements under Mexican law.

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Other Benefits.    For our U.S. employees, we pay a portion of premiums for medical coverage, pay premiums for short-term disability coverage, pay premiums for 50% coverage for long-term disability and pay premiums for AD&D coverage up to 2 ¹/₂ times the annual salary for each employee up to a maximum of $600,000. For U.S. and Mexico executives, we provide a basic amount of group life insurance coverage. Additionally, we provide eligible U.S. employees with the opportunity to purchase KCS Common Stock at a discount under the Kansas City Southern 2009 Employee Stock Purchase Plan, which plan is intended to satisfy Section 423 of the Code.

Benefits Provided for KCSM Executives.    We provide accident, medical and life insurance for our executives based in Mexico. Each of our Named Executive Officers based in Mexico may contribute to a savings fund up to 13% of his base salary up to Ps. 2,659.30 monthly, the legal maximum. We make a matching contribution to each such Named Executive Officer’s savings fund. In addition, we are required under Mexican law to make certain severance payments to any employee (including a Named Executive Officer) who is terminated without cause. See “Potential Payments Upon Termination of Employment or Change in Control” for a more detailed discussion of these payments.

Change in Control Benefits

Various compensation arrangements provide for award and account vesting and separation pay for our Named Executive Officers upon a change in control or the occurrence of certain events after a change in control. These arrangements are designed to:

Please see the “Potential Payments upon Termination of Employment or Change in Control” for a discussion of why the Compensation Committee believes the current levels of post-employment termination compensation and benefits are appropriate and consistent with our compensation objectives.

Pay Mix

The percentage of a Named Executive Officer’s total compensation resulting from each of the compensation elements is not specifically determined, but instead is a result of the targeted competitive positioning for each element. By design, “at-risk” components (particularly long-term incentives) comprise a significant portion of a Named Executive Officer’s total compensation. This is consistent with the Compensation Committee’s desire to reward long-term performance in a way that is aligned with stockholders’ interests. In 2014, the target pay mix for our Chief Executive Officer and all other Named Executive Officers serving on December 31, 2014 (as an average) was as follows:

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Executive Stock Ownership Guidelines

The Compensation Committee has set stock ownership guidelines for our Named Executive Officers and other members of senior management, which require executives to own a certain number of shares of Company Common Stock based upon a multiple of base salary, with the number of shares required for each executive determined by salary grade. The required multiples for our Named Executive officers are as follows:

The Compensation Committee will periodically review the continued appropriateness of the stock ownership guidelines. Executives are given five years from their start date or promotion date to meet the required stock ownership thresholds. All stock sales by executives who are not in compliance will be reviewed by the Corporate Secretary and approved by the CEO. If executives have not met this stock ownership requirement within five years, then they may be required to retain long-term incentive plan grants and 50% of AIP payouts may be awarded in stock until the executive is compliant.

Shares that count in determining compliance with the stock ownership guidelines are shares beneficially owned by the executive, shares held by the executive in any KCS benefit plan, restricted shares at the time of grant (even if not yet vested), performance shares when earned (even if not yet vested), and shares issued and retained on exercise of stock options. As of December 31, 2014, all of our executives met the stock ownership guidelines.

Participants in the Compensation Process

Compensation Committee.    The Compensation Committee, which is responsible for establishing our executive compensation policies and overseeing our executive compensation practices, is comprised of three directors. Each of these directors meets the independence requirements of the NYSE, qualifies as an outside director under Section 162(m) of the Code, and is considered a non-employee director under Rule 16b-3 under the Exchange Act.

Role of Towers Watson, our Compensation Consultant.    For assistance in fulfilling its responsibilities, the Compensation Committee retained Towers Watson as its compensation consultant to review and independently assess various aspects of our compensation programs, including the compensation of individuals serving as executives of KCSM, and to advise the Compensation Committee in making its executive compensation decisions for 2014. The Compensation Consultant is engaged by and reports directly to the Compensation Committee and has been retained again for 2015. The Compensation Committee has assessed the independence of the Compensation Consultant pursuant to SEC rules, analyzed whether the work performed raised any conflict of interest, and concluded that the Compensation Consultant is independent and that no conflict of interest exists. The Compensation Consultant’s role in 2014 has been to provide market data, including market trend data, to the Compensation Committee, to advise the Compensation Committee regarding the Company’s executive compensation relative to the market data, and to make recommendations to the Compensation Committee regarding compensation structure and components.

