Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section
14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
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United Parcel Service, Inc.
(Name of Registrant as Specified In Its
Charter)
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Statement, if Other Than the Registrant)
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Table of Contents
Notice of 2020 Annual Meeting
of Shareowners and
Proxy Statement
Thursday, May 14, 2020
8:00 a.m. Eastern Time
Hotel du Pont
Wilmington, Delaware
Table of Contents
Table of Contents
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Table of Contents
United Parcel Service, Inc.
55 Glenlake Parkway, N.E.
Atlanta, GA 30328
March 20, 2020
Dear Fellow Shareowners:
It is my pleasure to invite you to join us at UPS’s
2020 Annual Meeting of Shareowners. After a 46-year career with UPS, this will be my last Annual Meeting as Chairman and Chief
Executive Officer. UPS has been one of my life’s passions and it has been an honor to lead such an exceptional company. As
I transition to retirement, I look forward to passing the torch to Carol Tomé as she assumes the Chief Executive Officer
role. Carol is one of the most respected and talented leaders in Corporate America, and she has been a UPS Board member since 2003.
Carol has a proven track record of driving growth at a global organization, maximizing shareowner value, developing talent and
successfully executing strategic priorities. Please join me in welcoming Carol into her new role.
Since our last Annual Meeting, UPS celebrated the
20th anniversary of our initial public offering. Even 20 years ago, UPS recognized the need to transform to facilitate growth.
The IPO strengthened us and gave us the ability to grow, invest and make strategic acquisitions in markets around the world. It
laid the groundwork for the Smart Global Logistics Network we operate today.
Moving forward, we are accelerating the transformation
of nearly every aspect of our business, from leadership and culture, to operations and our go-to-market strategies. We are reinvesting
a portion of our transformation savings into creating new customer-focused services to support our four strategic growth imperatives:
small- and medium-sized businesses (SMBs), international growth markets, B2B and B2C e-commerce, and healthcare and life sciences.
The momentum from our actions is building as demonstrated by the positive underlying performance of the business, and it is providing
us flexibility to respond to the fast pace of change in the market.
The structural shifts in the market toward next-day
and 7-day delivery in the U.S. provide tremendous near-term growth opportunity, and we are taking aggressive steps to speed up
our network to help all customers adapt, especially SMBs. We are improving time-in-transit on lanes that serve about 80% of our
customers, doubling the volume we handle on Saturday and launching Sunday delivery. These actions are designed to take advantage
of opportunities today, while further diversifying our growing customer base and generating long-term profitable revenue growth.
Our Company is growing and becoming stronger, driven
by the diversity of talent embodied in 495,000 UPSers around the world and our culture of continuous transformation. We have a
proud 113-year history at UPS and are accelerating into the next decade of success for our Company, customers and shareowners.
Finally, I want to encourage all of our shareowners
to vote. This is your opportunity to share your views with the Company. We listen and take your feedback into account as we continually
seek to grow our business, improve governance and increase long-term shareowner value. We are grateful to those shareowners who
have previously shared their views. As we approach the Annual Meeting, I encourage you to contact us with any questions or feedback
at 404-828-6059.
On behalf of the entire Board of Directors, thank
you for your continued support of UPS.
David P. Abney
Chairman and Chief Executive Officer
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Notice of Annual Meeting of Shareowners and 2020 Proxy Statement |
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Notice of UPS 2020 Annual
Meeting
UNITED PARCEL SERVICE, INC.
55 Glenlake Parkway, N.E., Atlanta, Georgia 30328 |
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Date and Time: May 14, 2020, 8:00 a.m. Eastern
Time |
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Place: Hotel du Pont, 11th and Market
Streets, Wilmington, Delaware |
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Record Date: March 16, 2020 |
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Distribution Date: A Notice of Internet Availability of Proxy
Materials or the Proxy Statement is first being sent to shareowners on or about March 20, 2020. |
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Voting: Holders of class A common stock are entitled to 10
votes per share; holders of class B common stock are entitled to one vote per share. Your vote is important. Please vote
as soon as possible through the Internet, by telephone or by signing and returning your proxy card (if you received a paper
copy of the proxy card). Your voting options are described on the Notice of Internet Availability of Proxy Materials and/or
proxy card. |
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Admission: To attend the meeting in person you will need proof
of your share ownership (see page 74 for acceptable proof of ownership) as of the record date and a form of government-issued
photo identification. Each shareowner may appoint only one proxy holder or representative to attend the meeting on his or
her behalf. |
We intend to hold our Annual Meeting in person. However, we are actively
monitoring the coronavirus (COVID-19) situation and may choose to hold a Virtual Annual Meeting instead of holding the meeting
in Delaware.
In the event it is not possible or advisable to hold our Annual Meeting
in person, we will publicly announce a determination to hold a Virtual Annual Meeting in a press release available at www.investors.ups.com
as soon as practicable before the meeting. In that event, the 2020 Annual Meeting would be conducted solely virtually, at the above
date and time, via live audio webcast. You or your proxyholder could participate, vote and examine our stocklist at the Virtual
Annual Meeting by visiting www.virtualshareholdermeeting.com/UPS2020 and using your 16 digit control number, but only if the meeting
is not held in Delaware.
Important Notice Regarding the Availability of Proxy Materials
for the Shareowner Meeting to be held on May 14, 2020: The Proxy Statement and our 2019 Annual Report are available at www.proxyvote.com.
Questions? Call 404-828-6059 (option 2).
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Norman M. Brothers, Jr.
Secretary
Atlanta, Georgia
March 20, 2020 |
Items of Business
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Voting
Choices |
Board Voting
Recommendations |
Page |
Company Proposals: |
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1. Elect 12 director nominees named in the
Proxy Statement to serve until the 2021 Annual Meeting and until their respective successors are elected and qualified |
• Vote
for all nominees
• Vote against all nominees
• Vote for some nominees and against others
• Abstain from voting on one or more nominees |
FOR ALL |
20 |
2. Approve on an advisory basis a resolution
on executive compensation |
• Vote for
the resolution
• Vote against the resolution
• Abstain from voting on the resolution |
FOR |
59 |
3. Ratify the appointment of Deloitte &
Touche LLP as our independent registered public accounting firm for 2020 |
• Vote for
ratification
• Vote against ratification
• Abstain from voting on ratification |
FOR |
60 |
Shareowner Proposals
(if properly presented): |
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4. Prepare an annual report
on lobbying activities |
• Vote for
the proposal
• Vote against the proposal
• Abstain from voting on the proposal |
AGAINST |
63 |
5. Reduce the voting power of class A stock
from 10 votes per share to one vote per share |
• Vote for
the proposal
• Vote against the proposal
• Abstain from voting on the proposal |
AGAINST |
66 |
6. Prepare a report on reducing UPS’s
total contribution to climate change |
• Vote for
the proposal
• Vote against the proposal
• Abstain from voting on the proposal |
AGAINST |
68 |
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Table of Contents
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Proxy
Statement
UNITED PARCEL SERVICE, INC.
55 Glenlake Parkway, N.E., Atlanta, Georgia 30328
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This Proxy Statement contains important information
about matters on which you may vote at the 2020 Annual Meeting of Shareowners (the “Annual Meeting”). We are providing
these proxy materials to you because our Board of Directors is soliciting your proxy to vote your shares at the Annual Meeting.
The Annual Meeting will be held May 14, 2020, at 8:00 a.m. Eastern Time, at Hotel du Pont, 11th and Market Streets, Wilmington,
Delaware. We are first mailing this Proxy Statement to our shareowners on or about March 20, 2020.
