Use these links to rapidly review the document
TABLE OF CONTENTS
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy
Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant ý | ||
Filed by a Party other than the Registrant o |
||
Check the appropriate box: |
||
o |
Preliminary Proxy Statement |
|
o |
Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
|
ý |
Definitive Proxy Statement |
|
o |
Definitive Additional Materials |
|
o |
Soliciting Material under §240.14a-12 |
United Parcel Service, Inc. | ||||
(Name of Registrant as Specified In Its Charter) |
||||
(Name of Person(s) Filing Proxy Statement, if other than the Registrant) |
||||
Payment of Filing Fee (Check the appropriate box): |
||||
ý |
No fee required. |
|||
o |
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
|||
(1) | Title of each class of securities to which transaction applies: |
|||
(2) | Aggregate number of securities to which transaction applies: |
|||
(3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): |
|||
(4) | Proposed maximum aggregate value of transaction: |
|||
(5) | Total fee paid: |
|||
o |
Fee paid previously with preliminary materials. |
|||
o |
Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. |
|||
(1) |
Amount Previously Paid: |
|||
(2) | Form, Schedule or Registration Statement No.: |
|||
(3) | Filing Party: |
|||
(4) | Date Filed: |
Notice of 2014 Annual
Meeting of Shareowners
and Proxy Statement
55 Glenlake Parkway, N.E., Atlanta, Georgia 30328
Notice of Annual Meeting of Shareowners
May 8, 2014
To our Shareowners:
United Parcel Service, Inc.'s annual meeting of shareowners will be held at the Hotel du Pont, 11th and Market Streets, Wilmington, Delaware 19801, on Thursday, May 8, 2014, at 8:00 a.m. The purposes of the meeting are:
1. To elect 13 directors nominated by the board of directors and named in the proxy statement to serve until our 2015 annual meeting of shareowners and until their respective successors are elected and qualified;
2. To conduct an advisory vote to approve executive compensation, often referred to as a "say on pay";
3. To ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the year ending December 31, 2014;
4. To vote on two shareowner proposals described in the proxy statement, if properly presented at the meeting; and
5. To transact any other business as may properly come before the meeting.
Our board of directors has fixed the close of business on March 10, 2014 as the record date for determining holders of our common stock entitled to notice of, and to vote at, the annual meeting.
Teri P. McClure Secretary |
Atlanta, Georgia
March 17, 2014
Your vote is important. Please vote as soon as possible by using the Internet or by telephone or, if you received a paper copy of the proxy card by mail, by signing and returning the proxy card. Instructions for your voting options are described on the Notice of Internet Availability of Proxy Materials or proxy card.
Important Notice Regarding the Availability of Proxy Materials for the Shareowner Meeting to be Held on May 8, 2014. The proxy statement and annual report are available at www.proxyvote.com.
TABLE OF CONTENTS
2014 PROXY STATEMENT SUMMARY
UNITED PARCEL SERVICE, INC.
55 Glenlake Parkway, N.E., Atlanta, Georgia 30328
This summary highlights information contained elsewhere in this proxy statement. This summary does not contain all of the information that you should consider, and you should read the entire proxy statement carefully before voting.
UPS 2014 Annual Meeting Information
Items of Business
|
|
Board Vote Recommendation |
Page Reference (for more information) |
||||||
---|---|---|---|---|---|---|---|---|---|
Company Proposals: |
|||||||||
1. |
Elect 13 directors named in this proxy statement | FOR ALL | 65 | ||||||
2. |
Advisory vote to approve executive compensation | FOR | 66 | ||||||
3. |
Ratify the appointment of our independent registered public accounting firm | FOR | 68 | ||||||
Shareowner Proposals: |
|||||||||
4. |
Vote on a shareowner proposal on lobbying disclosure, if properly presented at the meeting | AGAINST | 69 | ||||||
5. |
Vote on a shareowner proposal to reduce the voting power of class A stock from 10 votes per share to one vote per share, if properly presented at the meeting | AGAINST | 72 |
UPS | Notice of Annual Meeting of Shareowners and 2014 Proxy Statement | 1
2014 PROXY STATEMENT SUMMARY (CONTINUED)
Director Nominees
The board of directors of United Parcel Service, Inc. ("we," "our," "us," the "Company," or "UPS") is asking you to elect the 13 nominees for director. The table below provides summary information about the 13 director nominees. A nominee will only be elected if the number of votes cast for the nominee's election is greater than the number of votes cast against that nominee. For more information about the nominees, including information about the qualifications, attributes and skills of the nominees, see page 11.
Name |
Age |
Director Since |
Occupation
|
|
||||||
---|---|---|---|---|---|---|---|---|---|---|
Independent Directors |
||||||||||
F. Duane Ackerman |
71 | 2007 | Former Chairman and Chief Executive Officer, BellSouth Corporation | |||||||
Rodney C. Adkins |
55 | 2013 | Senior Vice President of Corporate Strategy, International Business Machines | |||||||
Michael J. Burns |
62 | 2005 | Former Chairman, Chief Executive Officer and President, Dana Corporation | |||||||
Stuart E. Eizenstat |
71 | 2005 | Senior Counsel, Covington & Burling LLP | |||||||
William R. Johnson |
65 | 2009 | Former Chairman, President and Chief Executive Officer, H.J. Heinz Company | |||||||
Candace Kendle |
67 | 2011 | Co-founder and Former Chairman and Chief Executive Officer, Kendle International Inc. | |||||||
Ann M. Livermore |
55 | 1997 | Director and Former Executive Vice President, Hewlett-Packard Company | |||||||
Rudy H.P. Markham |
68 | 2007 | Former Financial Director, Unilever PLC and Unilever NV | |||||||
Clark T. Randt, Jr. |
68 | 2010 | Former U.S. Ambassador to the People's Republic of China | |||||||
Carol B. Tomé |
57 | 2003 | Chief Financial Officer and Executive Vice President Corporate Services, The Home Depot, Inc. | |||||||
Kevin M. Warsh |
43 | 2012 | Former Member of the Board of Governors of the Federal Reserve System, Distinguished Visiting Fellow, Hoover Institution, Stanford University | |||||||
Non-Independent Directors |
||||||||||
D. Scott Davis |
62 | 2006 | Chairman and Chief Executive Officer, United Parcel Service, Inc. | |||||||
Michael L. Eskew |
64 | 1998 | Former Chairman and Chief Executive Officer, United Parcel Service, Inc. |
Advisory Vote to Approve Executive Compensation
The board is asking you to approve, on an advisory basis, the compensation of our Named Executive Officers. We believe that our compensation programs encourage executive decision making that is aligned with the long-term interests of our shareowners by tying a significant portion of pay to company performance over a multi-year period and by promoting our long-standing owner-manager culture. Our compensation programs are designed to emphasize strong annual performance and foster long-term operational performance and success. For more information, see page 66.
2 | UPS | Notice of Annual Meeting of Shareowners and 2014 Proxy Statement
2014 PROXY STATEMENT SUMMARY (CONTINUED)
Ratification of the Appointment of the Independent Registered Public Accounting Firm
The board is asking you to ratify the selection of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2014. Set forth below is summary information with respect to the fees billed for services provided to us during the fiscal years ended December 31, 2013 and 2012. For more information, see page 63.
|
2013 |
2012
|
|||||
---|---|---|---|---|---|---|---|
Fees Billed: |
|||||||
Audit Fees |
$ | 13,345,000 | $ | 12,426,000 | |||
Audit-Related Fees |
1,060,000 | 970,000 | |||||
Tax Fees |
1,279,000 | 1,017,000 | |||||
Total |
$ | 15,684,000 | $ | 14,413,000 |
Vote on two Shareowner Proposals
The board is asking you to vote AGAINST two shareowner proposals. For more information about the proposals, see pages 69 to 73.
2013 Key Compensation Decisions
Our Named Executive Officers are compensated in a manner consistent with our strategy, competitive practice, sound compensation governance principles and shareowner interests.
Key compensation decisions for the Named Executive Officers for 2013 include the following:
For more information, see page 34.
UPS | Notice of Annual Meeting of Shareowners and 2014 Proxy Statement | 3
2014 PROXY STATEMENT SUMMARY (CONTINUED)
2013 Compensation Summary
The following table summarizes the compensation of our Chief Executive Officer, Chief Financial Officer and our next three most highly compensated executive officers, to whom we refer collectively as the Named Executive Officers, for fiscal year 2013. Total compensation for the Chief Executive Officer and three of the Named Executive Officers decreased in 2013 as compared to 2012. For more information, see page 48.
Name |
Salary($) |
Stock Awards($) |
Option Awards($) |
Non-Equity Incentive Plan Compen-sation($) |
Change in Pension Value($) |
All Other Compen- sation($) |
2013 Total($) |
|
2012 Total($) |
||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
D. Scott Davis |
1,079,913 | 8,272,663 | 475,277 | 465,877 | 0 | 41,935 | 10,335,665 | 12,147,349 | |||||||||||||||||||
David P. Abney |
499,494 | 3,240,051 | 146,550 | 172,738 | 0 | 18,412 | 4,077,245 | 5,332,672 | |||||||||||||||||||
Kurt P. Kuehn |
475,137 | 1,949,848 | 137,395 | 162,193 | 0 | 29,339 | 2,753,912 | 3,425,392 | |||||||||||||||||||
David A. Barnes |
454,347 | 1,409,536 | 132,346 | 156,103 | 0 | 16,231 | 2,168,563 | 3,126,529 | |||||||||||||||||||
John J. McDevitt |
453,594 | 1,441,607 | 133,089 | 156,864 | 2,034,460 | 21,676 | 4,241,290 | 2,578,695 |
2015 Annual Meeting
Shareowner proposals submitted pursuant to SEC Rule 14a-8 for inclusion in the proxy statement for our annual meeting of shareowners expected to be held in May 2015 must be received by us by close of business on November 17, 2014.
4 | UPS | Notice of Annual Meeting of Shareowners and 2014 Proxy Statement
PROXY
STATEMENT FOR THE 2014 ANNUAL MEETING
OF SHAREOWNERS
GENERAL INFORMATION ABOUT THE 2014 ANNUAL MEETING
This proxy statement and proxy card are furnished in connection with the solicitation of proxies to be voted at our annual meeting of shareowners, which will be held at the Hotel du Pont, 11th and Market Streets, Wilmington, Delaware 19801, on May 8, 2014, at 8:00 a.m. On March 17, 2014, we began mailing to shareowners of record either a Notice of Internet Availability of Proxy Materials ("Notice") or this proxy statement and proxy card.
Why am I receiving this proxy statement and proxy card?
You have received these proxy materials because our board of directors is soliciting your proxy to vote your shares at the annual meeting. This proxy statement describes issues on which we would like you to vote at our annual meeting of shareowners. It also gives you information on these issues so that you can make an informed decision.
Our board of directors has made this proxy statement and proxy card available to you on the Internet because you own shares of United Parcel Service, Inc. common stock, in addition to delivering printed versions of this proxy statement and proxy card to certain shareowners by mail.
When you vote by using the Internet or (if you received your proxy card by mail) vote by telephone or by signing and returning the proxy card, you appoint D. Scott Davis and Teri P. McClure (with full power of substitution) as your representatives at the annual meeting. They will vote your shares at the annual meeting as you have instructed them or, if an issue that is not on the proxy card comes up for vote, in accordance with their best judgment. This way, your shares will be voted whether or not you attend the annual meeting. Even if you plan to attend the annual meeting, we encourage you to vote in advance by using the Internet or (if you received your proxy card by mail) by telephone or by signing and returning your proxy card. If you vote by Internet or telephone, you do not need to return your proxy card.
Why did I receive a Notice of Internet Availability of Proxy Materials in the mail instead of a printed set of proxy materials?
Pursuant to rules adopted by the Securities and Exchange Commission, we are permitted to furnish our proxy materials over the Internet to our shareowners by delivering a Notice in the mail. We are sending the Notice to certain record shareowners. If you received a Notice by mail, you will not receive a printed copy of the proxy materials in the mail. Instead, the Notice instructs you on how to access and review the proxy statement and annual report over the Internet at www.proxyvote.com. The Notice also instructs you on how you may submit your proxy over the Internet. If you received a Notice by mail and would like to receive a printed copy of our proxy materials, you should follow the instructions for requesting these materials contained in the Notice.
Shareowners who receive a printed set of proxy materials will not receive the Notice, but may still access our proxy materials and submit their proxies over the Internet at www.proxyvote.com.
Who is entitled to vote?
Holders of our class A common stock and our class B common stock at the close of business on March 10, 2014 are entitled to vote. March 10, 2014 is referred to as the Record Date.
In accordance with Delaware law, a list of shareowners entitled to vote at the meeting will be available in electronic form at the place of the annual meeting on May 8, 2014 and will be accessible in electronic form for ten days prior to the meeting at our principal place of business, 55 Glenlake Parkway, N.E., Atlanta, Georgia 30328,
UPS | Notice of Annual Meeting of Shareowners and 2014 Proxy Statement | 5
GENERAL INFORMATION ABOUT THE 2014 ANNUAL MEETING (CONTINUED)
and at the offices of Morris, Nichols, Arsht & Tunnell, 1201 North Market Street, Wilmington, Delaware 19899, between the hours of 9:00 a.m. and 5:00 p.m.
To how many votes is each share of common stock entitled?
Holders of class A common stock are entitled to ten votes per share. Holders of class B common stock are entitled to one vote per share. On the Record Date, there were 209,810,663 shares of our class A common stock and 709,531,224 shares of our class B common stock outstanding and entitled to vote.
The voting rights of any shareowner or shareowners as a group, other than any of our employee benefit plans, who beneficially own shares representing more than 25% of our voting power are limited so that the shareowner or group may cast only one one-hundredth of a vote with respect to each vote in excess of 25% of the outstanding voting power.
How do I vote?
Shareowners of record may vote by using the Internet, by telephone or (if you received a proxy card by mail) by mail as described below. Shareowners also may attend the meeting and vote in person. If you hold class B shares through a bank or broker, please refer to your proxy card, Notice or other information forwarded by your bank or broker to see which voting options are available to you.
The method you use to vote will not limit your right to vote at the annual meeting if you decide to attend in person. Written ballots will be passed out to anyone who wants to vote at the annual meeting. If you hold your shares in "street name," you must obtain a proxy, executed in your favor, from the holder of record to be able to vote in person at the annual meeting.
What if I change my mind after I return my proxy?