In 2014, at the direction of the Compensation Committee, the Compensation Consultant performed an executive compensation market analysis to assess the competitiveness of the compensation of the executives of the Company, including the Named Executive Officers. This study is typically conducted every two years and the data and findings are used to inform compensation program decisions going forward until the next study is performed, as well as evaluate actions that have been taken relative to the Company’s market position in compensation. The study was used to inform decisions regarding 2014 programs and grants.

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The results of the most recent analysis were presented to the Compensation Committee in February 2014. The Compensation Consultant analyzed the market competitiveness of the following elements for each of the covered executive positions:

The Compensation Consultant also assessed the relative market positioning of retirement programs provided to executives including the Named Executive Officers, as well as perquisites.

In performing the study, the Company’s executive positions were initially “matched,” based on the Compensation Consultant’s understanding of the positions’ primary duties and responsibilities, to similar positions in Towers Watson’s 2014 Executive Compensation Data Bank. At the request of the Company, a premium was applied to the market compensation data for certain benchmark survey position matches to reflect the differences between the responsibilities of the Company’s positions and those of the benchmark survey job matches.

Peer Group

In connection with this analysis and prior benchmarking analyses, the Compensation Committee with its Compensation Consultant defined the Company’s primary United States and Mexico competitive market as transportation and mature, capital-intensive companies with annual revenues of at least $1 billion, but no more than $5 billion that participate in the Compensation Consultant’s Executive Compensation Database. In 2014, with respect to our U.S. Named Executive Officers, this group was comprised of the following companies, all of which had revenues in 2013 between $1 billion and $5 billion:

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With respect to Mr. Zozaya, this group was comprised of the following companies, all of which had revenues in Mexico in 2013 between $250 million and $2.5 billion:

Conclusions of Compensation Committee

The results of the study conducted by the Compensation Committee with its Compensation Consultant found that (i) our base salaries are, on average, aligned with approximately local country market 50th percentile levels; (ii) our target total cash compensation levels are on average within a competitive range around the U.S. market median; (iii) our target annual incentive award opportunities, expressed as a percentage of salary, are, on average, aligned with the U.S. market 50th percentile level; and (iv) our target long-term incentive award opportunities, and resulting target total direct compensation levels, are, on average, consistent with U.S. market median practices. Results for individual officers varied. For the Named Executive Officers as a group, average competitive positioning for base salary was competitive with the median for the market. The study also found that the Company’s retirement benefits fall within the competitive range, but toward the lower end of this range. The study concluded that perquisites were modest, but consistent with typical current practices.

The conclusion by our Compensation Committee is that the Named Executive Officers are being compensated at or near market median given their positions and responsibilities. The Compensation

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Committee is satisfied that the ratio of compensation between the CEO and the other Named Executive Officers is acceptable and reasonable, particularly when taking into consideration the differences in responsibilities of each. The policies or decisions relating to the compensation of the CEO are not materially different than the other Named Executive Officers.

Risk Considerations in our Compensation Program

The Company also engaged Towers Watson to review its compensation program to assess the risks that it could create, as reflected in the Company’s risk management practices and policies. The review covered a number of key facets of the Company’s compensation plans, including their purposes, the types of performance measures used, the number and organizational level of participants, the aggregate amount and maximum individual amounts payable under the plans, the ability of the participants to take actions that could influence the calculation of their awards, the scope of the risks that could be created by actions taken to enhance the amounts payable under the plans, and how the Company’s risk management policies and governance practices are structured to mitigate these risks. As a result of this review, the Company concluded that its compensation program does not create risks that are reasonably likely to have a material adverse effect on the Company or its stockholders.

Tax and Accounting Considerations

Section 162(m) of the Code generally limits the deduction by publicly held corporations for federal income tax purposes of compensation in excess of $1 million paid to the chief executive officer as of the end of the year and the next three highest compensated Named Executive Officers listed in the Summary Compensation Table, other than the chief financial officer, unless it is “performance-based.” Except as otherwise described in this section, the Compensation Committee intends to qualify compensation expense as performance-based and therefore deductible for federal income tax purposes.

The compensation packages of the Named Executive Officers for 2014 included base salary, annual cash incentives under the 2014 Annual Incentive Plan, performance share awards, restricted stock and non-qualified stock options. The highest total base salary was within the $1 million limit. The Company’s Annual Incentive Plan document was approved by stockholders in 2011 and is a performance-based plan under Section 162(m) of the code. Restricted shares with time-based vesting requirements awarded under the provisions of the 1991 Plan or the 2008 Plan do not qualify as performance-based compensation under Section 162(m). The restricted shares awarded to the Named Executive Officers have the potential to result in total compensation in excess of the $1 million limit under Section 162(m). Restricted shares with performance-based vesting requirements, stock options and performance shares awarded under the provisions of the 1991 Plan or 2008 Plan are intended to qualify as performance based compensation under Section 162(m) because the awards are earned based on our performance.