All properly executed written proxies, and all
properly completed proxies submitted through the Internet or by telephone, that are delivered pursuant to this solicitation will
be voted at the Annual Meeting in accordance with the directions given in the proxy, unless the proxy is revoked prior to completion
of voting at the meeting. Only owners of record of shares of the Company’s common stock as of the close of business on March
16, 2020, the “Record Date”, are entitled to notice of, and to vote at, the Annual Meeting (or any adjournment or postponement
of the meeting).
Proxy Statement Summary
This summary highlights information contained elsewhere in this Proxy
Statement.
Corporate Governance
Following is a brief overview of our corporate
governance policies and practices:
• |
We maintain an independent board; all of our directors
are independent, other than our current Chairman and CEO, David Abney, and our next CEO, Carol Tomé; |
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We currently have a highly engaged lead independent director with
significant oversight responsibilities, and effective September 30, 2020, we will have an independent Chairman; |
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Our independent directors meet regularly without management; |
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Annual elections for all directors; |
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Majority voting in uncontested director elections; |
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The board is fully engaged in the Company’s strategic planning
process, conducting an in depth review of Company strategy on an annual basis and receiving regular updates throughout the
year; |
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The board has a Risk Committee comprised entirely of independent board
members that is responsible for assisting in overseeing management’s identification and evaluation of enterprise risks,
including risks associated with cyber-security; |
• |
The board and each board committee conduct evaluations annually; |
• |
We regularly evaluate our governance policies and practices, and make changes when appropriate; for example, we voluntarily adopted a proxy access bylaw allowing qualifying shareowners to include director nominees in our proxy statement and, in November 2019, voluntarily committed to holding annual say on pay votes; |
• |
We regularly engage with shareowners; we contacted holders of over 43% of our class B common stock during this proxy season to discuss environmental, social and governance (“ESG”) matters, including executive compensation matters; |
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We maintain robust stock ownership guidelines, including a target ownership of eight times annual salary for the Chief Executive Officer, five times annual salary for other executive officers and five times the annual retainer for directors; and |
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We prohibit our executive officers and directors from hedging their ownership in UPS stock and entering into pledges of UPS stock. |
Leadership Transition
On March 12, 2020, we announced
that David Abney will retire as Chief Executive Officer effective June 1, 2020. To assist with transition matters, David will remain
on the board following his retirement and will serve as Executive Chairman of the board and Chair of the Executive Committee until
September 30, 2020, and thereafter as special consultant to the new Chief Executive Officer and the board until December 31, 2020.
Consistent with the long-term leadership succession planning conducted by our board and following a rigorous selection process
involving both internal
and external candidates, the
board appointed Carol Tomé to assume the role of Chief Executive Officer effective June 1, 2020. At that time, Carol will
also join the Executive Committee.
Carol is the former Executive
Vice President and Chief Financial Officer of The Home Depot, with responsibilities for corporate strategy, finance, and business
development. She has a proven track record of driving growth at a global organization, maximizing shareholder value, developing
talent and successfully executing strategic priorities. As a member of the UPS board since 2003,
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Notice of Annual Meeting of Shareowners and 2020 Proxy Statement |
Table of Contents
she has in-depth knowledge of
UPS’s business, strategy, people, culture and values and was determined by the board to be the right executive to lead UPS
at this important time in the Company’s strategic transformation.
In connection with the CEO transition,
the board also designated William R. Johnson to assume the role of independent Chairman, effective September 30, 2020. Bill has
been our independent Lead Director since 2016.
Our Board
The Board of Directors is elected annually by
the shareowners and is responsible for the strategic oversight of UPS. Having a significant majority of non-management independent
directors encourages robust debate and challenged opinions in the boardroom, while diversity - with respect to gender,
age, ethnicity, skills, experience and other factors - contributes to consideration of a wide range of perspectives. Members of
our board bring a broad range of professional skills and experiences. A mix of newer directors, who bring fresh viewpoints,
and longer-tenured directors, who have contributed to developing our strategy over time and have acquired an in-depth understanding
of our global organization, provides appropriate balance. For more information see page 20.
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On a regular basis, the Nominating and Corporate Governance Committee assesses
the skills and experience necessary for our board to function effectively, and considers where additional expertise may
be needed.
We believe that as a group, our 12 directors bring the requisite skills,
experience and diversity to ensure the overall effectiveness of our board. |
Diversity in our boardroom
supports UPS’s continued success and advantage
Gender Diversity |
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Overall Diversity |
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Age Diversity |
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Our Chairman and CEO provides
strong leadership and is supported – and constructively challenged – by an independent board
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While our current CEO serves as Chairman, the board benefits from the oversight of 11* independent directors, including an engaged lead independent director; William “Bill” Johnson has served in this role since 2016. Effective September 30, 2020, Bill will become independent Chairman. |
Our board has been meaningfully
refreshed since 2010 with 7* independent directors joining, and 6 departing
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The board recognizes that it continually needs
to monitor and improve the effectiveness of its operations and our directors. This is achieved through, among other practices,
an annual detailed evaluation process that provides for quantitative ratings in key areas of board performance and director education
opportunities.
The board consists of individuals with deep
experience and knowledge of UPS, complemented by the fresh perspectives of newer directors. Together, our directors work effectively
as a team and are highly focused on UPS’s success. |
* |
Carol Tomé
will become Chief Executive Officer on June 1, 2020 and will no longer be considered an independent director. |
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Table of Contents
Election of Directors
As a group, our 12 director nominees are appropriately
skilled and experienced to effectively oversee and constructively challenge the performance of management in the execution of our
strategy.
The table below provides summary information about the 12 director
nominees. For more information see page 20.
Name |
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Age |
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Director
Since |
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Occupation |
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Committee(s) |
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Other Public
Company
Boards |
Independent Directors |
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Rodney C. Adkins |
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61 |
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2013 |
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Former Senior Vice President, International Business
Machines |
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– Risk (Chair)
– Compensation |
|
3 |
Michael J. Burns |
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68 |
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2005 |
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Former Chairman, President and Chief Executive Officer,
Dana Corporation |
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– Audit |
|
0 |
William R. Johnson(1) |
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71 |
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2009 |
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Former Chairman, President and Chief Executive Officer,
H.J. Heinz Company |
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– Nominating and Corporate Governance (Chair)
– Executive |
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1 |
Ann M. Livermore |
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61 |
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1997 |
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Former Executive Vice President, Hewlett-Packard Company |
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– Compensation (Chair)
– Risk
– Executive |
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2 |
Rudy H.P. Markham |
|
74 |
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2007 |
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Former Financial Director, Unilever |
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– Audit (Chair) |
|
1 |
Franck J. Moison |
|
66 |
|
2017 |
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Former Vice Chairman, Colgate-Palmolive Company |
|
– Nominating and Corporate Governance
– Risk |
|
1 |
Clark T. Randt, Jr. |
|
74 |
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2010 |
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Former U.S. Ambassador to the People’s Republic of
China |
|
– Compensation
– Nominating and Corporate Governance |
|
3 |
Christiana Smith Shi |
|
60 |
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2018 |
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Former President, Direct-to-Consumer, Nike, Inc. |
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– Compensation
– Risk |
|
1 |
John T. Stankey |
|
57 |
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2014 |
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President and Chief Operating Officer, AT&T Inc. and
CEO, Warner Media LLC |
|
– Audit |
|
0 |
Kevin Warsh |
|
49 |
|
2012 |
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Former Member of the Board of Governors of the Federal
Reserve System, Distinguished Visiting Fellow, Hoover Institution, Stanford University |
|
– Compensation
– Nominating and Corporate Governance |
|
0 |
Non-Independent Directors |
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David P. Abney(2) |
|
64 |
|
2014 |
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Chairman and Chief Executive Officer, United Parcel Service,
Inc. |
|
– Executive (Chair) |
|
1 |
Carol B. Tomé(3) |
|
63 |
|
2003 |
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Former Chief Financial Officer and Executive Vice President
— Corporate Services, The Home Depot, Inc. |
|
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|
0 |
(1) |
Lead Independent Director. Effective September 30, 2020,
Bill will become independent Chairman. |
(2) |
David will retire as Chief Executive Officer effective June 1, 2020.