Shareowners of record may revoke their proxy and change their vote at any time before the polls close at the annual meeting by:
If you hold class B shares through a bank or broker, please refer to your proxy card, Notice or other information forwarded by your bank or broker to see how you can revoke your proxy and change your vote.
Attendance at the meeting will not by itself revoke a proxy.
6 | UPS | Notice of Annual Meeting of Shareowners and 2014 Proxy Statement
GENERAL INFORMATION ABOUT THE 2014 ANNUAL MEETING (CONTINUED)
How many votes do you need to hold the annual meeting?
The presence, in person or by proxy, of the holders of a majority of the votes entitled to be cast at the annual meeting will constitute a quorum. If a quorum is present, we can hold the annual meeting and conduct business.
On what items am I voting?
You are being asked to vote on the following items:
No cumulative voting rights are authorized, and dissenters' rights are not applicable to these matters.
How does the board of directors recommend that I vote?
The board recommends that you vote as follows:
How may I vote in the election of directors, and what is the voting standard?
With respect to the election of directors, you may:
The UPS Amended and Restated Bylaws (the "Bylaws") provide for majority voting in uncontested director elections.
The board recommends that you vote FOR each of the 13 nominees for director.
What happens if a nominee is unable to stand for election?
If a nominee is unable to stand for election, the board may either:
If the board designates a substitute nominee, shares represented by proxies voted for the nominee who is unable to stand for election will be voted for the substitute nominee.
UPS | Notice of Annual Meeting of Shareowners and 2014 Proxy Statement | 7
GENERAL INFORMATION ABOUT THE 2014 ANNUAL MEETING (CONTINUED)
How may I vote for the proposal to approve, on an advisory basis, the executive compensation of the Named Executive Officers as disclosed in this proxy statement?
With respect to this proposal, you may:
The board recommends that you vote FOR the approval of executive compensation.
How may I vote for the proposal to ratify the appointment of our independent registered public accounting firm?
With respect to this proposal, you may:
The board recommends that you vote FOR the ratification of the appointment of our independent registered public accounting firm.
How may I vote for the shareowner proposals?
With respect to each shareowner proposal, you may:
The board recommends that you vote AGAINST each of the shareowner proposals.
Will my shares be voted if I do not vote by using the Internet, by telephone or by signing and returning my proxy card?
If you are a shareowner of record of class A shares or class B shares and you do not vote by using the Internet or (if you received a proxy card by mail) by telephone or by signing and returning your proxy card, then your shares will not be voted and will not count in deciding the matters presented for shareowner consideration at the annual meeting.
If your class A shares are held pursuant to the UPS Stock Fund in the UPS 401(k) Savings Plan and you do not vote by using the Internet, by telephone or by signing and returning your proxy card, the trustee will vote your shares for each proposal in the same proportion as the shares held pursuant to that plan for which voting instructions were received.
If your class B shares are held in street name through a bank or broker, your bank or broker may vote your class B shares under certain limited circumstances if you do not provide voting instructions before the annual meeting, in accordance with NYSE rules that govern the banks and brokers. These circumstances include voting your shares on "routine matters," such as the ratification of the appointment of our independent registered public accounting firm described in this proxy statement. With respect to this proposal, therefore, if you do not vote your shares, your bank or broker may vote your shares on your behalf or leave your shares unvoted.
The remaining proposals are not considered routine matters under NYSE rules relating to voting by banks and brokers. When a proposal is not a routine matter and the brokerage firm has not received voting instructions from the beneficial owner of the shares with respect to that proposal, the brokerage firm cannot vote the shares on that proposal. This approach to uninstructed shares is called a "broker non-vote." Broker non-votes that are represented at the annual meeting will be counted for purposes of establishing a quorum, but
8 | UPS | Notice of Annual Meeting of Shareowners and 2014 Proxy Statement
GENERAL INFORMATION ABOUT THE 2014 ANNUAL MEETING (CONTINUED)
not for determining the number of shares voted for or against the non-routine matter.
We encourage you to provide instructions to your bank or brokerage firm by voting your proxy so that your shares will be voted at the meeting in accordance with your wishes.
What is the vote required for each proposal to pass, and what is the effect of abstentions and uninstructed shares on the proposals?
For the election of directors, a nominee will only be elected if the number of votes cast for the nominee's election is greater than the number of votes cast against that nominee. Abstentions are not considered votes cast for or against the nominee under a majority voting standard. For each other proposal to pass, in accordance with our Bylaws, the proposal must receive the affirmative vote of a majority of the voting power of the shares present in person or by proxy at the annual meeting and entitled to vote. The following table summarizes the board's recommendation on each proposal, the vote required for each proposal to pass and the effect of abstentions and uninstructed shares on each proposal.
Proposal Number |
Item |
Board Voting Recommendation |
Votes Required for Approval |
Abstentions |
Uninstructed shares |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
1. | Election of 13 directors | FOR | Majority of votes cast | No effect | No effect | |||||||||||
2. | Advisory approval of executive compensation | FOR | Majority of the voting power of the shares present in person or by proxy and entitled to vote | Count as votes against | No effect | |||||||||||
3. | Ratification of independent registered public accounting firm | FOR | Majority of the voting power of the shares present in person or by proxy and entitled to vote | Count as votes against | Discretionary voting by broker permitted | |||||||||||
4 - 5. | Shareowner proposals | AGAINST | Majority of the voting power of the shares present in person or by proxy and entitled to vote | Count as votes against | No effect |
What happens if I sign and return my proxy card but do not provide voting instructions?
If you return a signed card but do not provide voting instructions, your shares will be voted as follows:
What do I need to show to attend the annual meeting in person?
You will need proof of your share ownership (such as a recent brokerage statement or letter
UPS | Notice of Annual Meeting of Shareowners and 2014 Proxy Statement | 9
GENERAL INFORMATION ABOUT THE 2014 ANNUAL MEETING (CONTINUED)
from your broker showing that you owned shares of United Parcel Service, Inc. common stock as of the Record Date) and a form of government-issued photo identification. If you do not have proof of ownership and valid photo identification, you may not be admitted to the annual meeting. All bags, briefcases and packages will be held at registration and will not be allowed in the meeting.
Can I receive future proxy materials and annual reports electronically?
Yes. This proxy statement and the 2013 Annual Report to Shareowners are available on our investor relations website located at www.investors.ups.com. Instead of receiving a Notice or paper copies of the proxy materials in the mail, shareowners can elect to receive an email that provides a link to our future annual reports and proxy materials on the Internet. Opting to receive your proxy materials electronically will save us the cost of producing and mailing documents to your home or business, will reduce the environmental impact of our annual meetings, and will give you an automatic link to the proxy voting site.
If you are a shareowner of record and wish to enroll in the electronic proxy delivery service for future meetings, you may do so by going to www.icsdelivery.com/ups and following the prompts.
10 | UPS | Notice of Annual Meeting of Shareowners and 2014 Proxy Statement
OUR BOARD OF DIRECTORS
We currently have 13 members that make up our board of directors. All directors are elected annually to serve until the next annual meeting and until their respective successors are elected and qualified.
Rodney Adkins was first appointed to the board in June 2013. He was recommended as a candidate for director by one of our non-management directors. The remaining 12 directors have served since our last annual meeting.
All the members of our board have been nominated for reelection at this annual meeting. See "Proposal 1 Election of Directors" on page 65.
Biographical information about the 13 nominees for director and the experience, qualifications, attributes and skills considered by our Nominating and Corporate Governance Committee and board in determining that the nominee should serve as a director appears below. For additional information about how we identify and evaluate nominees for director, see "Governance of our Company Selecting Nominees for Director" on page 18.
F. Duane Ackerman,
Age 71 Director since 2007 Compensation Committee Member Chair of the Nominating and Corporate Governance Committee Duane previously served as President and Chief Executive Officer of BellSouth Corporation, a telecommunications company, from 1997 to 2006. He served as Chairman of the board of directors from 1998 to 2006 and as Vice Chairman and Chief Operating Officer from 1995 to 1997. He is also a director at Allstate Corporation and The Home Depot, Inc. During Duane's tenure at BellSouth he gained broad experience in managing a large, complex, labor-intensive business in a highly regulated industry. Duane has experience with collective bargaining arrangements and extensive knowledge in operations and communications technology. He has served as a director of other large, complex public companies, and served as the CEO of a publicly traded company for nearly a decade. |
||
UPS | Notice of Annual Meeting of Shareowners and 2014 Proxy Statement | 11
OUR BOARD OF DIRECTORS (CONTINUED)
Rodney C. Adkins, Age 55 Senior Vice President of Corporate Strategy, International Business Machines Director since 2013 Audit Committee Member Rod has served as IBM's Senior Vice President of Corporate Strategy since 2013. Rod was previously Senior Vice President, Systems and Technology Group, a position he held since 2009, and senior vice president of STG development and manufacturing, a position he held since 2007. In his over 30-year career with IBM, Rod has held a number of other development and management roles, including general management positions for the PC Company, UNIX Systems and Pervasive Computing. As a senior executive of a public technology company, Rod gained a broad range of experience, including experience in emerging technologies and services, global business operations, and supply chain management. He is a recognized leader in technology and technology strategy. |
||
|
Michael J. Burns, Age 62 Former Chairman, Chief Executive Officer and President, Dana Corporation Director since 2005 Audit Committee Member Michael was the Chairman, Chief Executive Officer and President of Dana Corporation from 2004 until 2008. He joined Dana Corporation in 2004 after 34 years with General Motors Corporation. Michael had served as President of General Motors Europe since 1998. Michael has years of senior leadership experience gained while managing large, complex businesses and leading an international organization that operated in a highly competitive industry. He also has experience in design, engineering, manufacturing, and sales and distribution. Michael also brings deep knowledge of technology and the supply of components and services to major vehicle manufacturers. |
|
12 | UPS | Notice of Annual Meeting of Shareowners and 2014 Proxy Statement
OUR BOARD OF DIRECTORS (CONTINUED)
D. Scott Davis, Age 62 UPS Chairman and Chief Executive Officer Director since 2006 Scott has served as UPS's Chairman and Chief Executive Officer since 2008. Scott was appointed Vice Chairman in 2006 and served as Chief Financial Officer and Treasurer from 2001 until 2008. From late 1998 to early 2000, he served as chief executive officer of Overseas Partners, Ltd., a Bermuda reinsurance company. Scott rejoined UPS as its vice president of finance in 2000. From 1991 until 1998, Scott held various leadership positions, primarily in the finance and accounting areas. Scott joined UPS in 1986 when the company acquired an Oregon technology company, II Morrow, where he had served as the chief financial officer and then chief executive officer. He also serves as a director of Honeywell International Inc. and EndoChoice, Inc. Scott has a unique understanding of our strategies and operations gained through his over 25 years of service to our Company, a complex, global business enterprise with a large, labor-intensive workforce. He has significant experience in financial management, including experience gained during his tenure as Chairman of the Board of the Federal Reserve Bank of Atlanta. In addition, Scott has experience serving as a director of Honeywell, a large, global business. |
||
|
Stuart E. Eizenstat, Age 71 Senior Counsel, Covington & Burling LLP Director since 2005 Compensation Committee Member Nominating and Corporate Governance Committee Member Stuart is Senior Counsel of Covington & Burling LLP in Washington, D.C., and heads the law firm's international practice. He served as Deputy Secretary of the United States Department of the Treasury from July 1999 to January 2001. He was Under Secretary of State for Economic, Business and Agricultural Affairs from 1997 to 1999. Stuart served as Under Secretary of Commerce for International Trade from 1996 to 1997 and was Ambassador to the European Union from 1993 to 1996. From 1977 to 1981 he was Chief Domestic Policy Advisor in the White House to President Carter. He is a trustee of Black Rock Funds, a member of the board of directors of Alcatel-Lucent and Globe Specialty Metals, and serves on the International Advisory Board of GML Ltd. and Office of Cherifien de Phosphates. He has received eight honorary doctorate degrees. Stuart has significant experience in international trade and global economic matters as a result of a decade and a half of service at senior levels of several U.S. administrations, where among other responsibilities, he was charged with advising on international economic policy, promoting U.S. exports, assisting American business efforts abroad, enforcing laws against unfair trade practices, developing trade policy and making financial and budgetary decisions. He has also served as an advisor on international matters to large, multi-national corporations. He brings the experience of leading the international practice of a major law firm and also brings insight on environmental issues through his continuing work on climate change issues. |
|
UPS | Notice of Annual Meeting of Shareowners and 2014 Proxy Statement | 13
OUR BOARD OF DIRECTORS (CONTINUED)
Michael L. Eskew, Age 64 Former UPS Chairman and Chief Executive Officer Director since 1998 Mike served as Chairman and Chief Executive Officer from 2002 until 2008. He was appointed Executive Vice President in 1999 and Vice Chairman in 2000. In 1994, Mike was named UPS's Corporate Vice President for Industrial Engineering. Two years later he became Group Vice President for Engineering. Mike joined UPS in 1972. Mike also serves as a director of 3M Company, International Business Machines and Eli Lilly and Company. Mike has acquired significant knowledge and understanding of our business and operations over his 35 years with UPS, a complex, global business enterprise with a large, labor intensive workforce. He has experience in engineering, operations and labor issues. Mike also has experience serving as a director of a number of other large public companies with complex global operations. |
||
|
William R. Johnson, Age 65 Former Chairman, President and Chief Executive Officer of H.J. Heinz Company Director since 2009 Nominating and Corporate Governance Committee Member Bill served as Chairman, President and Chief Executive Officer of the H.J. Heinz Company, a global packaged foods manufacturer, from 2000 until his retirement in 2013. He became President and Chief Operating Officer of Heinz in 1996, and assumed the position of President and Chief Executive Officer in 1998. Bill also serves on the board of directors of Emerson Electric Company and the Education Management Company. Bill has significant experience gained through over 13 years of service as the Chairman and Chief Executive Officer of H.J. Heinz, a corporation with significant international operations and a large, labor intensive workforce. He also has deep experience in operations, marketing, brand development and logistics. |
|
14 | UPS | Notice of Annual Meeting of Shareowners and 2014 Proxy Statement
OUR BOARD OF DIRECTORS (CONTINUED)
Candace Kendle, Age 67 Co-founder and Former Chairman and Chief Executive Officer of Kendle International, Inc. Director since 2011 Audit Committee Member Candace is the co-founder and was, until 2011, Chairman and Chief Executive Officer of Kendle International Inc., a global clinical research organization. Prior to founding Kendle International, she earned a doctorate in pharmacy from the University of Cincinnati and has held senior faculty positions at the University of North Carolina Schools of Pharmacy and Medicine; the University of Pennsylvania School of Medicine; the Philadelphia College of Pharmacy and Science; and the University of Cincinnati College of Pharmacy. Candace serves on the board of directors of Emerson Electric Company. During her tenure as Chairman and Chief Executive Officer of Kendle International, Candace gained insight and experience in executing strategic acquisitions, expansions into new markets, and product development. She also brings deep knowledge of the pharmaceutical industry as a result of her doctorate and post-doctorate work, her many years of experience as a professor and her many years of experience in the practical application of her clinical and pharmaceutical knowledge. |