The Compensation Committee will review from time to time the potential impact of Section 162(m) on the deductibility of executive compensation. However, the Compensation Committee intends to maintain the flexibility to take actions it considers are in the best interests of KCS and our stockholders and which may be based on considerations in addition to tax deductibility.

The Compensation Committee periodically reviews projections of the estimated accounting (pro forma expense) and tax impact of material elements of the executive compensation program.

2014 Salary Adjustments

In February 2014, the Compensation Committee approved base salary increases of 3% for our Chief Executive Officer and the other U.S. Named Executive Officers and 4% for Mr. Zozaya.

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2014 Short Term Incentive Plan

In February 2014, the Compensation Committee approved the 2014 Annual Incentive Plan (the “2014 AIP”) for our Named Executive Officers. Similar to the AIP in prior years, each Named Executive Officer was assigned incentive targets at the threshold, target and maximum incentive performance levels that are a percentage of the Named Executive Officer’s 2014 base salary earned in 2014. The target percentage assigned for each performance level depended on the executive’s salary grade and is set forth in the following table:

Following are the 2014 consolidated operating ratio incentive targets, as well as the percentage payout of the executive’s total incentive target for these metrics:

For the year ended December 31, 2014, our consolidated operating ratio as defined in the 2014 AIP was 67.1%. As a result of this, the Named Executive Officers (other than Mr. Ebbrecht) each earned a 2014 AIP payout of 200% of the target amount. See the Summary Compensation Table for actual amounts paid. Mr. Ebbrecht was not entitled to a payout under the 2014 AIP. Each year, the Compensation Committee will determine whether an annual incentive program will be adopted for that year and will establish participation, award opportunities and corresponding performance measures and goals, considering general market practices and its own subjective assessment of the effectiveness of such program in meeting its goals of motivating and rewarding our executives.

2014 Long-Term Incentive Program

As a result of the performance of the Company’s Named Executive Officers and the overwhelming approval of the say-on-pay vote at last year’s annual meeting, the Compensation Consultant utilized the guidelines developed during the creation of the 2013 long-term incentive program (the “2013 LTI Program”) to assist in the development of the 2014 LTI Program. The Compensation Committee agreed that the 2014 LTI Program should continue to:

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The 2014 LTI Program was approved in February 2014. The mix of awards was as follows:

2014 Long-Term Incentive Mix

Performance Shares:    Under the 2014 LTI Program, a three-year performance share award was granted. The performance metrics for earning the performance shares awarded under the 2014 LTI Program were determined by setting performance goals for each year of the three-year performance period. The average of the results for each year as measured against these performance goals at the end of the three-year performance period will then be multiplied by the total number of shares awarded at target to determine the number of performance shares earned. The Compensation Committee decided this was an appropriate manner to determine the shares earned, and believed this best aligned executives’ long-term incentive compensation with our multi-year business plan as well as with the interests of our stockholders.

Management may earn between 50% and 200% of the performance share award by meeting or exceeding the performance criteria set for the three-year period. The performance criteria for the three year plan were set at the February 2014 meeting of the Compensation Committee. The performance shares earned, if any, will vest at the end of the three year period, on the later of (i) February 28, 2017 or (ii) the date the Compensation Committee certifies that the Performance Goals for the three-year Performance Period are (or are not) satisfied.

The Compensation Committee determined to use the Company’s return on invested capital (“ROIC”) and consolidated operating ratio (“OR”) as the performance metrics for the performance shares under the 2014 LTI Program, weighted 75% and 25%, respectively. The Compensation Committee believes that ROIC allows it to not only assess the Named Executive Officers’ performance with respect to our earnings, but also allows the Compensation Committee to measure the efficiency of management in stewarding our capital base and determine the success of management in making long-term capital investment decisions to improve our financial and operating performance. ROIC provides the Compensation Committee a measurement that can hold management accountable for earning a return in excess of our cost of capital.