He will remain on the board and will serve as Executive Chairman and Chair of the Executive Committee until September 30,
2020. Thereafter, David will serve as special consultant to the Chief Executive Officer and the board until his retirement
from the Company effective December 31, 2020. |
(3) |
Carol will become Chief Executive Officer effective June 1, 2020,
at which time she will also join the Executive Committee. |
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Executive Compensation
Compensation Practices
A significant portion of executive compensation
is at-risk and tied to Company performance. This aligns executive decision-making with the long-term interests of our shareowners.
We also have a longstanding owner-manager culture. Our compensation and governance practices that support these principles include:
|
• |
payments with a balanced mix of cash and equity, providing a degree of financial certainty and appropriate incentives to retain and motivate executives; |
|
• |
payouts under annual performance incentive awards that are partially in the form of equity awards containing vesting requirements beyond the performance period, furthering both retention and incentive goals; |
|
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annual and long-term performance incentive award payouts that are dependent upon the achievement of multiple distinct goals, avoiding overemphasis on any one metric and mitigating excessive risk-taking; |
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payouts of long-term performance incentive awards only following a three-year performance period; |
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stock option awards that vest over a five-year period and only provide value if our stock price increases; |
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incentive compensation plans that include clawback provisions that permit recovery of awards granted to executive officers; |
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no automatic single trigger vesting provisions in connection with a change in control; incentive compensation plan awards require a “double trigger” — both a change in control and a termination of employment — to accelerate vesting; and |
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no tax gross-ups to executive officers with respect to equity awards or golden parachute excise taxes. |
For more information see page 31.
Key 2019 Compensation Actions
Key 2019 compensation decisions for our Named
Executive Officers (“NEOs”) included:
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most total direct compensation was performance-based and is considered “at risk” (90% for the CEO and 86% for all other NEOs as a group). See page 32. |
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approval of the compensation package for our new Chief Financial Officer. See page 40; |
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annual incentive awards for Company and individual performance during the year ended December 31, 2019 were earned below target for all NEOs. See page 35. |
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previously granted 2017 Long-Term Incentive Performance (“LTIP”) awards, which had three-year performance goals of revenue growth, operating return on invested capital and relative total shareowner return ending in 2019, were earned at 82% of target. For more information see page 39. |
|
• |
base salaries were increased by an average of 3.1% as a result of the annual salary review process. See page 34. |
Say on Pay Vote
We maintain executive compensation programs that
support the long-term interests of our shareowners. In 2017, our shareowners approved a non-binding resolution for us to provide
shareowners with the opportunity to vote on the compensation of our NEOs every three years. After a review of various factors,
including developments in corporate governance practices, the board
has determined that beginning at the Annual Meeting,
we will provide shareowners the opportunity to vote annually, on an advisory basis, on the compensation of our NEOs, as described
in the Compensation Discussion and Analysis section and in the compensation tables and accompanying narrative disclosure in this
proxy statement. For more information, see page 59.
Ratification of the Appointment of the Independent
Registered Public Accounting Firm
The Board of Directors has appointed Deloitte &
Touche LLP as our independent registered public accounting firm for the year ending December 31, 2020. The board recommends that
you ratify the appointment. Following is summary information about the fees billed to us by Deloitte & Touche LLP during
the years ended December 31, 2019 and 2018. For more information, see page 60.
| |
2019 | | |
2018 | |
Fees Billed: | |
| | | |
| | |
Audit Fees | |
$ | 16,464,000 | | |
$ | 14,558,000 | |
Audit-Related Fees | |
$ | 1,266,000 | | |
$ | 968,000 | |
Tax Fees | |
$ | 631,000 | | |
$ | 825,000 | |
Total | |
$ | 18,361,000 | | |
$ | 16,351,000 | |
Shareowner Proposals
The board recommends you vote AGAINST shareowner
proposals (1) requesting the preparation of an annual report on lobbying activities, (2) requesting the Company take action to
reduce the voting power of our class A stock and (3) requesting the preparation of a report on reducing our total contribution
to climate change. More information about these proposals is available starting on page 63.
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Table of Contents
Corporate Governance
We are committed to maintaining robust governance
practices that benefit the long-term interests of all stakeholders. We regularly review and update our corporate governance practices
in response to shareowner feedback, changes in law, and other
corporate developments, as well as the evolving
needs of our business. The following sections provide an overview of our corporate governance structure and processes, including
key aspects of our board operations.
Selecting Director Nominees
Maintaining a board of individuals, independent
of management and of the highest personal character, integrity and ethical standards is critical to the proper functioning of the
board. The Nominating and Corporate Governance Committee also seeks to promote diversity in the boardroom with respect to
gender, age, ethnicity, skills, experience
and other factors. Our director biographies highlight the skills, experiences and backgrounds that led the board to conclude
that each of these individuals should be nominated to serve as a director.
The Board’s Director Nomination Process
1 |
Review of Board Composition
The board’s annual evaluation helps the Nominating and Corporate Governance Committee identify
the board’s current and expected future needs by assessing areas where additional expertise, skills or experience
may be needed. The Nominating and Corporate Governance Committee regularly conducts an in-depth board composition
analysis. |
2 |
Identification of Candidates
The Nominating and Corporate Governance Committee uses a variety of sources to identify potential
candidates and emphasizes the importance of a diverse pool of candidates. Sources include board members, members of management
and independent consultants, outside parties who may know of suitable candidates, and shareowner recommendations. Prospective
candidate evaluations typically include feedback from independent consultants, the Nominating and Corporate Governance
Committee’s review of the candidate’s background and qualifications, interviews with board members, and open
discussions between the Committee and the full board. An independent consultant helps screen director candidates in consultation
with the Nominating and Corporate Governance Committee. This process allows for active and ongoing consideration
of potential directors with a focus on long-term Company strategy. |
3 |
Shortlisted Candidates
The Nominating and Corporate Governance Committee maintains a list of potential director candidates
according to desired skills, experiences and backgrounds. The list is reviewed at each Nominating and Corporate
Governance Committee meeting and updated as appropriate. Each director candidate is carefully evaluated to ensure that
existing and planned future commitments would not materially interfere with the candidate’s responsibilities as
a UPS director. |
4 |
Recommendation, Nomination and Annual Election
Candidates recommended by the Nominating and Corporate Governance Committee and approved by the board
are nominated for election. All directors are elected annually at the Annual Meeting. |
Result |
7 new independent directors added since 2010 |
Shareowner Recommendations, Nominations and Proxy
Access
The Nominating and Corporate Governance Committee
considers shareowner recommended director candidates on the same basis as recommendations from other sources. Shareowners can recommend
a director candidate to the Nominating and Corporate Governance Committee in writing to the following address:
Corporate Secretary, 55 Glenlake Parkway, N.E.,
Atlanta, Georgia 30328. Submissions should contain the name of the prospective candidate and describe the experience, qualifications,
attributes and skills that make the individual a suitable director nominee.