||
|
Ann M. Livermore, Age 55 Director and Former Executive Vice President, Hewlett Packard Company Director since 1997 Chair of the Compensation Committee Ann serves as a director of the Hewlett Packard Company, after retiring as an executive of the company in 2011. In her last operational role at HP, Ann was Executive Vice President of the HP Enterprise Business. Ann joined HP in 1982 and has held a variety of management positions in marketing, sales, research and development, and business management before being elected a corporate vice president in 1995. Ann has extensive experience in senior leadership positions at HP, one of the world's largest information technology companies. This experience includes leading a complex global business organization with a large workforce. Through her 29 years at HP, she has gained knowledge and experience in the areas of technology, marketing, sales, research and development and business management. |
|
UPS | Notice of Annual Meeting of Shareowners and 2014 Proxy Statement | 15
OUR BOARD OF DIRECTORS (CONTINUED)
Rudy H.P. Markham, Age 68 Former Financial Director, Unilever Director since 2007 Audit Committee Member Rudy was the Financial Director of Unilever from 2000 through 2007. He joined Unilever in 1968 and from 1989 through 1998 was based in East Asia where he held a series of increasing responsibilities, ultimately serving as Business Group President North East Asia based in Singapore. Rudy joined the board of Unilever as Strategy and Technology Director, became a member of its Executive Committee in 1998 and was subsequently appointed as Financial Director. In 2007, he retired from the board of Unilever and as Chief Financial Officer. Rudy is a non-executive director of Legal & General Group PLC, Standard Chartered PLC and AstraZeneca PLC. He is chairman of the supervisory board of Corbion, N.V., formerly CSM, N.V. Rudy has significant experience in finance, technology and international operations that he gained through his almost 40 years of service at Unilever, one of the world's largest consumer goods companies. Rudy also has insight into the operations of an organization with a large, global workforce, and has a unique insight into operations based in Asia. Rudy's experience also includes service as a director of other Europe based global public companies. |
||
|
Clark T. "Sandy" Randt, Jr., Age
68 Former U.S. Ambassador to the People's Republic of China Director since 2010 Nominating and Corporate Governance Committee Member Sandy is a former U.S. ambassador to the People's Republic of China, where he served from 2001 until 2009. From 1994 through 2002, he was a partner resident in the Hong Kong office of Shearman & Sterling, a major international law firm, where he headed the firm's China practice. From 1982 through 1984, Sandy served as First Secretary and Commercial Attaché at the U.S. Embassy in Beijing. In 1974, he was the China representative of the National Council for United States-China Trade, and from 1968 to 1972, he served in the U.S. Air Force Security Service. Currently, Sandy is president of Randt & Co. LLC, a company that advises firms with interests in China. Sandy also serves on the boards of Valmont Industries, Inc. and Qualcomm Incorporated. Sandy has substantial experience in Asia and in facilitating business throughout Asia. He is recognized as one of America's foremost authorities on China, and has more than 30 years of direct experience in Asia. He brings to the board experience in diplomacy and international trade. He has experience as an advisor on international matters to large, multi-national corporations, and brings the experience of leading the China practice of a major international law firm. |
|
16 | UPS | Notice of Annual Meeting of Shareowners and 2014 Proxy Statement
OUR BOARD OF DIRECTORS (CONTINUED)
Carol B. Tomé, Age 57 Chief Financial Officer and Executive Vice President Corporate Services, The Home Depot, Inc. Director since 2003 Chair of the Audit Committee Carol has been Executive Vice President and Chief Financial Officer of The Home Depot, Inc., one of the world's largest retailers, since 2001. In 2007 Carol assumed the additional role of Executive Vice President Corporate Services. Prior to that, she had been Senior Vice President Finance and Accounting/Treasurer since 2000. From 1995 until 2000, she served as Vice President and Treasurer. Carol has extensive experience in corporate finance gained throughout her career at Home Depot. She brings the experience of currently serving as chief financial officer of a complex, multi-national business with a large, labor intensive workforce. Carol's past role as Chair of the Board of the Federal Reserve Bank of Atlanta also brings a valuable financial experience. |
||
|
Kevin M. Warsh, Age 43 Former Member of the Board of Governors of the Federal Reserve System, Distinguished Visiting Fellow, Hoover Institution, Stanford University Director since 2012 Compensation Committee Member Kevin was a member of the Board of Governors of the Federal Reserve from 2006 until 2011. He currently serves as a distinguished visiting fellow at Stanford University's Hoover Institution and a lecturer at its Graduate School of Business. In addition, Kevin provides strategic consulting and advisory services to a range of businesses. From 2002 until 2006 Kevin served at the White House as President George W. Bush's special assistant for economic policy and as executive secretary of the National Economic Council. Kevin was previously employed by Morgan Stanley & Co. in New York, becoming vice president and executive director of the company's Mergers and Acquisitions Department. Kevin has extensive experience in understanding and analyzing the economic environment, the financial marketplace and monetary policy. He has a deep understanding of the economic and business environment throughout Asia. Kevin also brings the experience of working in the private sector for a leading investment bank gained during his tenure at Morgan Stanley & Co. |
|
UPS | Notice of Annual Meeting of Shareowners and 2014 Proxy Statement | 17
GOVERNANCE OF OUR COMPANY
The following sections provide an overview of our corporate governance structure and processes. Among other topics, we describe how we select directors, how we consider the independence of our directors and key aspects of our board operations.
Selecting Nominees for Director
Our board has delegated to the Nominating and Corporate Governance Committee the responsibility for reviewing and recommending to the board nominees for director. In accordance with our Corporate Governance Guidelines, the Nominating and Corporate Governance Committee, in evaluating director candidates, considers factors such as personal character, values and disciplines, ethical standards, diversity, other outside commitments, and professional background and skills, all in the context of an assessment of the needs of the board at the time. In addition, each director candidate is expected to ensure that other existing and planned future commitments will not materially interfere with his or her responsibilities as a director.
The Nominating and Corporate Governance Committee's objective is to maintain a board of individuals of the highest personal character, integrity and ethical standards, and that reflects a range of professional backgrounds and skills relevant to our business. For each of the nominees to the board, the biographies shown above highlight the experiences and qualifications that were among the most important to the Nominating and Corporate Governance Committee and the board in concluding that the nominee should serve as a director of the Company.
The Nominating and Corporate Governance Committee considers diversity in identifying nominees for director, including personal characteristics such as race and gender, as well as diversity in experience and skills relevant to the board's performance of its responsibilities in the oversight of a complex global business. The Nominating and Corporate Governance Committee assesses the effectiveness of its efforts at pursuing diversity through its periodic evaluation of the board's composition.
The Nominating and Corporate Governance Committee is responsible for recommending nominees for election to the board at each annual meeting of shareowners and for identifying one or more candidates to fill any vacancies that may occur on the board. The directors may act to fill any vacancy and also increase the number of directors, subject to the limit of 16 directors set in the Bylaws. Under our Corporate Governance Guidelines, the Nominating and Corporate Governance Committee may use a variety of sources in order to identify new candidates. New candidates may be identified through recommendations from independent directors or members of management, search firms, discussions with other persons who may know of suitable candidates to serve on the board, and shareowner recommendations. Evaluations of prospective candidates typically include a review of the candidate's background and qualifications by the Nominating and Corporate Governance Committee, interviews with the Committee as a whole, one or more members of the Committee, or one or more other board members, and discussions of the Committee and the full board. The Committee then recommends candidates to the full board, with the full board selecting the candidates to be nominated for election by the shareowners or to be elected by the board to fill a vacancy.
The Nominating and Corporate Governance Committee will consider director candidates proposed by shareowners on the same basis as recommendations from other sources. Any shareowner who wishes to recommend a prospective candidate for the board of directors for consideration by the Nominating and Corporate Governance Committee may do so by submitting the name and qualifications of the prospective candidate in writing to the following address: Corporate Secretary, 55 Glenlake Parkway, N.E., Atlanta, Georgia 30328. Any such submission should also describe the experience, qualifications, attributes and skills that make the prospective candidate a suitable nominee for the board of
18 | UPS | Notice of Annual Meeting of Shareowners and 2014 Proxy Statement
GOVERNANCE OF OUR COMPANY (CONTINUED)
directors. Our Bylaws set forth the requirements for direct nomination by a shareowner of persons for election to the board of directors. These requirements are described under "Other Information for Shareowners Shareowner Proposals or Shareowner Nominations for Director at 2015 Annual Meeting" on page 74.
Our Corporate Governance Guidelines include categorical standards adopted by the board to determine director independence that meet the listing standards set forth by the NYSE. Our Corporate Governance Guidelines are available on the governance section of our investor relations website at www.investors.ups.com.
Pursuant to the Corporate Governance Guidelines, the board undertook its annual review of director independence in February 2014. As part of this review, the board considered whether there were any relationships between each director or any member of his or her immediate family and UPS. The board also examined whether there were any relationships between an organization of which a director is a partner, shareholder or executive officer and UPS. The purpose of this review was to determine whether any such relationships were inconsistent with a determination that a director is independent. The board also evaluated the categorical standards that form a part of our Corporate Governance Guidelines.
As a result of this review, the board affirmatively determined that the following directors are independent directors: Duane Ackerman, Rodney Adkins, Michael Burns, Stuart Eizenstat, Bill Johnson, Candace Kendle, Ann Livermore, Rudy Markham, Sandy Randt, Carol Tomé and Kevin Warsh. The board also previously determined that John Thompson, who left the board in May 2013, was independent. Accordingly, 11 of our 13 directors are independent, and all directors on the following committees are independent:
In determining the independence of Rodney Adkins, Stuart Eizenstat, Bill Johnson and Carol Tomé, our board considered ordinary course relationships between UPS and the companies that employed these directors during 2013.
Executive Sessions of our Non-Management Directors
Our non-management directors hold executive sessions without management present as frequently as they deem appropriate, typically at the time of each regular board meeting. The presiding director for these meetings rotates among the chairpersons of the independent board committees, currently the Audit, Compensation and Nominating and Corporate Governance Committees. The presiding director determines the agenda for the session and, after the session, acts as a liaison between the non-management directors and the Chairman and Chief Executive Officer. The presiding director may invite the Chairman and Chief Executive Officer to join the session for certain discussions, as he or she deems appropriate. If the non-management directors include in the executive sessions any directors who are not independent directors, then at least once a year there is an executive session including only the independent directors.
Our Corporate Governance Guidelines provide that our board will include a majority of independent directors. Our Guidelines also provide that the board will select the Chairman and the Chief Executive Officer and that the board periodically will evaluate whether or not to separate the roles of Chairman and Chief Executive Officer. Our Bylaws provide the board with the flexibility of having a single person serve as Chairman and Chief Executive Officer or separating the roles.
UPS | Notice of Annual Meeting of Shareowners and 2014 Proxy Statement | 19
GOVERNANCE OF OUR COMPANY (CONTINUED)
Scott Davis has served as Chairman of the Board since he was appointed Chief Executive Officer on January 1, 2008. Having our Chief Executive Officer serve as Chairman of the Board is consistent with the historical practice of UPS, as all nine of our previous Chief Executive Officers have also served as Chairman of the Board.
As described above under "Director Independence," 11 of our 13 directors are independent. In addition, all of the directors on each of the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee are independent directors. Each of these committees is led by a committee chair who sets the agenda for the committee and reports to the full board on the committee's work. We do not have a lead director, but our Corporate Governance Guidelines provide that our non-management directors meet in executive session without management present as frequently as they deem appropriate, typically at the time of each regular board meeting. The chairs of the independent board committees rotate as presiding director, and the presiding director acts as a liaison between the non-management directors and the Chief Executive Officer after each executive session.
The board is responsible for selecting the Company's Chairman and the Chief Executive Officer, and has the authority pursuant to our Guidelines and Bylaws to determine the most appropriate leadership structure for UPS at any given point in time. The board believes that it is in the best interests of the Company periodically to evaluate and make a determination regarding whether or not to separate the roles of Chairman and Chief Executive Officer based upon the circumstances, and regularly undertakes this evaluation. Currently, the board believes that it is in the best interests of the Company and its shareowners for a single person to serve in both roles. Our company has employed this leadership structure of having a combined Chairman and Chief Executive Officer for many years, and we believe that this leadership structure has been effective for the Company. We believe that having a combined Chairman and Chief Executive Officer, a board with a majority of independent directors who meet regularly in executive session, and independent chairs for the board's Audit, Compensation, and Nominating and Corporate Governance Committees provides the best form of leadership for the Company and its shareowners.
Board's Role in Risk Oversight
Our board is responsible for overseeing our risk management. Under its charter, the Audit Committee is responsible for discussing with management policies with respect to financial risk assessment and enterprise risk management, including guidelines to govern the process by which major financial and accounting risk assessment and management is undertaken by the Company. The Audit Committee also oversees our corporate compliance programs, as well as the internal audit function. The board's other independent committees oversee risks associated with their respective areas of responsibility. For example, the Compensation Committee considers the risks associated with our compensation policies and practices, with respect to both executive compensation and compensation generally. In addition to the committees' work in overseeing risk management, our full board regularly engages in discussions of the most significant risks that the Company is facing and how these risks are being managed. The board also receives reports on risk management from senior officers of the Company and from the committee chairs. The board reviews periodic assessments from the Company's ongoing enterprise risk management process that are designed to identify potential events that may affect the achievement of the Company's objectives or have a material adverse effect on the Company.
The Company's chief legal officer and Corporate Secretary reports directly to our Chief Executive Officer, providing him with visibility into the Company's risk profile. The head of the Company's compliance and internal audit functions regularly reports to the Audit Committee, and each of the chief legal officer, controller and the compliance and internal audit department manager have regularly scheduled private sessions with the
20 | UPS | Notice of Annual Meeting of Shareowners and 2014 Proxy Statement
GOVERNANCE OF OUR COMPANY (CONTINUED)
Audit Committee. The board of directors believes that the work undertaken by the committees of the board, together with the work of the full board of directors and the Chief Executive Officer, enables the board of directors to effectively oversee the Company's management of risk.