For this purpose, ROIC is defined as the quotient of the Company’s net operating profit after taxes (“NOPAT”) for the applicable performance period divided by the Company’s invested capital where (i) NOPAT is the sum of the Company’s net income, interest expense and interest on the present value of the Company’s operating leases (all preceding items tax effected), with further adjustments to eliminate the after-tax effects of (a) the amount of lease termination costs recognized as a separate line item within operating expenses in the consolidated statement of income, (b) debt retirement costs, (c) foreign exchange gains/losses, (d) the foreign exchange impact on the Company’s Effective Tax Rate (“ETR”), (e) the impacts

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of changes in statutory income tax rates and laws on the Company’s ETR, (f) the impacts of changes in accounting principles, and (g) other special one-time adjustments included in Adjusted Diluted Earnings Per Share as reported by the Company which are not already included in the preceding points; and (ii) invested capital is the sum of the Company’s average equity balance, average debt balance and the present value of the Company’s operating leases, with further adjustments to eliminate the average equity impacts of (x) changes in accounting principles, and (y) incremental debt incurred after January 1, 2014 for lease conversions. Incremental debt is defined as debt incurred to finance the purchase of equipment under existing operating leases and the purchase of replacement equipment as operating leases expire, reduced by the present value of the related operating leases.

The Compensation Committee determined to use OR as the other performance metric believing it to be a solid indicator of the Company’s financial performance and profitability. The Compensation Committee recognized that OR is a measure easily monitored by our management employees and is widely monitored by investors. For this purpose, OR is defined as the Company’s consolidated operating ratio with any necessary adjustments to eliminate the effects of (i) the amount of lease termination costs recognized as a separate line item within operating expenses in the consolidated statement of income, (ii) changes in accounting principles, and (iii) other special one-time adjustments included in Adjusted Diluted Earnings Per Share as reported by the Company which are not already included in the preceding points.

Following are the performance levels for the 2014 LTI Program*:

*These performance levels should not be viewed as predictions or estimates of future performance and the actual achievement of these levels is subject to numerous known and unknown risks and uncertainties including, without limitation, those described under “forward looking statements”, “risk factors” or similar headings in our quarterly and annual reports filed with the SEC. The Compensation Committee establishes these levels solely to help it align pay with performance. The levels are not intended to provide investors or any other party with guidance about our future financial performance or operating results.

For the year ended December 31, 2014, our return on invested capital (as defined under the 2014 LTI Program) was 10.0%. Our consolidated operating ratio (as defined under the 2014 LTI Program) was 67.1%. These results will be combined with the results of 2015 and 2016 to determine the average results of the three-year performance period that will be used to determine the number of performance shares earned under the 2014 LTI Program.

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The following awards were granted to the Company’s Named Executive Officers for the 2014 LTI Program:

Restricted Stock:    In addition to the performance share component of the 2014 LTI Program, the Compensation Committee determined it appropriate that 25% of the award be in the form of time-based, cliff vesting, restricted stock of the Company for purposes of acting as a management retention tool during the three-year term of the program. The restricted stock awarded under the 2014 LTI Program does not vest until February 28, 2017.

Options.    The other 25% of the award is in the form of time-based non-qualified stock options under the 2014 LTI Program, which provides a high degree of alignment between management and stockholders. The options become vested and exercisable in equal installments on February 20, 2015, February 20, 2016 and February 20, 2017, respectively. The stock options must be exercised in all events no later than ten years from the date of grant. The exercise price of the stock options is equal to the fair market value of the Company’s common stock on the date of grant.

The restricted stock, stock options and performance shares granted to the Named Executive Officers were awarded under the Company’s 2008 Stock Option and Performance Award Plan (the “2008 Plan”). The purpose of the 2008 Plan is to allow officers, directors, employees and consultants of KCS and its affiliates to acquire or increase equity ownership in the Company. The 2008 Plan was approved by the stockholders of the Company on October 7, 2008. In 2013, stockholders re-approved the material terms of the performance measures under the 2008 Plan for the payment of performance-based awards granted under the 2008 Plan. The equity awards described in the Non-Management Director Compensation Table and Summary Compensation Table were awarded under the 2008 Plan.

Discretionary Supplemental Cash Award

The total number of performance shares earned under the terms of the 2012 long-term incentive program (the “2012 LTI Program”) was 83.8% of the performance shares granted to the executives for the 2012 LTI Program. Achievement of the 2012 LTI Program targets was negatively impacted by a lease conversion program that commenced in 2013. Under this program, in the fourth quarter of 2013, the Company issued debt at historically low interest rates and used the proceeds in 2013, 2014 and 2015 to purchase or replace locomotives and other equipment that were under operating leases. The Company estimates that the conversion of leased equipment to company-owned equipment will produce significant long-term incremental financial benefit. As a result of incremental debt incurred to finance the purchase of locomotives and equipment and one-time lease termination costs, the lease conversion program negatively impacted ROIC for 2013 and 2014 and negatively impacted OR for 2014. At the time the 2012 LTI Program targets were established, the Company was in the very early stages of analyzing the lease conversion opportunity and related financial impacts, and therefore the ROIC and OR goals established in the 2012 LTI Program did not include any potential impacts from these transactions. Consequently, the lease conversion program resulted in a reduction in the number of performance shares earned by the executives under the 2012 LTI Program and will also have a negative impact to the performance shares earned under the 2013 long-term incentive program. The Compensation Committee believes that this lease conversion program