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As part of our ongoing commitment to strong corporate
governance practices, we proactively adopted proxy access for shareowners. We provide a single shareowner, or group of up to 20
shareowners, that has owned at least 3 percent of UPS’s outstanding stock continuously for at least three years, the ability
to include director nominees in UPS’s proxy materials for an annual meeting of shareowners. Shareowners may include
in the proxy materials nominees for the greater
of 20 percent of the board seats or two directors. Our Bylaws set forth the requirements for the formal shareowner nomination process
for director candidates. These requirements are described under “Other Information—Submission of Shareowner Proposals
and Director Nominations” on page 75.
Board Diversity
A wide range of perspectives is critical to effective
corporate governance and oversight. When constituting the board and identifying director nominees, overall a key consideration
of the Nominating and Corporate Governance Committee is diversity with respect to gender, age, ethnicity, skills, experience and
other factors. The Committee assesses the effectiveness of its diversity
efforts through periodic evaluations of the board’s
composition. Our 12 director nominees consist of three women, one African-American, two Europeans and an individual who spent his
entire professional career in Asia. The director nominees range in age between 49 and 74 years.
|
Gender Diversity |
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Overall Diversity |
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Age Diversity |
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Board Refreshment and Succession
Planning
The Nominating and Corporate Governance Committee
regularly considers the long-term make-up of our Board of Directors and how board composition changes over time. The Committee
also considers the skills needed on our board as our business evolves. The board seeks to balance the knowledge and experience
that comes from longer-term board service with new ideas and energy that can come from new directors. Since 2010 we have added
7* new independent directors to the board and have had 6 directors retire. The median tenure of the director nominees of approximately
8 years reflects an appropriate balance between different perspectives brought by long-serving directors and new directors.
Director Independence
Our Corporate Governance Guidelines include director
independence standards consistent with the listing standards of the New York Stock Exchange (“NYSE”), which require
a majority of the directors to be independent. Our Corporate Governance Guidelines are available on the governance section of our
investor relations website at www.investors.ups.com.
* |
Carol Tomé will become Chief Executive Officer on June 1, 2020 and will
no longer be considered an independent director. |
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Table of Contents
The board evaluated each director’s independence
in February 2020 and considered whether there were any relationships between UPS and each director, or any member of his or her
immediate family. The board also examined whether there were any relationships between UPS and organizations where a director is
or was a partner, principal shareowner or executive officer. Specifically, the board evaluated certain ordinary course business
transactions and relationships between UPS and the organizations that currently or previously in the prior year employed Michael
Burns and John Stankey, or their immediate
family members. The board determined that none
of these transactions or relationships were material to the Company, the individuals or the organizations with which they were
associated.
As a result of this review, the board affirmatively
determined that all our director nominees (other than our current Chairman and Chief Executive Officer, David Abney, and our next
Chief Executive Officer, Carol Tomé) are independent. All members of the Audit, Compensation, Nominating and Corporate Governance,
and Risk Committees are independent.
Board Leadership Structure
Based on the periodic evaluation and recommendation
of the Nominating and Corporate Governance Committee, the board determines the most appropriate board leadership structure,
including who should serve as Chairman, and whether
the roles of Chairman and Chief Executive Officer should be separated or combined.
Current Board Leadership
UPS Chief Executive Officer David Abney has primary
responsibility for managing the Company’s day–to-day operations, and he draws on his extensive knowledge of our business,
industry and competitive developments, key customers and business partners to set the board’s agenda. David communicates
UPS’s strategy to shareowners, employees, regulators, customers and the public. He provides open and frequent feedback to
board members on significant matters within and outside of the board meeting cycle. David is available to all directors between
meetings and meets regularly with the lead independent director, as described below, to receive feedback from the board. He seeks
to ensure that board meetings are productive and interactions with the directors facilitate a useful exchange of viewpoints.
As a result, the board has determined that David
Abney is best positioned to continue to lead the board as Chairman at this time to focus the board’s attention on the issues
of greatest importance to the Company and its shareowners.
At the same time, independent oversight is important
to the board. Our Corporate Governance Guidelines provide that if the positions of Chairman and Chief Executive Officer are combined,
or if the Chairman is not an independent director, the independent directors will appoint an independent member to serve as lead
independent director.
The lead independent director’s authority
and responsibilities include:
|
• |
presiding at meetings of the board at which the Chairman is not present, including executive sessions
of the non-management and independent directors; |
|
|
|
|
• |
approving information sent to the board; |
|
• |
approving the agenda and schedule for board meetings to provide sufficient time for discussion of all agenda items; |
|
|
|
|
• |
serving as liaison between the Chairman and the non-management and independent directors; |
|
|
|
|
• |
being available for consultation and communication with major shareowners upon request; and |
|
|
|
|
• |
having authority to call executive sessions of the non-management and independent directors. |
The independent members of the board have appointed
Bill Johnson as lead independent director. Bill devotes significant time to understanding our business and communicating with the
Chairman and Chief Executive Officer, and other directors, between meetings. He provides significant input into the board meeting
agendas, and he spends time with our Chairman and Chief Executive Officer after each board meeting to provide feedback. He also
periodically meets with our largest shareowners to answer questions and to provide perspective on appropriate topics, such as the
Company’s culture and governance practices.
Furthermore, all of the members of each of the
Audit Committee, the Compensation Committee, the Nominating and Corporate Governance Committee and the Risk Committee are independent.
Each committee is led by a chairperson who sets the meeting agendas and reports to the full board on the committee’s work.
Additionally, the independent directors meet in executive session without management present at each board meeting, as described
below. This structure provides the best form of leadership for the Company and its shareowners at this time.
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Board Leadership Changes
As discussed above, David Abney will retire as
Chief Executive Officer on June 1, 2020. The board has determined that in order to assist with transition matters, David should
serve as Executive Chairman of the board until he retires from the board on September 30, 2020. The board also decided that, given
the evolving needs of the Company, thereafter Bill Johnson should serve as the independent Chairman of the board. The board
believes that this structure will promote continued
independent board leadership while enabling our new Chief Executive Officer to focus on leading the Company. Bill has served on
our board since 2009 and as our independent Lead Director since 2016. He has deep institutional knowledge of the Company and will
provide strong continuity of leadership.
Executive Sessions of Independent
Directors
Directors hold executive sessions without management
present at each regular board meeting. The lead independent director determines the agenda for each session, presides at each session
and, after the session, acts as a liaison between the independent
directors and the Chairman and Chief Executive
Officer. The lead independent director may invite the Chairman and Chief Executive Officer to join the session for certain discussions
when deemed appropriate.
Board and Committee Evaluations
The board employs both an ongoing informal and
a formal annual process to evaluate its performance and the contributions of individual directors to the successful execution of
the board’s obligations. The Chairman and the board’s lead independent director frequently discuss the performance
of the board
and the board’s committees, and have informal
discussions about individual director contributions to the board. The lead independent director shares feedback from these discussions
with the full board and with individual board members.