We believe that our board's leadership structure, as described above, supports the risk oversight function of the board. While we have a combined Chief Executive Officer and Chairman of the Board, strong independent directors chair the various committees involved with risk oversight, and there is open communication between management and directors with respect to risk oversight.
Corporate Governance Guidelines, Committee Charters and Code of Business Conduct
Our Corporate Governance Guidelines are available on the governance section of our investor relations website at www.investors.ups.com. The charters for each of the Audit, Compensation and Nominating and Corporate Governance Committees also are available on the governance section of our investor relations website.
We have a long-standing commitment to conduct our business in accordance with the highest ethical principles. Our Code of Business Conduct is applicable to all the representatives of our enterprise, including our executive officers and all other employees and agents of our company and our subsidiary companies, as well as to our directors. A copy of our Code is available on the governance section of our investor relations website.
Committees of the Board of Directors
Our board of directors has four committees: the Audit Committee, the Compensation Committee, the Nominating and Corporate Governance Committee and the Executive Committee. The following table shows the current members of each committee.
Director |
Audit |
Compensation |
Nominating and Corporate Governance |
Executive
|
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
F. Duane Ackerman |
X | X | * | X | |||||||||
Rodney C. Adkins |
X | ||||||||||||
Michael J. Burns |
X | ||||||||||||
D. Scott Davis |
X | * | |||||||||||
Stuart E. Eizenstat |
X | X | |||||||||||
Michael L. Eskew |
X | ||||||||||||
William R. Johnson |
X | ||||||||||||
Candace Kendle |
X | ||||||||||||
Ann M. Livermore |
X | * | |||||||||||
Rudy H.P. Markham |
X | ||||||||||||
Clark T. Randt, Jr. |
X | ||||||||||||
Carol B. Tomé |
X | * | |||||||||||
Kevin M. Warsh |
X |
X= current committee member; * = chair
UPS | Notice of Annual Meeting of Shareowners and 2014 Proxy Statement | 21
GOVERNANCE OF OUR COMPANY (CONTINUED)
Audit Committee. During 2013, the Audit Committee held 13 meetings. Each member of our Audit Committee meets the independence requirements of the NYSE and SEC rules and regulations, and each is financially literate. Our board has determined that Carol Tomé is an audit committee financial expert as defined by the SEC. The primary responsibilities of our Audit Committee include:
Compensation Committee. During 2013, the Compensation Committee held six meetings. Each member of our Compensation Committee meets the independence requirements of the NYSE, including the enhanced independence requirements applicable to Compensation Committee members under NYSE rules effective July 1, 2013, is a non-employee director under Rule 16b-3 of the Securities Exchange Act of 1934 and is an outside director under Section 162(m) of the Internal Revenue Code. For additional information about the Compensation Committee's processes and the role of executive officers and compensation consultants in determining compensation, see "2013 Compensation Discussion and Analysis", The primary responsibilities of our Compensation Committee include:
Nominating and Corporate Governance Committee. During 2013, the Nominating and Corporate Governance Committee held five meetings. Each member of our Nominating and Corporate Governance Committee meets the independence requirements of the NYSE. The
22 | UPS | Notice of Annual Meeting of Shareowners and 2014 Proxy Statement
GOVERNANCE OF OUR COMPANY (CONTINUED)
primary responsibilities of our Nominating and Corporate Governance Committee include:
Executive Committee. The Executive Committee may exercise all powers of the board of directors in the management of our business and affairs, except for those powers expressly reserved to the board under Delaware law or otherwise limited by the board of directors. The Executive Committee held no meetings during 2013.
Compensation Committee Interlocks and Insider Participation
Duane Ackerman, Stuart Eizenstat, Ann Livermore, John Thompson and Kevin Warsh were members of the Compensation Committee of our board of directors during 2013. None of these directors are employees or former employees of UPS. None of the members of the Compensation Committee has any direct or indirect material interest in or relationship with us outside of his or her position as a non-employee director. None of our executive officers serves as a member of a board of directors or compensation committee of any entity that has one or more executive officers who serves on our board of directors or Compensation Committee.
Compensation Practices and Risk Management
We believe our compensation practices provide a balanced mix of cash and equity, annual and longer-term incentives, and performance metrics which mitigate excessive risk-taking that would be reasonably likely to have a material adverse effect on us. These practices include:
UPS | Notice of Annual Meeting of Shareowners and 2014 Proxy Statement | 23
GOVERNANCE OF OUR COMPANY (CONTINUED)
metrics encourages decision-making that is in the best long-term interests of our shareowners;
Meetings of the Board of Directors and Attendance at the Annual Meeting
Our board of directors held five meetings during 2013. Each of our directors attended at least 75% of the total number of meetings of the board and any committees of which he or she was a member. It is the board's policy that our directors attend the annual meeting. All of the directors who were serving on the board at the time of our 2013 annual meeting attended the meeting.
Majority Voting for Directors and Director Resignation Policy
Our Bylaws provide for majority voting in uncontested director elections. Under the majority voting standard, directors are elected by a majority of the votes cast, which means that the number of shares voted for a director must exceed the number of shares voted against that director.
Under our Corporate Governance Guidelines, the Nominating and Corporate Governance Committee has established procedures for any director who is not elected to tender his or her offer to resign. Upon receiving the director's offer to resign, the Nominating and Corporate Governance Committee will recommend to the board whether to accept or reject the offer to resign, or whether other action should be taken. In determining whether or not to recommend that the board accept any resignation offer, the Nominating and Corporate Governance Committee may consider all factors believed relevant by the Committee's members. If a majority of the members of the Nominating and Corporate Governance Committee were required to tender their offers of resignation as provided above, the independent directors on the board who were not required to tender their offers of resignation will act as a committee to consider the offers and recommend to the board whether or not to accept them.
The board will act on the Nominating and Corporate Governance Committee's recommendation within 90 days following certification of the election results. In deciding whether or not to accept the offer to resign as well as, if applicable, the effective date of the board's acceptance of the offer to resign and any other conditions, the board will consider the factors considered by the Nominating and Corporate Governance Committee and any additional information and factors that the board believes to be relevant. Any director who offers to resign is expected to recuse himself or herself from the board vote unless the number of independent directors who were successful incumbents is fewer than three. Thereafter, the board will promptly publicly disclose its decision regarding any offer to resign (including the reason(s) for rejecting the resignation offer, if applicable). If the board determines to accept a director's offer to resign pursuant to this process, the Nominating and Corporate Governance Committee will recommend to the board and the board will thereafter determine whether and when to fill such vacancy or reduce the size of the board.
24 | UPS | Notice of Annual Meeting of Shareowners and 2014 Proxy Statement
GOVERNANCE OF OUR COMPANY (CONTINUED)
We have not entered into any related person transactions that meet the requirements for disclosure in this proxy statement.
In accordance with our Audit Committee charter, our Audit Committee is responsible for overseeing our written Code of Business Conduct, which includes policies relating to conflicts of interest. The Code requires that all of our employees and directors avoid conflicts of interest, defined as situations where the person's private interests conflict, or even appear to conflict, with the interests of UPS as a whole.
At least annually, each director and executive officer completes a detailed questionnaire that inquires about any business relationship that may give rise to a conflict of interest and all transactions in which UPS is involved and in which the executive officer, a director or a related person has a direct or indirect material interest. We also conduct a review, at least annually, of our financial systems to identify potential conflicts of interest and related person transactions.
The Nominating and Corporate Governance Committee, which includes only independent directors, conducts an annual review of the information from the questionnaire and financial systems review, evaluates related person transactions (if any) involving the directors and their related persons and makes recommendations to the board of directors regarding the independence of each board member.
If a transaction arises during the year that may require disclosure as a related person transaction, information about the transaction would be provided to the Audit Committee and the Nominating and Corporate Governance Committee, as applicable, for review, approval or ratification of the transaction.
We have purchase, finance and other transactions and relationships in the normal course of business with companies with which our directors are associated, but which are not material. The Nominating and Corporate Governance Committee has reviewed these transactions and relationships and believes they were entered into on terms that are both reasonable and competitive. Additional transactions and relationships of this nature may be expected to take place in the ordinary course of business in the future.
Communicating with our Board of Directors
Any shareowners or interested parties who wish to communicate directly with our board of directors, with our non-management directors as a group or with the presiding director may do so by writing to the Corporate Secretary, 55 Glenlake Parkway, N.E., Atlanta, Georgia 30328. Please specify to whom your letter should be directed. Once the communication is received and reviewed by the Corporate Secretary, it will be promptly forwarded to the addressee. Advertisements, solicitations for business, requests for employment, requests for contributions or other inappropriate material will not be forwarded to our directors.
Other Information Regarding Directors
Michael Burns is the former Chairman, Chief Executive Officer and President of Dana Corporation. Dana Corporation filed a voluntary petition under Chapter 11 of the federal bankruptcy laws on March 3, 2006. On January 31, 2008, Dana Corporation emerged from Chapter 11, prior to his departure from Dana Corporation.
UPS | Notice of Annual Meeting of Shareowners and 2014 Proxy Statement | 25
OTHER GOVERNANCE MATTERS
We prohibit our directors and executive officers from hedging their ownership of UPS stock. This prohibition applies to purchasing or selling derivative securities relating to UPS stock and purchasing financial instruments that are designed to hedge or offset any decrease in the market value of UPS securities.
Additionally, in early 2013, we adopted a policy prohibiting our directors and executive officers from entering into future pledges of UPS securities as collateral for a loan and holding UPS securities in margin accounts. These individuals are encouraged (but not required) to unwind any existing pledges.
We are committed to proactive interaction with investors as a productive way to facilitate our shareowners' understanding of our company's leadership, the decisions we make and the values we maintain. Our approach to shareowner engagement is based on a foundation of transparency.
During 2013, our management team participated in numerous investor meetings to discuss our business, our strategy and our financial results. These meetings included in-person, telephone and webcast conferences, headquarters and facility visits within the United States and in key international locations.
Our management team extended invitations to discuss our executive compensation program and corporate governance practices to several of our largest shareowners in order to solicit their feedback and answer any questions they may have. We have proactively extended this invitation to our largest shareowners in each of the past several years, and plan to continue to do so in the future. In response to these invitations, we participated in telephone conversations with key investors. We regularly update our Compensation Committee on the conversations with key investors.
The Compensation Committee carefully considers feedback from shareowners and we will continue to proactively solicit feedback from our largest investors. The Committee also annually engages the independent compensation consultant to present an overview of executive compensation trends that may be important to investors. The Committee's consideration of feedback from shareowners, along with market information and analyses provided by the independent compensation consultant, have influenced a number of changes to our executive compensation program over the past several years. These changes include increasing the performance-based equity in our compensation program and eliminating single-trigger equity vesting following a change in control. The Committee continues to design our executive compensation program guided by our executive compensation philosophy and core principles as described in the Compensation Discussion and Analysis.
Materials from our investor presentations, including information on the work of our board and its committees, are available on our investor relations website at www.investors.ups.com.
Political Contributions and Lobbying Expenditure Oversight and Disclosure
We recognize the increasing interest of U.S. public company shareowners in greater transparency about corporate political contributions. The board has adopted a Political Contributions and Lobbying Policy designed to ensure that contributions to which it applies are made in a manner consistent with our core values and to protect and enhance shareowner value. We publish on our website at www.investors.ups.com our policy and a semi-annual report disclosing the amounts and recipients of all federal and state political contributions and expenditures made by UPS in the United States. The Nominating and Corporate Governance Committee reviews and
26 | UPS | Notice of Annual Meeting of Shareowners and 2014 Proxy Statement
OTHER GOVERNANCE MATTERS (CONTINUED)
approves the political contribution report prior to its publication on our website.
UPS exercises its right to participate in the public policy process in order to advance the best interests of our company and its shareowners. The UPS Public Affairs department is responsible for coordinating our lobbying activities, including engagements with federal, state, and local governments. All lobbying activities are conducted only with the prior approval of the UPS Public Affairs department, which works with senior management to focus our involvement at all levels of government on furthering our business objectives and our goal of protecting and enhancing shareowner value. The head of our public affairs group reviews all UPS lobbying activities and regularly reports to the board concerning lobbying and political activities.
UPS files a publicly available federal Lobbying Disclosure Act Report each quarter, as required by law. This report provides information on activities associated with influencing legislation through communications with any member or employee of a legislative body or with any covered executive branch official. It also provides disclosure on expenditures for the quarter, describes the specific pieces of legislation that were the topic of communications, and identifies the individuals who lobbied on behalf of UPS. These reports are available at www.lobbyingdisclosure.house.gov and www.senate.gov/legislative/Public_Disclosure/LDA_reports.htm. UPS files similar periodic reports with state agencies reflecting state lobbying activities which are also publicly available.
Commitment to the Environment and Sustainability
Each year we make publicly available on our website at www.investors.ups.com a sustainability report that showcases the aspirations, achievements and challenges of our commitment to balancing the social, economic and environmental aspects of our business. The report describes how UPS is using its logistics expertise to address social and environmental issues around the globe. We are committed to the principle that UPS is part of an interconnected global community, and understand that our success is dependent on economic stability, global trade and a society that welcomes opportunity. In return, we must act responsibly as a business, an employer and a corporate citizen.
Our board takes environmental and social issues seriously, and environmental and social risks are part of our comprehensive enterprise risk management program over which the board exercises risk management oversight responsibility. Our chief sustainability officer regularly reports to the board of directors on a range of topics including sustainability goals and performance. Sustainability is a key part of our strategy, and the board actively considers environmental and social issues in connection with the board's involvement in UPS's strategic planning process.
Succession Planning and Management Development
We are focused on talent development at all levels within our organization, and many of the members of our Management Committee have spent their entire careers at UPS. Among the board's key responsibilities is to ensure that management establishes and the board oversees an effective executive succession plan. The board regularly reviews the succession plans that support our overall business strategy, with a focus on key positions at the senior officer level. The board recognizes that succession planning and talent management are closely connected to risk management.
Potential leaders are given exposure and visibility to board members through formal presentations and informal events. More broadly, the board is regularly updated on key talent indicators for the overall workforce, including through diversity, recruiting and development programs.
UPS | Notice of Annual Meeting of Shareowners and 2014 Proxy Statement | 27
OWNERSHIP OF SECURITIES
Securities Ownership of Certain Beneficial Owners and Management
The following table sets forth information as to any person known to us to be the beneficial owner of more than five percent of our class A or class B common stock.