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was in the best interests of the Company and wants to incent executives to take actions that benefit all stockholders as originally intended under these long term incentive plans. The Committee also intends to review in 2016 the impact of the lease conversion program to achievement of targets under the 2013 long term incentive program. In February 2015, the Compensation Committee approved a discretionary supplemental cash award to each of the Company’s current executives who are participants in the 2012 LTI Program. This amount is shown in the “Bonus” column in the Summary Compensation Table for the Named Executive Officers. The total amount of this discretionary supplemental cash award to all executives was $2.1 million.

Compensation Committee Report

The Compensation Committee has received and discussed with management the disclosures contained in “Compensation Discussion and Analysis” in this Proxy Statement. Based on that review and analysis, we recommended to the Board of Directors that the Compensation Discussion and Analysis section be included in this Proxy Statement.

The Compensation Committee

Henry R. Davis, Chairman

Robert J. Druten

Rodney E. Slater

This Compensation Committee Report is not deemed “soliciting material” and is not deemed filed with the SEC or subject to Regulation 14A or the liabilities under Section 18 of the Exchange Act.

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Executive Compensation

The following table and narrative disclose compensation earned in 2014 by the Named Executive Officers. The table shows amounts earned by such persons for all services rendered in all capacities to KCS and its subsidiaries during the past year.

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Narrative to Summary Compensation Table

Employment Agreements.    Each of the Named Executive Officers is a party to an employment agreement.

Pursuant to their respective employment agreements, Messrs. Starling, Upchurch, Zozaya, Ottensmeyer, and Erdman receive as compensation for their services an annual base salary at the rate approved by the Compensation Committee. We believe that the unique responsibilities, rail and international transportation experience, accountability, leadership and achievements of Mr. Starling as our Company’s Chief Executive Officer are worthy of special consideration in setting his compensation. The salaries for these executive officers shall not be reduced except as agreed to by the parties or as part of a general salary reduction applicable to all officers. Messrs. Starling, Upchurch, Zozaya, Ottensmeyer, and Erdman are eligible to participate in benefit plans or programs generally available to management employees of KCSR or KCSM, as applicable. Each of the employment agreements of Messrs. Starling, Upchurch, Ottensmeyer, and Erdman provides that the value of the respective Named Executive Officer’s annual compensation is fixed at a percentage of base salary for purposes of determining contributions, coverage and benefits under any disability insurance policy and under any cash compensation-based plan provided to the Named Executive Officer as follows: 175% for Mr. Starling; 145% for Mr. Upchurch; 175% for Mr. Ottensmeyer; and 145% for Mr. Erdman.

For information regarding potential payments to the Named Executive Officers upon termination of employment or change in control, see “Potential Payments Upon Termination of Employment or Change in Control” below.

Indemnification Agreements.    We have entered into indemnification agreements with our KCS officers and directors. Each of our U.S. Named Executive Officers is an officer of KCS. These agreements are intended to supplement our officer and director liability insurance and to provide the officers and directors with specific contractual assurance that the protection provided by our Bylaws will continue to be available regardless of, among other things, an amendment to the Bylaws or a change in management or control of KCS. The indemnification agreements provide for indemnification to the fullest extent permitted by the Delaware General Corporation Law and for the prompt advancement of expenses, including attorneys’ fees and all other costs and expenses incurred in connection with any action, suit or proceeding in which the director or officer was or is a party, is threatened to be made a party or is otherwise involved, or to which the director or officer was or is a party, is threatened to be made a party or is otherwise involved by reason of service in certain capacities. Under the indemnification agreements, if required by the Delaware General Corporation Law, an advancement of expenses incurred will be made upon delivery to us of an undertaking to repay all advanced amounts if it is ultimately determined by final adjudication that the officer or director is not entitled to be indemnified for such expenses. The indemnification agreements allow directors and officers to seek court relief if indemnification or expense advances are not received within specified periods, and obligate us to reimburse them for their expenses in pursuing such relief in good faith.

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The following table provides information for each of the Named Executive Officers regarding 2014 grants of annual incentive awards, equity incentive plan awards, restricted shares, and stock options.