Formal Evaluation Process
1 |
Detailed Formal Annual Evaluation Process
The charters of each of the Audit Committee, Compensation Committee,
Nominating and Corporate Governance Committee and Risk Committee require an annual performance evaluation. The Nominating and Corporate
Governance Committee oversees the annual board assessment process and the implementation of the annual committee assessments. |
2 |
Questionnaires
All board and committee members complete a detailed confidential questionnaire
each year. The questionnaire provides for quantitative ratings in key areas, including overall board effectiveness, meeting effectiveness,
access to information, information format, board committee structure, access to management, succession planning, meeting dialogue,
communication with the Chief Executive Officer, operational reporting, financial oversight, capital structure and financing, capital
spending, long-term strategic planning, risk oversight, crisis management and time management. The questionnaire also allows directors
to provide written feedback and make detailed anonymous comments. |
3 |
Review
The Chair of the Nominating and Corporate Governance Committee reviews
the responses with the chairs of the other board committees. The Chair of the Nominating and Corporate Governance Committee also
discusses the board evaluation results with the full board. |
4 |
Follow-up
Matters requiring follow-up are addressed by the Chair of the Nominating
and Corporate Governance Committee or the chairs of the other committees as appropriate. |
Result |
Feedback from the evaluations has driven several improvements in board operations over the last few years, including the format of delivery of board meeting materials, board meeting agendas and recurring topics, strategic planning and oversight, director recruitment practices and orientation, and succession planning. |
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Majority Voting and Director Resignation Policy
Our Bylaws provide for majority voting in uncontested director elections.
This means that in order to be elected, the number of votes cast for a nominee must exceed the number of votes cast against that
person. Any incumbent director who does not receive a majority of the votes cast must offer to resign from the board.
In such an event, the Nominating and Corporate Governance Committee
will recommend to the board whether to accept or reject the director’s offer to resign after considering all relevant factors.
The board will act on the recommendation within 90 days following certification of the election results. The board
will take into account the factors considered by the Nominating and
Corporate Governance Committee and any additional relevant information.
Any director who offers to resign must recuse himself or herself from
the board vote, unless the number of independent directors who were successful incumbents is fewer than three. The board will promptly
disclose its decision regarding any director’s offer to resign, including its reasoning. If the board determines to accept
a director’s offer to resign, the Nominating and Corporate Governance Committee will recommend whether and when to fill such
vacancy or whether to reduce the size of the board.
Risk Oversight
Board Oversight of Risk
Effective risk management is an important component of the board’s
oversight obligation. Our board regularly engages in discussions of our most significant risks and how these risks are being managed.
The board reviews periodic assessments from the Company’s 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.
As a component of exercising its risk management oversight responsibilities, the board has delegated to its standing committees
responsibilities as set out below. The board receives reports on appropriate areas of risk management from the committee chairs
regularly.
Risk Committee |
|
Audit Committee |
|
Compensation Committee |
|
Nominating and Corporate
Governance
Committee |
Oversees management’s identification and evaluation
of strategic enterprise risks, including risks associated with intellectual property, operations, privacy, technology, information
security, cybersecurity and cyber incident response, and business continuity. |
|
Oversees policies with respect to financial risk assessment, including
guidelines to govern the process by which major financial and accounting risk assessment and management is undertaken. |
|
Considers risks associated with our compensation policies and practices,
with respect to both executive compensation and compensation generally. |
|
Considers risks related to governance matters, including succession planning
for the Chief Executive Officer and other senior officers. |
The Company’s General Counsel, Chief Information Officer, and
the head of the Company’s compliance and internal audit functions have regularly scheduled individual private meetings with
the Risk Committee.
The Risk Committee also provides an annual update to the full board
on the Company’s enterprise risk management survey and risk assessment results. The update enables the board to provide feedback
to the Company about significant enterprise risks, and to assess the Company’s identification of its most significant risk
areas. The Risk Committee also coordinates with the Audit Committee as necessary and appropriate to enable the Audit Committee
to perform its responsibilities.
The Audit Committee has certain statutory, regulatory, and other responsibilities
with respect to oversight of risk assessment and risk management. Specifically, the Audit Committee is responsible
for overseeing policies with respect to financial risk assessment.
The head of the Company’s compliance and internal audit functions regularly reports to the Audit Committee, and each of the
General Counsel, Chief Financial Officer and the compliance and internal audit department manager have regularly scheduled private
sessions with the Audit Committee.
In addition, the Company’s General Counsel reports directly
to our Chairman and CEO, providing him with visibility into the Company’s risk profile. The board believes that the work
undertaken by its committees, together with the work of the full board and the Company’s senior management, enables effective
oversight of the Company’s management of risk. For more information about the board’s committees and their responsibilities
see page 28.
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Strategic Planning and Oversight
Setting the strategic course of the Company involves a high level
of constructive engagement between management and the board. Acting as a full board and through each board committee, the board
is fully engaged in the Company’s strategic planning process. Management develops and prioritizes strategic plans on an annual
basis. Management then reviews these plans with the board, along with the Company’s challenges, industry dynamics, and legal,
regulatory and governance developments, among other factors, during an annual board strategy meeting.
Management provides the board with comprehensive updates throughout
the year regarding the implementation and results of the Company’s strategic plans, as well as monthly updates
regarding the Company’s financial performance. In addition,
the CEO communicates regularly with the board on important business opportunities, financial and operational performance, risks
and other Company developments such as labor relations, customer interactions and media coverage during and outside the regular
board meeting cycle.
This process allows the board to leverage its substantial experience
and expertise in strategy development to execute effectively on its oversight responsibility of our corporate strategy and long-range
operating plans.
Management Succession Planning and Development
Succession planning and talent development are important at all levels
within our organization. The board oversees management’s emergency and long-term succession plans at the executive officer
level, most importantly the CEO position. The board annually reviews succession plans for senior management including the CEO,
all in the context of the Company’s overall business strategy and with a focus on risk management. More broadly, the board
is regularly updated on key talent indicators for the overall workforce, including diversity, recruiting and development programs.
The board’s succession planning activities are ongoing and strategic,
and are supported by board committees and independent third-party consultants as needed. In addition, the CEO annually provides
his assessment to the board of senior leaders and their potential to succeed at key senior management positions. As a part of this
process, potential leaders interact with board members through formal presentations and during informal events. This process resulted
in the hiring of Brian Newman as the Company’s new CFO in September 2019 in connection with Richard Peretz’s retirement
announcement, and the March 2020 announcement of the hiring of Carol Tomé as the Company’s next CEO following David
Abney’s retirement on June 1, 2020.
Meeting Attendance
The board held 6 meetings during 2019. Also during 2019, the Audit
Committee met 10 times, the Compensation Committee met 5 times, the Nominating and Corporate Governance Committee met 4 times and
the Risk Committee met 4 times. Board meetings generally occur over two days. Prior to board meetings, the lead independent director
and the board’s committee chairs work with management to determine and prepare agendas for the meetings. The board committees
generally meet on the first day of the board meeting, followed by the board meeting and a dinner. The board dinner presents opportunities
for continued discussions or questions, interactions with senior management and exposure to other employees. The second day typically
consists of reports from each committee
chair to the full board, additional presentations by internal business
leaders or others with expertise in various subject matters, and an executive session consisting of only independent board members.
The executive sessions are chaired by our lead independent director.
If a director cannot attend a meeting in person, they typically participate
by teleconference. All of our directors attended greater than 90% of the total number of board and any committee meetings of which
he or she was a member in 2019. Our directors are expected to attend each annual meeting, and all directors attended the 2019 Annual
Meeting. The independent directors met in executive session at all of the board meetings held in 2019.
|
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Code of Business Conduct
We are committed to conducting our business in accordance with the
highest ethical principles. Our Code of Business Conduct is applicable to anyone who represents UPS, including our directors, executive
officers and all other employees and agents
of UPS. A copy of our Code of Business Conduct is available under
the heading “ESG – Governance Documents” on our investor relations website at www.investors.ups.com.
Conflicts of Interest and Related Person Transactions
Our Audit Committee is responsible for overseeing our Code of Business
Conduct, which includes policies regarding conflicts of interest. The Code requires employees and directors to avoid conflicts
of interest, defined as situations where the person’s private interests conflict, or may appear to conflict, with the interests
of UPS.