Name and address |
Number of Shares Beneficially Owned |
Percent of Class |
|||||
---|---|---|---|---|---|---|---|
BlackRock Inc.(1) 40 East 52nd Street New York, NY 10022 |
43,108,151 | 6.00 | % | ||||
The Vanguard Group(2) 100 Vanguard Blvd. Malvern, PA 19355 |
36,409,563 |
5.08 |
% |
28 | UPS | Notice of Annual Meeting of Shareowners and 2014 Proxy Statement
OWNERSHIP OF SECURITIES (CONTINUED)
The following table sets forth the beneficial ownership of our common stock as of February 1, 2014 by our current directors and nominees, our Chief Executive Officer, Chief Financial Officer and three other executive officers who had the highest total compensation for 2013, calculated in accordance with SEC rules and regulations (the "Named Executive Officers"), and all of our directors and executive officers as a group.
|
|
|
Additional Shares in which the Beneficial Owner Has or Participates in the Voting or Investment Power(5) |
|
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Number of Shares Beneficially Owned(1)(2) |
|
|||||||||||
|
Total Shares Beneficially Owned(6) |
||||||||||||
Directors and Executive Officers |
Class A Shares(3)(4) |
Class B Shares |
|||||||||||
David P. Abney |
206,084 | 1,452 | 0 | 207,536 | |||||||||
F. Duane Ackerman |
13,048 | 0 | 0 | 13,048 | |||||||||
Rodney C. Adkins |
1,875 | 0 | 0 | 1,875 | |||||||||
David A. Barnes |
182,579 | 0 | 0 | 182,579 | |||||||||
Michael J. Burns |
15,825 | 0 | 0 | 15,825 | |||||||||
D. Scott Davis |
446,470 | 0 | 5,366,742 | (7) | 5,813,212 | ||||||||
Stuart E. Eizenstat |
15,825 | 200 | 0 | 16,025 | |||||||||
Michael L. Eskew |
338,876 | 31,154 | 5,366,742 | (7) | 5,736,772 | ||||||||
William R. Johnson |
11,860 | 160 | 0 | 12,020 | |||||||||
Candace Kendle |
5,806 | 0 | 0 | 5,806 | |||||||||
Kurt P. Kuehn |
112,587 | 0 | 0 | 112,587 | |||||||||
Ann M. Livermore |
38,581 | 0 | 0 | 38,581 | |||||||||
Rudy H.P. Markham |
12,494 | 0 | 0 | 12,494 | |||||||||
John J. McDevitt |
144,570 | 0 | 0 | 144,570 | |||||||||
Clark T. Randt, Jr. |
7,735 | 0 | 0 | 7,735 | |||||||||
Carol B. Tomé |
17,867 | 2,936 | 0 | 20,803 | |||||||||
Kevin M. Warsh |
3,482 | 0 | 0 | 3,482 | |||||||||
Shares held by all directors and executive officers as a group (21 persons) |
1,913,665 | 43,455 | 5,366,742 | (8) | 7,323,862 | (8) |
UPS | Notice of Annual Meeting of Shareowners and 2014 Proxy Statement | 29
OWNERSHIP OF SECURITIES (CONTINUED)
30 | UPS | Notice of Annual Meeting of Shareowners and 2014 Proxy Statement
OWNERSHIP OF SECURITIES (CONTINUED)
In addition to the beneficial ownership of our common stock shown above, our directors and executive officers hold equity instruments that are not reported in the beneficial ownership table but represent additional financial interests that are subject to the same market risk as ownership of our common stock. The number of shares of stock to which these stock units are equivalent as of February 1, 2014 is as follows.
|
Restricted Stock Units |
Phantom Stock Units |
Restricted Performance Units |
Stock Option Deferral Shares |
Other Deferred Compensation Plan Shares |
Total
|
|||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
David P. Abney |
54,790 | 0 | 17,065 | 16,911 | 0 | 88,766 | |||||||||||||
F. Duane Ackerman |
0 | 0 | 0 | 0 | 6,216 | 6,216 | |||||||||||||
Rodney C. Adkins |
0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||
David A. Barnes |
21,391 | 0 | 15,075 | 9,682 | 0 | 46,148 | |||||||||||||
Michael J. Burns |
0 | 0 | 0 | 0 | 4,192 | 4,192 | |||||||||||||
D. Scott Davis |
138,683 | 0 | 48,889 | 5,846 | 0 | 193,418 | |||||||||||||
Stuart E. Eizenstat |
0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||
Michael L. Eskew |
0 | 0 | 0 | 34,643 | 0 | 34,643 | |||||||||||||
William R. Johnson |
0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||
Candace Kendle |
0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||
Kurt P. Kuehn |
27,996 | 0 | 15,389 | 13,681 | 0 | 57,066 | |||||||||||||
Ann M. Livermore |
0 | 2,165 | 0 | 0 | 0 | 2,165 | |||||||||||||
Rudy H.P. Markham |
0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||
John J. McDevitt |
22,117 | 0 | 15,496 | 23,671 | 0 | 61,284 | |||||||||||||
Clark T. Randt, Jr. |
0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||
Carol B. Tomé |
0 | 1,024 | 0 | 0 | 0 | 1,024 | |||||||||||||
Kevin M. Warsh |
0 | 0 | 0 | 0 | 0 | 0 |
Restricted stock units ("RSUs") are bookkeeping units, the value of each of which corresponds to one share of UPS class A common stock.
Phantom stock units are bookkeeping units, the value of each of which corresponds to one share of UPS class A common stock. Phantom stock units were granted to non-employee directors pursuant to a deferred compensation program previously provided to non-employee directors. Dividends paid on UPS common stock are added to the director's phantom stock unit balance. Upon termination of the individual's service as a director, amounts represented by phantom stock units will be distributed in cash over a time period elected by the recipient.
Restricted performance units ("RPUs") are bookkeeping units, the value of each of which corresponds to one share of UPS class A common stock. We grant RPUs to the Named Executive Officers under two programs, the Management Incentive Program and the Long-Term Incentive Performance award program.
Stock option deferral shares are shares held for the individual in a rabbi trust within the UPS Deferred Compensation Plan. Each individual elected to defer the receipt of these shares rather than acquiring them directly upon the exercise of a stock option.
Other deferred compensation plan shares are amounts within the UPS Deferred Compensation Plan allocated to UPS common stock. These represent the non-employee directors' retainer fees that have been deferred and invested in UPS stock.
UPS | Notice of Annual Meeting of Shareowners and 2014 Proxy Statement | 31
COMPENSATION MATTERS DIRECTOR COMPENSATION
We provide both cash and equity awards to our non-employee directors. Our employee directors do not receive any compensation for service as a director. Directors are reimbursed for their expenses related to board membership.
In 2013, the annual cash retainer for our non-employee directors was increased from $90,000 to $100,000. The chairs of the Compensation and Nominating and Corporate Governance Committees received an additional annual cash retainer of $20,000, and the chair of the Audit Committee received an additional annual cash retainer of $25,000. Cash retainers are paid on a quarterly basis. Under the UPS Deferred Compensation Plan, non-employee directors may defer retainer fees, but we do not make any company or matching contributions under this plan. There are no preferential or above-market earnings in the UPS Deferred Compensation Plan.
In addition, in 2013 non-employee directors received an annual restricted stock unit grant in the amount of $160,000 that will be settled in shares of class A common stock (rounded down to the nearest whole share). RSUs are required to be held until the director separates from the UPS board of directors. Following separation, the RSUs are paid in shares of class A common stock. The annual equity grant is prorated based on the portion of the year that a director serves on the board. There is no additional equity award for new non-employee directors who join the board.
The following table sets forth the compensation paid to our non-employee directors in 2013.
Name |
Fees Earned or Paid in Cash($) |
Stock Awards($)(1) |
Total($)
|
|||||||
---|---|---|---|---|---|---|---|---|---|---|
F. Duane Ackerman |
112,500 | 159,994 | 272,494 | |||||||
Rodney C. Adkins(2) |
50,000 | 159,988 | 209,988 | |||||||
Michael J. Burns |
95,000 | 159,994 | 254,994 | |||||||
Stuart E. Eizenstat |
95,000 | 159,994 | 254,994 | |||||||
Michael L. Eskew |
95,000 | 159,994 | 254,994 | |||||||
William R. Johnson |
95,000 | 159,994 | 254,994 | |||||||
Candace Kendle |
95,000 | 159,994 | 254,994 | |||||||
Ann M. Livermore |
108,750 | 159,994 | 268,744 | |||||||
Rudy H.P. Markham |
95,000 | 159,994 | 254,994 | |||||||
Clark T. Randt, Jr. |
95,000 | 159,994 | 254,994 | |||||||
John W. Thompson(3) |
52,500 | 0 | 52,500 | |||||||
Carol B. Tomé |
117,500 | 159,994 | 277,494 | |||||||
Kevin W. Warsh |
95,000 | 159,994 | 254,994 |
32 | UPS | Notice of Annual Meeting of Shareowners and 2014 Proxy Statement
COMPENSATION MATTERS DIRECTOR COMPENSATION (CONTINUED)
The aggregate number of stock awards and option awards made under our director compensation programs and outstanding as of December 31, 2013 for each of our non-employee directors are set forth below.
|
Stock Awards | Stock Options | ||||||||
---|---|---|---|---|---|---|---|---|---|---|
Name |
Restricted Stock Units (#) |
Phantom Stock Units (#) |
Number of Shares Underlying Options (#) |
|||||||
F. Duane Ackerman |
10,977 | 0 | 0 | |||||||
Rodney C. Adkins |
1,875 | 0 | 0 | |||||||
Michael J. Burns |
10,977 | 0 | 0 | |||||||
Stuart E. Eizenstat |
10,977 | 0 | 0 | |||||||
Michael L. Eskew |
10,977 | 0 | 0 | |||||||
William R. Johnson |
11,860 | 0 | 0 | |||||||
Candace Kendle |
5,806 | 0 | 0 | |||||||
Ann M. Livermore |
10,977 | 2,165 | 0 | |||||||
Rudy H.P. Markham |
10,977 | 0 | 0 | |||||||
Clark T. Randt, Jr. |
7,735 | 0 | 0 | |||||||
Carol B. Tomé |
10,977 | 1,024 | 1,343 | |||||||
Kevin M. Warsh |
3,482 | 0 | 0 |
UPS | Notice of Annual Meeting of Shareowners and 2014 Proxy Statement | 33
COMPENSATION MATTERS EXECUTIVE COMPENSATION
The following sections provide information about our Named Executive Officers and our executive compensation program. It starts with the Compensation Discussion and Analysis, which explains how and why the Compensation Committee, sometimes referred to as the "Committee," made its 2013 compensation decisions for the Named Executive Officers, followed by the report of our Compensation Committee. We then provide the detailed executive compensation tables in the format required by the SEC.
2013 Compensation Discussion and Analysis
The Compensation Discussion and Analysis describes UPS's executive compensation programs for 2013 and certain aspects of the programs for 2014. The focus of this section of the proxy is to explain how and why the Committee made its 2013 compensation decisions for the following Named Executive Officers, or NEOs:
D. Scott Davis | Chairman and Chief Executive Officer | |
David P. Abney | Senior Vice President and Chief Operating Officer | |
Kurt P. Kuehn | Senior Vice President and Chief Financial Officer | |
David A. Barnes | Senior Vice President and Chief Information Officer | |
John J. McDevitt | Senior Vice President, Human Resources and Labor Relations |
Executive Summary
Business Environment
2013 was a year that continued to have periods of economic uncertainty. Despite these challenges, UPS was able to deliver positive results for our shareowners for the year due to the unique network we have built. While we fell short of our earnings per share goal, we still achieved new records in revenue and earnings per share. In 2013, UPS earned $4.37 billion on $55.4 billion in revenue.
Our customers trusted us with, on average, more than 16.9 million packages each day in 2013, or 4% more than in 2012. While most of that increase came from the rapid growth in e-commerce, we are also benefitting from the significant investments we have made to serve customers in fast-growing segments like healthcare and high tech. Other highlights for 2013 include the following:
34 | UPS | Notice of Annual Meeting of Shareowners and 2014 Proxy Statement
COMPENSATION MATTERS EXECUTIVE COMPENSATION (CONTINUED)
The improving global economy and the continued growth in e-commerce, healthcare and technology provide opportunities for UPS to deliver segment-specific customer solutions while leveraging our extensive asset base. We are guided by four transformative strategies: deploying technology-enabled operations, providing unique and industry-specific customer solutions, expanding our global network and serving the needs of end consumers around the world. We believe that UPS is well-positioned to benefit from the opportunities that arise today and in the years ahead.
Summary of 2013 Compensation Actions
As noted above, key compensation decisions for the Named Executive Officers for 2013 include the following:
Compensation and Governance Practices
We believe that our compensation programs encourage executive decision-making that is aligned with the long-term interests of our shareowners by tying a significant portion of pay to company performance over a multi-year period and by promoting our long-standing owner-manager culture. Other compensation and governance practices that support these principles, each of which is described in more detail in this Compensation Discussion and Analysis, include the following:
UPS | Notice of Annual Meeting of Shareowners and 2014 Proxy Statement | 35
COMPENSATION MATTERS EXECUTIVE COMPENSATION (CONTINUED)
amount of the award are materially restated and the executive officer engaged in fraud or intentional misconduct.
Compensation Decisions Process and Inputs
Executive Compensation Strategy
The UPS executive compensation programs are designed to:
Our compensation programs are designed to emphasize strong annual performance and foster long-term operational performance and success. We believe that a majority of total compensation (base salary, annual incentives and long-term incentives) that can be earned by the Named Executive Officers should be "at risk", meaning that the compensation is only earned by meeting annual or long-term performance goals. The 2013 compensation elements with "at risk" components are approximately 86% of the 2013 target compensation opportunity for all of the Named Executive Officers, and approximately 89% for our Chief Executive Officer.
36 | UPS | Notice of Annual Meeting of Shareowners and 2014 Proxy Statement
COMPENSATION MATTERS EXECUTIVE COMPENSATION (CONTINUED)
Below are charts that demonstrate, for the CEO and for the NEOs as a group, the portion of target compensation that is at risk.
2013 Target Compensation for CEO
2013 Target Compensation for all NEOs
Roles and Responsibilities
The UPS executive compensation program is administered by the Compensation Committee of the board of directors. Each of the four non-employee directors on the Compensation Committee meets the independence requirements of the NYSE, including the enhanced independence requirements under NYSE listing standards that became effective July 1, 2013.
The Compensation Committee has sole authority to engage and terminate outside advisors and consultants to assist the Compensation Committee in carrying out its responsibilities. In 2013, the Committee retained Frederic W. Cook & Co. ("Cook"). Cook reports directly to the Chair of the Compensation Committee. Cook provides no additional services to UPS.
In November 2013, the Compensation Committee considered the independence of Cook and the existence of potential conflicts of interest in light of new SEC rules and NYSE listing standards that became effective on July 1, 2013. In evaluating Cook's independence and potential conflicts of interest involving Cook, the Compensation Committee requested and received a letter from Cook addressing the consulting firm's independence and the existence of any potential conflicts of interest, including the following factors: (1) other services provided to us by the consultant; (2) fees paid by us as a percentage of the consulting firm's total revenue; (3) policies or procedures maintained by the consulting firm that are designed to prevent a conflict of interest; (4) any business or personal relationships between the individual consultants involved in the engagement and a member of the Compensation Committee; (5) any company stock owned by the individual consultants involved in the engagement; and (6) any business or personal relationships between our executive officers and the consulting firm or the individual consultants involved in the engagement. The Compensation Committee discussed these considerations and concluded that Cook is independent and that the engagement of Cook did not raise any conflict of interest.
UPS | Notice of Annual Meeting of Shareowners and 2014 Proxy Statement | 37
COMPENSATION MATTERS EXECUTIVE COMPENSATION (CONTINUED)
The following table summarizes the roles of each of the key participants in the executive compensation decision-making process.
Participant |
Roles
|
|
---|---|---|
Compensation Committee | Reviews and recommends to the board the corporate goals and objectives relevant to the compensation for the Chief Executive Officer Evaluates the performance of the Chief Executive Officer in light of the goals and objectives and determines and approves the total compensation of the Chief Executive Officer based on this evaluation Reviews the Chief Executive Officer's performance assessment of other executive officers, and reviews and approves compensation for the executive officers, including the Named Executive Officers Reviews and approves awards to executive officers under certain incentive compensation and equity-based plans, and reviews and approves the design of other benefit plans for executive officers Oversees the evaluation of risk associated with the Company's total compensation strategy and compensation programs Considers whether the compensation consultant is independent and whether the work of the compensation consultant raises any conflict of interest Reviews and discusses with management the Compensation Discussion and Analysis Prepares the Compensation Committee's report on executive compensation |
|
Independent Members of the Board of Directors | Reviews the Committee's assessment of the Chief Executive Officer's performance |
|
Independent Compensation Consultant | Serves as a resource for market data on pay practices and trends Provides independent advice to the Compensation Committee Provides competitive analysis and advice related to outside director compensation Reviews the Compensation Discussion and Analysis Conducts an annual risk review |
|
Executive Officers | The Chief Executive Officer makes compensation recommendations to the Compensation Committee for the other executive officers with respect to base salary The Chief Executive Officer and the Chief Financial Officer make recommendations on performance goals under our incentive compensation plans and provide recommendations as to whether performance goals were achieved at the end of the performance period Executive officers are not present when the Compensation Committee meets in executive session, or when decisions about their own compensation are made |
38 | UPS | Notice of Annual Meeting of Shareowners and 2014 Proxy Statement
COMPENSATION MATTERS EXECUTIVE COMPENSATION (CONTINUED)
Market Data
While the Compensation Committee considers market data in making compensation decisions, it does not target compensation at a particular percentile or within any targeted range based solely on competitive data. The data is one of a variety of factors considered by the Compensation Committee when considering base salary, annual and long-term equity awards and total compensation levels, and is generally considered as a market check.
Each year, we review general compensation survey data from sources such as Towers Watson to provide the Compensation Committee with information about our compensation levels relative to comparable sized companies. In addition, we look at pay practices and levels for a peer group of companies that typically have global operations, a diversified business and annual sales and market capitalizations comparable to UPS. The peer group considered by the Committee in determining 2013 compensation consisted of the following 18 companies:
The Boeing Company | The Home Depot, Inc. | PepsiCo, Inc. | ||
Caterpillar Inc. | Johnson & Johnson | The Procter & Gamble Company | ||
The Coca-Cola Company | The Kroger Co. | Sysco Corporation | ||
Costco Wholesale Corporation | Lockheed Martin Corporation | Target Corp. | ||
Dell Inc. | Lowe's Companies, Inc. | United Technologies Corporation | ||
FedEx Corporation | McDonald's Corp. | Walgreen Co. | ||
There were two changes made to the peer group for 2013. First, Coca-Cola Enterprises, Inc. was eliminated due to the sale of its North American operations to The Coca-Cola Company resulting in a primarily internationally-focused company with total revenue below our peers. Second, The Home Depot, Inc. was added after determining that its scope of operations, total revenues, market capitalization and other peer selection criteria made it appropriate to include in the UPS group. Both of these changes were recommended by the independent compensation consultant following its annual peer group review and were approved by the Compensation Committee.
Internal Equity
In addition to market data, the Compensation Committee considers the differentials between executive officer compensation and other UPS positions, and the additional responsibilities of the Chief Executive Officer compared to the other executive officers. Internal comparisons are made between executive officers and their direct reports in an effort to ensure that compensation paid to executive officers is reasonable compared to that of others with whom they work.
Annual Performance Reviews
Each year the Chief Executive Officer provides the Compensation Committee with a subjective assessment of the Named Executive Officers. The Compensation Committee undertakes a comprehensive review each year of the Chief Executive Officer's performance and the full board meets in executive session to review the Chief Executive Officer's performance. Factors considered include the Chief Executive Officer's strategic vision and leadership, execution of our business strategy and achievement of our business goals, his demonstrated ability to make long-term decisions that create competitive advantage and his overall effectiveness as a leader and role model.
Elements of UPS Compensation
The components of the compensation program for our Named Executive Officers are:
UPS | Notice of Annual Meeting of Shareowners and 2014 Proxy Statement | 39
COMPENSATION MATTERS EXECUTIVE COMPENSATION (CONTINUED)
Base Salary
The Compensation Committee considers a number of factors in determining the annual base salaries of the Named Executive Officers. While company performance is the most important factor, scope of responsibility, leadership, market data and internal equity comparisons are all considered by the Compensation Committee when determining annual salary adjustments.
For 2013, base salaries of the NEOs were increased by an average of 3.6%. The base salary of the CEO was increased by 3.0%, which was equivalent to the merit budget for the broader management population in 2013. Base salary increases were to reward performance and, for certain Named Executive Officers, to bring their compensation more in line with market rates.
Annual Incentives
MIP Performance Incentive Award Overview
The MIP award is designed to align pay with annual company performance. Based on the formula approved by the Compensation Committee for 2013, maximum executive officer MIP awards are targeted at a pool of 0.5% of net income in total; the CEO's maximum is 20% of the pool and each other NEO's maximum is 7.25% of the pool. The same performance measure and maximum allocation were approved by the Compensation Committee for 2014.
The maximum incentive pool approach for the executive officers is intended to align pay with actual company performance in a manner that also provides compensation that is intended and structured to qualify as "performance-based compensation" exempt from the $1 million annual deduction limit of Section 162(m) of the Internal Revenue Code. The awards are granted under the 2012 Plan. Company net income performance will fund the pool to a maximum level, but the actual awards are determined based on the Compensation Committee's discretion. The Committee may approve awards that are less than the maximum but may not exceed the funded maximum amount for each NEO.
The primary factors considered by the Committee in exercising its negative discretion include:
Although the Compensation Committee will consider the awards earned by non-executive employees under the broader MIP plan, it is just one input to their determination.
MIP awards for executive officers are considered performance-based compensation fully at risk based on company performance. The design also supports our emphasis on stock ownership and long-term performance because the award is provided two-thirds in restricted performance units, or RPUs, and one-third in cash. As set forth in the terms and conditions approved by the Compensation Committee, MIP RPUs vest 20% per year over a five year period.
We determine the number of RPUs granted by calculating the dollar value of the portion of the MIP award allocated to RPUs and dividing by the applicable closing price of our class B common stock on the NYSE. In light of the five year vesting schedule, we do not maintain additional holding period requirements for our employees after vesting. When dividends are paid on UPS common stock, an equivalent value is credited to the participant's bookkeeping account in additional RPUs.
40 | UPS | Notice of Annual Meeting of Shareowners and 2014 Proxy Statement
COMPENSATION MATTERS EXECUTIVE COMPENSATION (CONTINUED)
2013 MIP Performance Incentive Award Results
For 2013, the Company's adjusted net income was $4.336 billion which results in a maximum incentive pool for executive officers of $21.68 million. The maximum for the CEO is therefore $4.34 million, and is $1.57 million for the other Named Executive Officers. In exercising their discretion to reduce the maximum available for each executive officer under the MIP performance incentive award and to more closely align executive officer MIP performance incentive awards with company performance, the Committee considered a number of factors including, but not limited to, company performance relative to target objectives for the executive officers detailed in the accompanying table (the 2013 MIP Evaluation Metrics), the level at which the MIP award was earned by non-executive employees, the general macro-economic environment and the Company's overall performance.
The 2013 MIP Performance Incentive Evaluation Metrics and actual results considered by the Committee are shown in the following table.
2013 MIP Evaluation Metrics |
Target |
Actual
|
|||||
---|---|---|---|---|---|---|---|
Consolidated Revenue Growth |
5.0 | % | 2.4 | % | |||
Adjusted(1) Consolidated Earnings Per Share Growth |
9.0 | % | 1.0 | % | |||
Consolidated Package Average Daily Volume Growth |
2.7 | % | 3.9 | % |
A specific weight was not assigned to any of the aspects of performance listed above. The Committee uses its judgment to determine final awards based on the Company's success in implementing the business plan and the challenges of the economic and competitive market in which UPS operated during the year.
Summarized in the table below are the NEOs' maximum funded MIP performance incentive award based on the net income formula, target MIP performance incentive award, and the actual MIP performance incentive award based on the Committee's discretion. The MIP award, if earned, is provided two-thirds in RPUs and one-third in cash.
2013 MIP Award |
Maximum($) |
Target($) |
Actual($)
|
|||||||
---|---|---|---|---|---|---|---|---|---|---|
D. Scott Davis |
4,335,934 | 1,742,638 | 1,306,978 | |||||||
David P. Abney |
1,571,776 | 635,045 | 476,284 | |||||||
Kurt P. Kuehn |
1,571,776 | 595,343 | 446,507 | |||||||
David A. Barnes |
1,571,776 | 573,440 | 430,080 | |||||||
John J. McDevitt |
1,571,776 | 576,685 | 432,514 |
MIP Ownership Incentive Award
To reward management employees for maintaining significant ownership of UPS equity securities, all MIP participants are eligible for an additional incentive award up to the equivalent of one month's salary. The MIP ownership incentive award is paid in the same proportion of cash and RPUs as the MIP performance incentive award.
UPS | Notice of Annual Meeting of Shareowners and 2014 Proxy Statement | 41
COMPENSATION MATTERS EXECUTIVE COMPENSATION (CONTINUED)
The amount of the award is equal to the value of the participant's equity ownership multiplied by an ownership incentive award percentage, which is 1.25% for the Chief Executive Officer and 1.50% for the other Named Executive Officers. The maximum award that can be earned is one month's salary.
Ownership levels for the 2013 awards were determined by totaling the number of UPS shares in the participant's family group accounts and the participant's unvested restricted units and deferred compensation shares, and then multiplying the sum by the closing price of a class B share on the NYSE on December 31, 2013 (the last trading day of the year). All of the Named Executive Officers earned the maximum MIP ownership incentive award of one month's salary.
Long-Term Incentives
Our long-term incentive programs provide participants with grants of equity-based incentives that are intended to reward performance over a multi-year period. For 2013, our equity programs included the Stock Option Program and the Long-Term Incentive Performance ("LTIP") award program. All awards under the programs for 2013 were granted under the 2012 Plan.
Program |
Payment Form and Program Type |
Target Amount |
Performance Measures and/or Value Proposition |
Program Objectives
|
||||
---|---|---|---|---|---|---|---|---|
Stock options | Stock options vest 20% per year over five years and have a ten-year term | 45% of annualized base salary for the Chief Executive Officer and 30% for the other executive officers | Value recognized only if UPS stock price appreciates | Provides a significant link to company stock price performance Enhances stock ownership and shareowner alignment |
||||
Restricted performance units under LTIP | RPUs are settled in UPS stock if earned based on company performance If earned, award vests after the end of the third fiscal year |
As a percent of base salary: 675% Chief Executive Officer 575% Chief Operating Officer 450% Chief Financial Officer 250% other executive officers |
Revenue growth Operating return on invested capital Three-year EPS targets Value increases or decreases with stock price |
Supports the Company's annual and long-term operating plan and business strategy Enhances stock ownership and shareowner alignment |
Stock Option Program
The Compensation Committee believes that stock options provide a significant link to company performance and maximize shareowner value, as the option holder receives value only if our stock price increases. Stock options also have retention value, as the option holder will not receive value from the options unless he or she remains our employee during the vesting period of the award (except in the case of retirement, death or disability during the vesting period).
The non-qualified stock options vest 20% per year over five years and expire ten years from the date of grant. Unvested stock options vest automatically upon death, disability or retirement. In light of the five year duration of the vesting schedule, we do not maintain additional holding period requirements for our employees after
42 | UPS | Notice of Annual Meeting of Shareowners and 2014 Proxy Statement
COMPENSATION MATTERS EXECUTIVE COMPENSATION (CONTINUED)
vesting. Grants do not include dividend equivalents or any reload grant features.
Long-Term Incentive Performance Award Program Overview
The LTIP award program is designed to further strengthen the performance component of our executive compensation package and enhance retention of key talent. Approximately 500 members of our senior management team, including the Named Executive Officers, participate in this program.
The program has a three-year award cycle. A target award of RPUs is granted to executive officers and certain other eligible managers at the beginning of the three-year period. Ninety percent of the total target award is divided into three substantially equal performance tranches, one for each calendar year in the three-year award cycle. The remaining 10% is based upon achievement of a diluted earnings per share target for the third year. Performance measures, such as revenue growth, operating return on invested capital ("ROIC"), and diluted earnings per share, are set by the Compensation Committee at the beginning of each calendar year in the three-year award cycle.
The actual number of RPUs that the management employee will receive is determined once the payment percentage for a particular tranche has been approved by the Compensation Committee, based on achievement of performance goals for the applicable calendar year.