The board has adopted a related person transactions policy that applies
to any transaction or series of transactions in which: (1) the Company or any of its subsidiaries is a participant; (2) any “related
person” (executive officer, director, greater than 5% beneficial owner of the Company’s common stock, or an immediate
family member of any of the foregoing) has or will have a material direct or indirect interest; and (3) the aggregate amount involved
since the beginning of the Company’s last completed fiscal year will exceed or may reasonably be expected to exceed $100,000.
The policy provides that related person transactions that may arise
during the year are subject to Audit Committee approval or ratification. In determining whether to approve or ratify a transaction,
the Audit Committee will consider, among other factors it deems appropriate, whether the transaction is on terms no less favorable
than terms generally available to an unaffiliated third-party, the extent of the related person’s interest in the transaction,
whether the transaction would impair independence and whether there is a business reason for UPS to enter into the
transaction. A copy of the policy is available under the heading “ESG
– Governance Documents” on our investor relations website at www.investors.ups.com. The Company did not engage in any
related person transactions since January 1, 2019 that required disclosure in this Proxy Statement or under the Company’s
policy.
At least annually, each director and executive officer completes a
detailed questionnaire regarding any business relationships that may give rise to a conflict of interest, including transactions
where UPS is involved and where an executive officer, a director or a related person has a direct or indirect material interest.
We also review the Company’s financial systems and related person transactions to identify potential conflicts of interest.
The Nominating and Corporate Governance Committee reviews the information from the questionnaires and our financial systems and
makes recommendations to the Board of Directors regarding the independence of each board member. We have immaterial normal course
of business transactions and relationships with companies with which our directors are associated. The Nominating and Corporate
Governance Committee reviewed the transactions and relationships that occurred since January 1, 2019 and believes they were entered
into on terms that are both reasonable and competitive and did not affect director independence. Additional transactions and relationships
of this nature may be expected to take place in the ordinary course of business in the future.
Transactions in Company Stock
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.
We also prohibit our executive officers and directors from entering into pledges of UPS stock.
Furthermore, our employees, officers, and directors are prohibited
from engaging in short sales of UPS stock.
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Shareowner Engagement
Responsiveness to Shareowners
Shareowner engagement is an essential aspect
of corporate governance. Our management team participates in numerous investor meetings throughout the year to discuss our business,
our strategy and our financial results. These meetings include in-person, telephone and webcast conferences, as well as key site
visits. Our Investor Relations team reports to the board periodically on these interactions as well as on investor sentiment.
During this proxy season, our management
team contacted holders of over 43% of our class B common stock to discuss ESG matters, including our corporate governance policies
and
practices, and our executive compensation
programs. We also proactively correspond with key investors throughout the year. We inform the board about our conversations with
key investors concerning ESG matters through the Compensation Committee and the Nominating and Corporate Governance Committee.
The Compensation Committee also annually engages an independent compensation consultant to review executive compensation trends
that may be important to our investors.
Communicating with our Board of Directors
Shareowners or other interested parties who wish to communicate
directly with our board, with our non-management directors as a group or with the lead independent 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.
After review by the Corporate Secretary,
appropriate communications will be promptly forwarded to the addressee.
Advertisements, solicitations for business, requests for employment, requests for contributions, matters that may be better addressed
by management or other inappropriate materials will not be forwarded.
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Political Contributions and Lobbying
Overview
Our responsible participation in the U.S.
political process is important to our success and the protection of shareowner value. We participate in this process in accordance
with good corporate governance practices. Our Political Contributions and Lobbying Policy (“policy”) is available at
www.investors.ups.com. The following discussion highlights our practices and procedures regarding political contributions and lobbying:
| • | Our policy is overseen by the Nominating and Corporate Governance Committee; |
| | |
| • | as a general matter, UPS does not make corporate political contributions; |
| • | any deviations from the prohibition against corporate political contributions must be approved
by the Nominating and Corporate Governance Committee and reported in UPS’s semi-annual political contribution report; and |
| | |
| • | UPS offers certain eligible employees the opportunity to make political contributions through a
Company-sponsored political action committee, called the UPS Political Action Committee, or UPSPAC. UPSPAC is organized and operated
on a strictly voluntary, nonpartisan basis and is registered with the Federal Election Commission. |
Oversight and Processes
Political contributions are made in a legal,
ethical and transparent manner that we believe best represents the interests of our shareowners. All political and lobbying activities
are conducted only with the prior approval of our Public Affairs department and in accordance with the terms of our policy. Senior
management works with Public Affairs to focus our involvement at all levels of
government on furthering our business objectives
and our goals of protecting and enhancing shareowner value. The president of our Public Affairs department reviews all political
and lobbying activities and regularly reports to the board and to the Nominating and Corporate Governance Committee.
Lobbying and Trade Associations
Our Public Affairs department is responsible
for coordinating our lobbying activities, including engagements with federal, state, and local governments. UPS is a member of
a variety of trade associations and other tax exempt organizations that engage in lobbying. The Company may participate in lobbying
activities when involvement is consistent with specific business objectives. These decisions are subject to board oversight and
are regularly reviewed by the Nominating and Corporate Governance Committee.
| • | Lobbying activities are conducted only with the prior approval of our Public Affairs department,
which works with senior management to focus on furthering our business objectives and our goal of protecting and enhancing shareowner
value. |
| • | The Nominating and Corporate Governance Committee regularly reviews UPS’s participation in
trade associations and other tax exempt organizations that engage in lobbying to determine if our involvement is consistent with
specific UPS business objectives. |
We have comprehensive policies, practices
and tracking mechanisms to support and govern our lobbying activities. These mechanisms cover compliance with laws and regulations
regarding the lobbying of government officials, the duty to track and report lobbying activities, and the obligation to treat lobbying
costs and expenses as nondeductible for tax purposes.
Transparency
We are committed to meaningful
transparency with respect to our political activities. We publish a semi-annual report disclosing the following information
under the heading “ESG – Political Contributions” on our investor relations website at www.
investors.ups.com, which is reviewed and approved by the Company’s Nominating and Corporate Governance Committee prior
to publication:
| • | Amounts and recipients of any federal and state political contributions made by us in the United
States (if any such expenditures are made); and |
| • | payments to trade associations that receive $50,000 or more from us and that use a portion of the
payment for political contributions, as reported by the trade association to us. |
We also file a publicly available federal
Lobbying Disclosure Act Report each quarter, providing 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. The report also
provides
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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.
UPS files similar periodic reports with state
agencies reflecting state lobbying activities which are also publicly available.
Sustainability
We are the world’s largest package
delivery company, a leader in the U.S. less-than-truckload industry and a premier provider of global supply chain management solutions.
We operate one of the largest airlines in the world, as well as the world’s largest private fleet of alternative-powered
vehicles. We are a global leader in logistics, with more than 495,000 employees, serving 10.6 million customers daily in more than
220 countries and territories. Our success depends on economic stability, global trade and a society that welcomes opportunity.
We understand the importance of acting responsibly as a business, an employer and a corporate citizen.
Consideration of economic, environmental
and social sustainability risks and opportunities are a part of our comprehensive enterprise risk management program. The board
regularly reviews the effectiveness of our risk management and due diligence processes related to material sustainability topics.