LTIP Target Award Values
In March 2013, the Compensation Committee approved 2013 target award values for the three-year 2013 LTIP awards at 675% of base salary for the Chief Executive Officer, 575% of base salary for the Chief Operating Officer, 450% of base salary for the Chief Financial Officer and 250% of base salary for the other executive officers. Target award values are based on internal pay equity considerations and market data regarding total compensation of comparable positions at similarly sized companies. In 2013, after taking into account the foregoing considerations, the Compensation Committee approved an increase in the target award value for the Chief Financial Officer from 300% to 450% of base salary. Differences in the target award values are based on increasing levels of responsibility among the management team. The maximum LTIP award that can be earned is 150% of target.
The threshold, target and maximum number of RPUs that can be earned by the Named Executive Officers under the 2013 LTIP is shown in the Grants of Plan-Based Awards for 2013 table.
Total 2013 Long-Term Equity Incentive Award Target Values
Shown in the table is the total long-term incentive opportunity granted to the Named Executive Officers in 2013, based upon a percentage of annualized base salary.
Named Executive Officer |
Options (% salary) |
LTIP RPUs (% salary) |
Total (% salary) |
|||||||
---|---|---|---|---|---|---|---|---|---|---|
D. Scott Davis |
45 | 675 | 720 | |||||||
David P. Abney |
30 | 575 | 605 | |||||||
Kurt P. Kuehn |
30 | 450 | 480 | |||||||
David A. Barnes |
30 | 250 | 280 | |||||||
John J. McDevitt |
30 | 250 | 280 |
LTIP Performance Targets and Results
Performance targets and actual results for the completed performance periods for the 2011 LTIP, 2012 LTIP and 2013 LTIP are described below. Where the three-year LTIP cycles overlap, the performance goals for individual years are the same. The underlying units are earned based on actual performance as compared to pre-established performance criteria for each period over the three-year cycle of the award. The tranches based on 2013 performance, and the related Committee decisions, are shaded in the chart below. A description of the adjustments we make to the performance goals is included after the table.
UPS | Notice of Annual Meeting of Shareowners and 2014 Proxy Statement | 43
COMPENSATION MATTERS EXECUTIVE COMPENSATION (CONTINUED)
|
Percent of Total LTIP Award |
Performance Goals(1) |
Actual Results(1) |
Percent of LTIP Tranche Earned |
|||||||
---|---|---|---|---|---|---|---|---|---|---|---|
2011 LTIP Award |
|||||||||||
2011 Performance Tranche |
30 | % | revenue growth 8.0% operating ROIC 24.0% |
revenue growth 7.2% operating ROIC, as adjusted 24.3% |
95 | % | |||||
2012 Performance Tranche |
30 | % | revenue growth 6.0% operating ROIC 26.0% |
revenue growth 1.9% operating ROIC, as adjusted 24.6% |
70 | % | |||||
2013 Performance Tranche |
30 | % | revenue growth 5.0% operating ROIC 25.2% |
revenue growth 2.4% operating ROIC, as adjusted 24.1% |
85 | % | |||||
2013 Earnings Measurement Tranche |
10 | % | 2013 earnings per share $5.24 to $5.51 (75%); > $5.51 (100%) | 2013 earnings per share, as adjusted $4.57 |
0 | % | |||||
2012 LTIP Award |
|||||||||||
2012 Performance Tranche |
30 | % | revenue growth 6.0% operating ROIC 26.0% |
revenue growth 1.9% operating ROIC, as adjusted 24.6% |
70 | % | |||||
2013 Performance Tranche |
30 | % | revenue growth 5.0% operating ROIC 25.2% |
revenue growth 2.4% operating ROIC, as adjusted 24.1% |
85 | % | |||||
2013 LTIP Award |
|||||||||||
2013 Performance Tranche |
30 | % | revenue growth 5.0% operating ROIC 25.2% |
revenue growth 2.4% operating ROIC, as adjusted 24.1% |
85 | % |
As shown in the table above, based on actual performance, 85% of the 2013 performance tranche was earned for each of the outstanding LTIP awards, while the 2013 earnings measurement tranche for the 2011 LTIP award was not earned.
The RPUs for 2013 are now earned based on performance, meaning the amount of the award for the 2013 performance period has been determined, but will not vest until January 31 following the third year of the cycle, provided the participant remains employed as of the vesting date. For example, units earned under the 2011 LTIP award vested on January 31, 2014 and units earned under the 2013 LTIP award will vest on January 31, 2016. Special vesting rules apply to terminations by reason of death, disability or retirement. A participant's earned RSU and RPU account will be adjusted quarterly for dividends paid on class A common stock. Awards that vest will be distributed in the form of class A common stock.
Benefits and Perquisites
Consistent with our culture, the benefits and perquisites offered to the Named Executive Officers are the same or similar to programs offered to the entire UPS management team, with the exception of a financial planning service and executive health services. Additional information on these benefits can be found in the program descriptions below.
The UPS 401(k) Savings Plan
The UPS 401(k) Savings Plan is a 401(k) plan offered to all U.S.-based employees who are not subject to a collective bargaining agreement and who are not eligible to participate in another savings plan sponsored by UPS or one of its subsidiaries. We provided a matching contribution to those UPS employees who made elective deferrals to the UPS 401(k) Savings Plan. We match 50% of up to 5% of eligible pay contributed to the UPS 401(k) Savings Plan for eligible employees hired on or before December 31, 2007,
44 | UPS | Notice of Annual Meeting of Shareowners and 2014 Proxy Statement
COMPENSATION MATTERS EXECUTIVE COMPENSATION (CONTINUED)
including the Named Executive Officers. We match 100% of up to 3.5% of eligible pay contributed to the plan for eligible employees hired on or after January 1, 2008. The match is paid in shares of class A common stock.
Qualified and Non-Qualified Pension Plans
Named Executive Officers participate in our qualified retirement program, the UPS Retirement Plan, on the same terms as all other participants. Benefits payable under the plan are subject to the maximum compensation limits and the annual benefit limits for a tax-qualified defined benefit plan as established by the Internal Revenue Service. Amounts exceeding these limits are paid pursuant to the UPS Excess Coordinating Benefit Plan, which is a non-qualified restoration plan designed to replace the amount of benefits limited under the tax-qualified plan. Without the Excess Coordinating Benefit Plan, the Named Executive Officers would receive a lower benefit as a percent of final average earnings than the benefit received by other participants in the UPS Retirement Plan.
Discounted Employee Stock Purchase Plan
To foster our manager-owner philosophy, we have maintained a Discounted Employee Stock Purchase Plan since 2001. The plan provides all U.S.-based employees, including the Named Executive Officers, and some internationally based employees, with the opportunity to purchase up to $10,000 in our class A common stock annually at a discount to the market price of our stock. The plan has been designed to comply with Section 423 of the Internal Revenue Code. The purchase price at which our class A common stock may be acquired under the plan is equal to 95% of the fair market value of the shares on the last day of each calendar quarter. Share purchases are made on a quarterly basis.
Financial Planning Service
Our executive officers are eligible for a financial services benefit through which the Company reimburses fees from financial and tax services providers up to $15,000 per year, including the cost of personal excess liability insurance coverage.
Executive Health Services
UPS's business continuity is best facilitated by avoiding any prolonged or unexpected absences by members of its senior management team. To that end, all Named Executive Officers were provided certain executive health services, including comprehensive physical examinations.
Other Compensation and Governance Policies
Stock Ownership Guidelines
The board has adopted stock ownership guidelines that apply to management and to members of our board of directors. The guidelines further our core philosophy that managers should also be owners of our company. The guidelines are based on our expectation that each executive officer and director will maintain a targeted level of investment in our stock. Compensation programs are designed to foster long-term stock ownership by all of our managers; therefore each executive officer has accumulated a meaningful number of shares of our common stock. As a result, the interests of shareowners and our executive officers are closely aligned, and our executive officers have a strong incentive to provide effective management.
Target ownership for the Chief Executive Officer is eight times annual salary, and for the other executive officers is five times annual salary. The target for our non-employee directors is five times their annual retainer. Shares of class A common stock, deferred units and vested and unvested RSUs and RPUs are considered as owned for purposes of calculating ownership. Managers and directors are expected to reach target ownership within five years of adoption of the guideline or the date that the manager or director became subject to the guideline.
As of December 31, 2013, all of the Named Executive Officers met or exceeded their stock
UPS | Notice of Annual Meeting of Shareowners and 2014 Proxy Statement | 45
COMPENSATION MATTERS EXECUTIVE COMPENSATION (CONTINUED)
ownership guidelines, after excluding any shares pledged by the Named Executive Officer.
In addition, all of our non-employee directors who have been subject to the stock ownership guidelines for at least five years exceed their target ownership. Kevin Warsh, who joined the board in 2012, and Rodney Adkins, who joined the board in 2013, have an additional three and four years, respectively, to achieve target ownership. RSUs are required to be held by the non-employee director until he or she separates from the UPS board of directors.
Hedging and Pledging Policies
We prohibit our executive officers and directors from hedging their ownership in UPS stock. Specifically, they are prohibited from purchasing or selling derivative securities relating to UPS stock and from purchasing financial instruments that are designed to hedge or offset any decrease in the market value of UPS securities.
Additionally, in early 2013 we adopted a policy prohibiting our directors and executive officers from entering into future pledges of UPS securities, including using UPS securities as collateral for a loan and holding UPS securities in margin accounts. These individuals are encouraged (but not required) to unwind any existing pledges.
Clawback Policy
The 2012 Plan and 2009 Plan provide that if an award is made to an executive officer, and the Compensation Committee later determines that financial results used to determine the amount of the award are materially restated and that the executive officer engaged in fraud or intentional misconduct, we will seek repayment or recovery of the award. This clawback applies to all awards granted under the 2012 Plan and 2009 Plan.
Equity Grant Practices
Grants for all equity programs under the 2012 Plan are approved by the Compensation Committee. Stock options have an exercise price equal to the closing market price on the NYSE on the date of grant.
Employment or Change in Control Agreements
We do not have employment agreements with any of our executive officers. In addition, we do not have a separate change in control or severance agreement with any of our executive officers.
The 2012 Plan generally requires a "double trigger" both a change in control and a termination of employment to accelerate the vesting of unvested awards. The 2009 Plan also requires a double trigger. The UPS Incentive Compensation Plan adopted in 1999 (the "1999 Plan") included a provision for an automatic acceleration of unvested awards in the event of a change in control. This provision applies equally to all outstanding equity awards under the 1999 Plan. At the time of the adoption of the 1999 Plan, the accelerated vesting of all outstanding equity awards following a change in control was a customary and reasonable component of an equity incentive program. All of the equity awards granted to the Named Executive Officers prior to May 7, 2009 are subject to the single trigger, while equity awards granted after that date are subject to the double trigger.
Consideration of Previous "Say on Pay" Voting Results
Because a substantial majority (over 70%) of votes cast for the shareowner "say on frequency" vote at our 2011 annual meeting expressed a preference for having a say on pay vote every three years, we are holding our "say on pay" vote at this annual meeting of shareowners. We welcome the input of our shareowners on our compensation policies and compensation program at any time, and not just in the years when we conduct a say on pay vote.
46 | UPS | Notice of Annual Meeting of Shareowners and 2014 Proxy Statement
COMPENSATION MATTERS EXECUTIVE COMPENSATION (CONTINUED)
Our last say on pay vote was held at our 2011 annual meeting of shareowners, where over 93% of votes cast for or against the proposal approved our compensation program as described in our 2011 proxy statement. As described under "Proposal 2 Advisory Vote to Approve Executive Compensation," on page 66, the Compensation Committee believes that shareowners support our compensation policies. Therefore, the Compensation Committee continued to apply the same principles in determining the amounts and types of executive compensation since the last say on pay vote.
Tax Implications of Executive Compensation
Section 162(m) of the Internal Revenue Code makes compensation paid to certain Named Executive Officers in amounts in excess of $1 million not tax deductible unless the compensation is paid under a predetermined objective performance plan meeting certain requirements, or satisfies one of various other exemptions. The Compensation Committee believes that the interests of our shareowners are best served by not restricting the Compensation Committee's discretion and flexibility in crafting compensation plans and arrangements. While the Compensation Committee intends to structure awards to comply with Section 162(m), the Compensation Committee may approve elements of compensation for certain executive officers that are not fully deductible, and reserves the right to do so in the future in appropriate circumstances.
Report of the Compensation Committee
The Compensation Committee is responsible for, among other things, reviewing and approving compensation for the executive officers, establishing the performance goals on which the compensation plans are based and setting the overall compensation principles that guide the committee's decision-making. The Compensation Committee has reviewed the Compensation Discussion and Analysis and discussed it with management. Based on the review and the discussions with management, the Compensation Committee recommended to the board of directors that the Compensation Discussion and Analysis be included in the 2014 proxy statement and incorporated by reference in the Annual Report on Form 10-K for the year ended December 31, 2013 filed with the Securities and Exchange Commission.
The Compensation Committee
Ann M.
Livermore, Chair
F. Duane Ackerman
Stuart E. Eizenstat
Kevin M. Warsh
UPS | Notice of Annual Meeting of Shareowners and 2014 Proxy Statement | 47
COMPENSATION MATTERS EXECUTIVE COMPENSATION (CONTINUED)
Summary Compensation Table for 2013
The following table shows the compensation for each of the Named Executive Officers for 2013, 2012 and 2011.
Name and Principal Position |
Year |
Salary ($)(1) |
Stock Awards ($)(2) |
Option Awards ($)(3) |
Non-Equity Incentive Plan Compen- sation ($)(4) |
Change in Pension Value ($)(5) |
All Other Compen- sation ($)(6) |
Total ($) |
|||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
D. Scott Davis |
2013 | 1,079,913 | 8,272,663 | 475,277 | 465,877 | 0 | 41,935 | 10,335,665 | |||||||||||||||||
Chairman and Chief Executive |
2012 | 1,049,703 | 8,714,617 | 463,675 | 426,034 | 1,453,028 | 40,292 | 12,147,349 | |||||||||||||||||
Officer |
2011 | 1,022,865 | 9,455,012 | 450,807 | 566,996 | 1,516,686 | 40,732 | 13,053,098 | |||||||||||||||||
David P. Abney |
2013 | 499,494 | 3,240,051 | 146,550 | 172,738 | 0 | 18,412 | 4,077,245 | |||||||||||||||||
Senior Vice President and Chief |
2012 | 485,517 | 3,405,622 | 142,980 | 158,132 | 1,123,038 | 17,383 | 5,332,672 | |||||||||||||||||
Operating Officer |
2011 | 473,097 | 3,614,104 | 148,937 | 209,431 | 606,037 | 14,931 | 5,066,537 | |||||||||||||||||
Kurt P. Kuehn |
2013 | 475,137 | 1,949,848 | 137,395 | 162,193 | 0 | 29,339 | 2,753,912 | |||||||||||||||||
Senior Vice President and Chief |
2012 | 452,502 | 1,759,853 | 130,852 | 145,017 | 908,556 | 28,612 | 3,425,392 | |||||||||||||||||
Financial Officer |
2011 | 427,137 | 1,865,518 | 136,299 | 191,660 | 535,154 | 29,815 | 3,185,583 | |||||||||||||||||
David A. Barnes |
2013 | 454,347 | 1,409,536 | 132,346 | 156,103 | 0 | 16,231 | 2,168,563 | |||||||||||||||||
Senior Vice President and Chief |
2012 | 436,866 | 1,468,744 | 127,255 | 140,909 | 937,023 | 15,732 | 3,126,529 | |||||||||||||||||
Information Officer |
2011 | 418,137 | 1,566,642 | 132,558 | 186,386 | 485,169 | 14,648 | 2,803,540 | |||||||||||||||||
John J. McDevitt |
2013 | 453,594 | 1,441,607 | 133,089 | 156,864 | 2,034,460 | 21,676 | 4,241,290 | |||||||||||||||||
Senior Vice President, Human |
2012 | 440,898 | 1,518,495 | 129,841 | 143,599 | 327,698 | 18,164 | 2,578,695 | |||||||||||||||||
Resources and Labor Relations |
2011 | 429,621 | 1,633,122 | 135,248 | 190,183 | 168,010 | 13,796 | 2,569,980 |
In accordance with SEC rules, we also are required to disclose the grant date fair value for awards with performance conditions assuming maximum performance. The grant date fair value for the 2013 LTIP RPU awards, assuming maximum performance, are as follows: Davis $10,774,467; Abney $4,245,181; Kuehn $2,386,697; Barnes $1,636,434; and McDevitt $1,676,129.
48 | UPS | Notice of Annual Meeting of Shareowners and 2014 Proxy Statement
COMPENSATION MATTERS EXECUTIVE COMPENSATION (CONTINUED)
depend on the change in our stock price over time. An overview of the features of these awards can be found in the "Compensation Discussion and Analysis" above.
Amounts for 2013 were impacted by the increase in discount rates of 87 basis points for the UPS Retirement Plan and 94 basis points for the UPS Excess Coordinating Benefit Plan. There are no above market or preferential earnings for the UPS Deferred Compensation Plan. For all NEOs except John McDevitt, the decline in the present value of accrued pension benefits due to the increase in discount rates more than offset the increase in present value for additional benefit accruals and other changes.
Name |
401(k) Match |
Life Insurance |
RPRO |
Financial Planning |
Healthcare Benefits |
Total
|
|||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
D. Scott Davis |
6,375 | 8,157 | 6,308 | 15,000 | 6,095 | 41,935 | |||||||||||||
David P. Abney |
6,375 | 2,319 | 0 | 3,623 | 6,095 | 18,412 | |||||||||||||
Kurt P. Kuehn |
6,375 | 2,194 | 0 | 14,675 | 6,095 | 29,339 | |||||||||||||
David A. Barnes |
6,375 | 2,086 | 0 | 1,675 | 6,095 | 16,231 | |||||||||||||
John J. McDevitt |
6,375 | 2,083 | 0 | 7,123 | 6,095 | 21,676 |
For a description of the Restoration Plan Rollover Option, or RPRO, see "2013 Pension Benefits" below.
UPS | Notice of Annual Meeting of Shareowners and 2014 Proxy Statement | 49
COMPENSATION MATTERS EXECUTIVE COMPENSATION (CONTINUED)
Grants of Plan-Based Awards for 2013
The following table provides information about awards granted in 2013 to each of the Named Executive Officers.
|
|
|
|
|
|
|
|
All Other Stock Awards: Number of Shares of Stock or Units (#)(3) |
All Other Option Awards: Number of Securities Underlying Options (#)(4) |
|
Grant Date Fair Value of Stock and Option Awards ($)(5) |
|||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
|
Estimated Possible Payouts Under Non-Equity Incentive Plan Awards(1) |
Estimated Future Payouts Under Equity Incentive Plan Awards(2) |
Exercise or Base Price of Option Awards ($/Sh) |
||||||||||||||||||||||||||||||
Name |
Grant Date |
Threshold ($) |
Target ($) |
Maximum ($) |
Threshold (#) |
Target (#) |
Maximum (#) |
|||||||||||||||||||||||||||
D. Scott Davis |
| 580,879 | 1,445,311 | |||||||||||||||||||||||||||||||
|
03/01/2013 | 38,712 | 86,026 | 124,738 | 7,420,594 | |||||||||||||||||||||||||||||
|
03/01/2013 | 30,683 | $ | 82.87 | 475,277 | |||||||||||||||||||||||||||||
|
03/08/2013 | 10,282 | 852,069 | |||||||||||||||||||||||||||||||
David P. Abney |
| 211,682 | 523,925 | |||||||||||||||||||||||||||||||
|
03/01/2013 | 15,253 | 33,895 | 49,148 | 2,923,736 | |||||||||||||||||||||||||||||
|
03/01/2013 | 9,461 | $ | 82.87 | 146,550 | |||||||||||||||||||||||||||||
|
03/08/2013 | 3,817 | 316,315 | |||||||||||||||||||||||||||||||
Kurt P. Kuehn |
| 198,448 | 523,925 | |||||||||||||||||||||||||||||||
|
03/01/2013 | 11,191 | 24,868 | 36,059 | 1,659,803 | |||||||||||||||||||||||||||||
|
03/01/2013 | 8,870 | $ | 82.87 | 137,395 | |||||||||||||||||||||||||||||
|
03/08/2013 | 3,500 | 290,045 | |||||||||||||||||||||||||||||||
David A. Barnes |
| 191,147 | 523,925 | |||||||||||||||||||||||||||||||
|
03/01/2013 | 5,989 | 13,308 | 19,297 | 1,127,695 | |||||||||||||||||||||||||||||
|
03/01/2013 | 8,544 | $ | 82.87 | 132,346 | |||||||||||||||||||||||||||||
|
03/08/2013 | 3,401 | 281,841 | |||||||||||||||||||||||||||||||
John J. McDevitt |
| 192,228 | 523,925 | |||||||||||||||||||||||||||||||
|
03/01/2013 | 6,023 | 13,383 | 19,406 | 1,154,379 | |||||||||||||||||||||||||||||
|
03/01/2013 | 8,592 | $ | 82.87 | 133,089 | |||||||||||||||||||||||||||||
|
03/08/2013 | 3,466 | 287,228 |
50 | UPS | Notice of Annual Meeting of Shareowners and 2014 Proxy Statement
COMPENSATION MATTERS EXECUTIVE COMPENSATION (CONTINUED)
Outstanding Equity Awards at Fiscal Year-End 2013
The following table shows the number of shares covered by exercisable and unexercisable options and unvested RSUs and RPUs held by the Named Executive Officers on December 31, 2013.
|
|
|
|
|
|
Stock Awards | ||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
|
|
|
|
|
|
|
|
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(3) |
|||||||||||||||||||
|
|
|
|
|
|
|
|
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(4) |
||||||||||||||||||||
|
Option Awards | |
|
|||||||||||||||||||||||||
Name |
Number of Securities Underlying Unexercised Options (#) Exercisable |
Number of Securities Underlying Unexercised Options (#) Unexercisable (1) |
Option Exercise Price ($) |
Option Grant Date |
Option Expiration Date |
Number of Shares or Units of Stock That Have Not Vested (#)(2) |
Market Value of Shares or Units of Stock That Have Not Vested ($)(3) |
|||||||||||||||||||||
D. Scott Davis |
11,844 | 0 | 80.88 | 5/1/2006 | 4/29/2016 | |||||||||||||||||||||||
|
16,086 | 0 | 70.90 | 5/9/2007 | 5/8/2017 | |||||||||||||||||||||||
|
26,089 | 0 | 71.58 | 5/7/2008 | 5/7/2018 | |||||||||||||||||||||||
|
32,244 | 8,061 | 55.83 | 5/6/2009 | 5/6/2019 | |||||||||||||||||||||||
|
17,699 | 11,800 | 67.18 | 5/5/2010 | 5/5/2020 | |||||||||||||||||||||||
|
11,328 | 16,994 | 74.25 | 5/4/2011 | 5/4/2021 | |||||||||||||||||||||||
|
6,239 | 24,958 | 76.89 | 3/1/2012 | 3/1/2022 | |||||||||||||||||||||||
|
0 | 30,683 | 82.87 | 3/1/2013 | 3/1/2023 | |||||||||||||||||||||||
|
118,770 | 12,480,312 | 186,674 | 19,615,704 | ||||||||||||||||||||||||
David P. Abney |
9,052 | 0 | 80.88 | 5/1/2006 | 4/29/2016 | |||||||||||||||||||||||
|
11,260 | 0 | 70.90 | 5/9/2007 | 5/8/2017 | |||||||||||||||||||||||
|
8,619 | 0 | 71.58 | 5/7/2008 | 5/7/2018 | |||||||||||||||||||||||
|
10,652 | 2,663 | 55.83 | 5/6/2009 | 5/6/2019 | |||||||||||||||||||||||
|
5,847 | 3,898 | 67.18 | 5/5/2010 | 5/5/2020 | |||||||||||||||||||||||
|
3,742 | 5,615 | 74.25 | 5/4/2011 | 5/4/2021 | |||||||||||||||||||||||
|
1,924 | 7,696 | 76.89 | 3/1/2012 | 3/1/2022 | |||||||||||||||||||||||
|
0 | 9,461 | 82.87 | 3/1/2013 | 3/1/2023 | |||||||||||||||||||||||
|
44,745 | 4,701,764 | 73,550 | 7,728,634 | ||||||||||||||||||||||||
Kurt P. Kuehn |
8,862 | 0 | 72.07 | 5/9/2005 | 5/8/2015 | |||||||||||||||||||||||
|
8,178 | 0 | 80.88 | 5/1/2006 | 4/29/2016 | |||||||||||||||||||||||
|
9,652 | 0 | 70.90 | 5/9/2007 | 5/8/2017 | |||||||||||||||||||||||
|
7,454 | 0 | 71.58 | 5/7/2008 | 5/7/2018 | |||||||||||||||||||||||
|
9,212 | 2,304 | 55.83 | 5/6/2009 | 5/6/2019 | |||||||||||||||||||||||
|
5,057 | 3,372 | 67.18 | 5/5/2010 | 5/5/2020 | |||||||||||||||||||||||
|
3,425 | 5,138 | 74.25 | 5/4/2011 | 5/4/2021 | |||||||||||||||||||||||
|
1,760 | 7,044 | 76.89 | 3/1/2012 | 3/1/2022 | |||||||||||||||||||||||
|
0 | 8,870 | 82.87 | 3/1/2013 | 3/1/2023 | |||||||||||||||||||||||
|
28,472 | 2,991,822 | 43,415 | 4,562,048 |
UPS | Notice of Annual Meeting of Shareowners and 2014 Proxy Statement | 51
COMPENSATION MATTERS EXECUTIVE COMPENSATION (CONTINUED)
|
|
|
|
|
|
Stock Awards | ||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
|
|
|
|
|
|
|
|
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(3) |
|||||||||||||||||||
|
|
|
|
|
|
|
|
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(4) |
||||||||||||||||||||
|
Option Awards | |
|
|||||||||||||||||||||||||
Name |
Number of Securities Underlying Unexercised Options (#) Exercisable |
Number of Securities Underlying Unexercised Options (#) Unexercisable (1) |
Option Exercise Price ($) |
Option Grant Date |
Option Expiration Date |
Number of Shares or Units of Stock That Have Not Vested (#)(2) |
Market Value of Shares or Units of Stock That Have Not Vested ($)(3) |
|||||||||||||||||||||
David A. Barnes |
8,178 | 0 | 80.88 | 5/1/2006 | 4/29/2016 | |||||||||||||||||||||||
|
9,652 | 0 | 70.90 | 5/9/2007 | 5/8/2017 | |||||||||||||||||||||||
|
7,454 | 0 | 71.58 | 5/7/2008 | 5/7/2018 | |||||||||||||||||||||||
|
6,909 | 2,304 | 55.83 | 5/6/2009 | 5/6/2019 | |||||||||||||||||||||||
|
5,057 | 3,372 | 67.18 | 5/5/2010 | 5/5/2020 | |||||||||||||||||||||||
|
3,331 | 4,997 | 74.25 | 5/4/2011 | 5/4/2021 | |||||||||||||||||||||||
|
1,712 | 6,850 | 76.89 | 3/1/2012 | 3/1/2022 | |||||||||||||||||||||||
|
0 | 8,544 | 82.87 | 3/1/2013 | 3/1/2023 | |||||||||||||||||||||||
|
26,028 | 2,735,015 | 28,491 | 2,993,834 | ||||||||||||||||||||||||
John J. McDevitt |
8,883 | 0 | 80.88 | 5/1/2006 | 4/29/2016 | |||||||||||||||||||||||
|
10,488 | 0 | 70.90 | 5/9/2007 | 5/8/2017 | |||||||||||||||||||||||
|
7,827 | 0 | 71.58 | 5/7/2008 | 5/7/2018 | |||||||||||||||||||||||
|
7,255 | 2,419 | 55.83 | 5/6/2009 | 5/6/2019 | |||||||||||||||||||||||
|
5,310 | 3,540 | 67.18 | 5/5/2010 | 5/5/2020 | |||||||||||||||||||||||
|
3,398 | 5,099 | 74.25 | 5/4/2011 | 5/4/2021 | |||||||||||||||||||||||
|
1,747 | 6,989 | 76.89 | 3/1/2012 | 3/1/2022 | |||||||||||||||||||||||
|
0 | 8,592 | 82.87 | 3/1/2013 | 3/1/2023 | |||||||||||||||||||||||
|
26,909 | 2,827,579 | 29,039 | 3,051,418 |
52 | UPS | Notice of Annual Meeting of Shareowners and 2014 Proxy Statement
COMPENSATION MATTERS EXECUTIVE COMPENSATION (CONTINUED)
Option Exercises and Stock Vested in 2013
The following table sets forth the number and corresponding value realized during 2013 with respect to options that were exercised and restricted stock units and restricted performance units that vested for each Named Executive Officer.