In addition, the board actively considers these factors in connection with the board’s involvement in UPS’s strategic
planning process. The board delegates authority for day-to-day management of sustainability topics to management. Our chief sustainability
officer periodically reports to the board regarding sustainability strategies, priorities, goals and performance. In addition,
the board is regularly briefed on issues of concern for customers, unions, employees, retirees and investors. Furthermore, the
board oversees efforts of management to develop our values, strategies and policies related to economic, environmental and social
impacts.
Each year we publish a corporate sustainability
report showcasing the aspirations, achievements and challenges of our commitment to balancing the social, economic and environmental
aspects of our business. The report is reviewed by the board prior to publication. Below is a list of key goals outlined in our
most recent report:
| • | reduce by 12% absolute greenhouse gas (“GHG”) emissions across our global ground operations
by 2025; |
| • | source 25% of total electricity
needs from renewable sources by 2025; |
| • | source 40% of ground fuel from low carbon or alternative fuels by 2025; |
| • | 25% of annual vehicle purchases by 2020 will be alternative fuel and advanced technology vehicles; |
| • | improve our lost time injury frequency 1 percent by 2020; |
| • | reduce the number of vehicle accidents 3 percent by 2020; |
| • | increase total annual charitable contributions to $117 million by 2020; |
| • | complete 20 million hours of global volunteerism and community service by the end of 2020; and |
| • | plant 15 million trees by 2020. |
Our Sustainability Report is available at
www.sustainability.ups.com.
Corporate Governance Guidelines and Committee
Charters
Our Corporate Governance Guidelines are available
under the heading “ESG – Governance Documents” on our investor relations website at www.investors.ups.com. The
charters for each of the Audit Committee, Compensation Committee, Nominating and Corporate Governance Committee and Risk Committee
also are available on the website. Each committee reviews its charter annually to determine if any changes are needed. In addition,
the
Nominating and Corporate Governance Committee
reviews our Corporate Governance Guidelines annually and recommends any changes to the board for approval. When considering changes
to our committee charters or Corporate Governance Guidelines, we take into account current governance trends and best practices,
advice from outside sources and input from our investors.
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Our Board of Directors
Proposal 1 — Director Elections
What am I voting on? Shareowners are being asked to elect
each of the 12 director nominees named in this Proxy Statement to hold office until the 2021 Annual Meeting and until their respective
successors are elected and qualified.
Voting Recommendation: Our Board of Directors recommends
that shareowners vote FOR the election of each nominee.
Vote Required: A director will be elected if the number
of votes cast for that director exceeds the number of votes against that director.
|
The board has nominated the 12 persons named
below for election as directors at the Annual Meeting. David Abney will be retiring from his role as Chief Executive Officer effective
June 1, 2020. At that time, Carol Tomé will assume the role of Chief Executive Officer, and David will become Executive
Chairman of the board, serving in such role until September 30, 2020. The board determined that it is appropriate that Carol continue
to serve as a member of the board in connection with this leadership transition. With the exception of David, all nominees will
serve until the next Annual Meeting and until their respective successors are elected and qualified. Each nominee was elected by
shareowners at our last Annual Meeting. If any nominee is unable to serve as a director, which we do not anticipate, the
board may reduce the number of directors
that serve on the board or choose a substitute nominee. Any nominee who is currently a director, and for whom more votes are cast
against than are cast for, must offer to resign from the board.
Biographical information about the nominees
for director appears below, including information about 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. For additional
information about how we identify and evaluate nominees for director, see “Corporate Governance — Selecting Director
Nominees” on page 10.
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|
David
P. Abney
UPS Chairman and Chief Executive Officer |
Age: 64
Director since 2014
Skills and Experience
- |
Leadership |
- |
Management of large, complex businesses |
- |
Logistics |
- |
International business |
- |
Executing strategic acquisitions |
Other Public Company Boards
Board Committee
Career
David became UPS’s Chief Executive Officer
in 2014, and assumed the role of Chairman of the Board of Directors in 2016. David previously served as chief operating officer
since 2007, overseeing logistics, sustainability, engineering and all facets of the UPS transportation network. Before serving
as COO, David was president of UPS International, leading the company’s strategic initiative to increase its global logistics
capabilities. During his career, he was also involved in a number of global acquisitions that included the Fritz Companies, Stolica,
Lynxs, and Sino-Trans in China. Earlier in his career, he served as president of SonicAir, a same-day delivery service that signaled
UPS’s move into the service parts logistics sector. David began his UPS career in 1974 in Greenwood, Mississippi.
David will retire as CEO effective June 1, 2020.
To assist with transition matters, David will remain on the board and will serve as Executive Chairman from June 1, 2020 until
September 30, 2020 and as special consultant to the Chief Executive Officer and the board from September 30, 2020 until December
31, 2020, at which time he will retire from UPS.
In addition to his corporate responsibilities,
David serves as a Trustee of The UPS Foundation and as a Trustee of the Annie E. Casey Foundation. He was the 2019 Chairman of
the Metro Atlanta Chamber of Commerce, is the former Chairman and current member of the World Affairs Council of Atlanta, and is
a member of the Business Roundtable. David serves on the Board of Directors of Macy’s Inc. and is a board member of the nonprofit
organization, Catalyst. He served on the Board of Directors of Johnson Controls International plc until 2018.
Reasons for election to the UPS Board
David has a thorough understanding of our strategies
and operations gained through his over 46 years of service to our Company, a complex, global business enterprise with a large,
labor-intensive workforce. He has significant experience in operations, having served as our Chief Operating Officer for more than
seven years, including in-depth knowledge of logistics. He also has significant international experience, having spent a number
of years overseeing our international group. In addition, David has experience serving as a director of other companies, including
Johnson Controls, a global diversified technology and industrial company serving customers in more than 150 countries, and Macy’s,
one of the nation’s premier retailers.
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|
Rodney
C. Adkins
Former Senior Vice President, International Business Machines |
Age: 61
Director since 2013
Skills and Experience
- |
Technology and technology strategy |
- |
Global business operations |
- |
Supply chain management |
Other Public Company Boards
- |
Avnet, Inc. |
- |
PayPal Holdings, Inc. |
- |
W.W. Grainger, Inc. |
Board Committees
- |
Risk (Chair) |
- |
Compensation |
Career
Rod is President of 3RAM Group LLC, a private
company specializing in capital investments, business consulting and property management services. Rod previously served as IBM’s
Senior Vice President of Corporate Strategy before retiring in 2014. 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, a multinational technology company, Rod held a number of other development and management
roles, including general management positions for the PC Company, UNIX Systems and Pervasive Computing.
Rod currently serves as non-executive Chairman
of Avnet, Inc., in addition to serving on the Boards of Directors of PayPal Holdings, Inc. and W.W. Grainger, Inc. He also served
on the Boards of Directors of Pitney Bowes, Inc. until 2013 and PPL Corporation until 2019.
Reasons for election to the UPS Board
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. In addition, Rod has experience serving
as a director of other publicly traded companies.
|
Michael J. Burns
Former Chairman, Chief Executive Officer and President,
Dana Corporation |
Age: 68
Director since 2005
Skills and Experience
- |
Leadership |
- |
Management of large, complex businesses |
- |
Design, engineering, manufacturing, sales and distribution |
- |
Technology |
Board Committee
Career
Mike was the Chairman, President and Chief Executive
Officer of Dana Corporation from 2004 until his retirement in 2008. He joined Dana Corporation in 2004 after 34 years with General
Motors Corporation. Mike had served as President of General Motors Europe since 1998.
Reasons for election to the UPS Board
Mike 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. Mike also brings deep knowledge
of technology and the supply of components and services to major vehicle manufacturers.
22 |
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Notice of Annual Meeting of Shareowners and 2020 Proxy Statement |
Table of Contents
|
William R. Johnson
UPS Lead Director
Former Chairman,
President and Chief Executive Officer, H.J. Heinz Company |
Age: 71
Director since 2009
- |
Lead Director since 2016 |
Skills and Experience
- |
Leadership |
- |
Management of large, complex businesses |
- |
Operations |
- |
Marketing and brand development |
- |
Logistics |
Other Public Company Boards
Board Committees
- |
Nominating and Corporate Governance (Chair) |
- |
Executive |
Career
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
PepsiCo, Inc. He served on the Boards of Directors of H.J. Heinz Company until 2013, Education Management Corporation until 2014,
and Emerson Electric Company until 2017.
Reasons for election to the UPS Board
Bill has significant senior management 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.
|
Ann M. Livermore
Former Executive Vice President, Hewlett Packard Company |
Age: 61
Director since 1997
Skills and Experience
- |
Management of large, complex businesses |
- |
Technology strategy |
- |
Sales and marketing |
Other Public Company Boards
- |
Hewlett Packard Enterprise Company |
- |
Qualcomm Incorporated |
Board Committees
- |
Compensation (Chair) |
- |
Risk |
- |
Executive |
Career
Ann was Executive Vice President of the HP Enterprise
Business at Hewlett Packard until her retirement in 2011. 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 serves on the Boards of Directors of Hewlett
Packard Enterprise Company, Qualcomm Incorporated, and D2iQ (formerly Mesosphere), a private software company. She served on the
Board of Directors of Hewlett Packard Company until 2015. Ann is also a lecturer at the Stanford Graduate School of Business.
Reasons for election to the UPS Board
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.
|
23 |
Table of Contents
|
Rudy H.P. Markham
Former Financial Director, Unilever |
Age: 74
Director since 2007
Skills and Experience
- |
Finance, technology and international operations |
- |
Management of large, complex businesses |
- |
Business operations in Asia |
Other Public Company Boards
Board Committee
Career
Rudy was the Financial Director of Unilever from 2000 through his
retirement in 2007. He joined Unilever in 1968. From 1989 through 1998 he 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 Directors
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 Directors of Unilever and as Chief Financial Officer.
Rudy also is Vice Chairman of the Supervisory Board of Corbion, N.V.,
formerly CSM, N.V. He served on the Boards of Directors of Standard Chartered Bank until 2014, Legal & General PLC until 2017,
and Astra Zeneca PLC until 2019. Rudy is a British citizen and he currently resides in the U.K.
Reasons for election to the UPS Board
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.
|
Franck J. Moison
Former Vice Chairman,
Colgate-Palmolive Company |
Age: 66
Director since 2017
Skills and Experience
- |
Executing strategic acquisitions |
- |
Emerging markets |
- |
International business |
Other Public Company Boards
Board Committees
- |
Nominating and Corporate Governance |
- |
Risk |
Career
Franck was Vice Chairman for the Colgate-Palmolive
Company, a global consumer products company, a position he held from 2016 until his retirement in 2018. He led Colgate-Palmolive’s
operations in Asia, South Pacific and Latin America, and he also led Global Business Development. Previously, he was Chief Operating
Officer of Emerging Markets from 2010 until 2016, and he was given additional responsibility for Business Development in 2013.
Beginning in 1978, Franck served in various management positions with the Colgate-Palmolive Company, including President, Global
Marketing, Global Supply Chain & R&D from 2007 to 2010, and President, Western Europe, Central Europe and South Pacific
from 2005 to 2007.
He serves on the Boards of Directors of Hanes
Brands, Inc., and Somalogic (a private biotech company), the advisory Board of Ses-Imagotag in France, is a director of the French
American Chamber of Commerce, is Chairman of the International Advisory Board of the EDHEC Business School (Paris, London, Singapore)
and is a member of the International Board of the McDonough School of Business at Georgetown University. He served on the Board
of Directors of H.J. Heinz Corporation until 2013.
Reasons for election to the UPS Board
Franck has extensive experience as a senior executive
at a large organization engaged in international business. He is a leader in consumer product innovation, strategic marketing,
acquisitions, and emerging market business development. He is a highly accomplished marketing and operating executive in the global
consumer products industry. In addition, Franck has experience serving as a director of other publicly traded companies.
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Notice of Annual Meeting of Shareowners and 2020 Proxy Statement |
Table of Contents
|
Clark “Sandy”
T. Randt, Jr.
Former U.S. Ambassador to the People’s Republic
of China |
Age: 74
Director since 2010
Skills and Experience
- |
Facilitating business throughout Asia |
- |
Diplomacy and international trade |
- |
Advisor on international matters |
Other Public Company Boards
- |
Qualcomm Incorporated |
- |
Valmont Industries, Inc. |
- |
Wynn Resorts, Ltd. |
Board Committees
- |
Compensation |
- |
Nominating and Corporate Governance |
Career
Sandy is President of Randt & Co. LLC, a
company that advises firms with interests in China. Sandy is a former U.S. ambassador to the People’s Republic of China,
where he served from 2001 until 2009. From 1994 through 2001, 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.
Sandy also serves on the Boards of Directors
of Qualcomm Incorporated, Valmont Industries, Inc. and Wynn Resorts, Ltd.
Reasons for election to the UPS Board
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 35 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, multinational corporations, and brings the experience of leading the China practice
of a major international law firm.
|
Christiana Smith Shi
Former President of Direct-to-Consumer, Nike, Inc. |
Age: 60
Director since 2018
Skills and Experience
- |
E-commerce |
- |
Global retail operations |
- |
Supply chain management |
Other Public Company Boards
- |
Mondelēz International, Inc. |
Board Committees
Career
Christiana is currently the founder and principal
at Lovejoy Advisors, LLC, an advisory services firm that assists clients with digitally transforming consumer and retail businesses.
She was the President, Direct-to-Consumer, for Nike, Inc., a global apparel company, from 2013 until 2016. From 2012 through 2013,
she was Nike’s Vice President and General Manager, Global Digital Commerce. She joined Nike in 2010 as Vice President and
Chief Operating Officer, Global Direct-to-Consumer. Prior to joining Nike, Christiana spent 24 years at global management consulting
firm McKinsey & Company, the last 10 as a senior partner. She began her career at Merrill Lynch & Company in 1981 and served
in various trading, institutional sales and investment banking roles.
Christiana also serves on the Board of Directors
of Mondelēz International, Inc. She served on the Boards of Directors of West Marine, Inc. until 2017 and Williams-Sonoma, Inc.
until 2019.
Reasons for election to the UPS Board
Christiana has substantial experience in digital
commerce, global retail operations and helping companies with transformative change. She also has strong supply chain and cost
management expertise in the global consumer industry. She gained experience advising senior executives at consumer companies across
North America, Europe, Latin America and Asia on leadership and strategy. Christiana also has extensive public company board experience.
|
25 |
Table of Contents
|
John T. Stankey
President and Chief Operating Officer, AT&T Inc. and
CEO, Warner Media LLC |
Age: 57
Director since 2014
Skills and Experience
- |
Technology and communications services |
- |
Global business operations |
- |
Large, multi-national unionized workforces |
|
|
Board Committee |
- |
Audit |
Career
John is responsible for three of AT&T’s
four business units — AT&T Communications, Warner Media and Xandr. John was appointed CEO of Warner Media in June 2018
and assumed his additional responsibilities in October 2019. John previously led the integration planning team in support of the
AT&T and Time Warner merger, and prior to that, he served as CEO, AT&T Entertainment Group. John was named to that position
after leading the company’s acquisition of DIRECTV in 2015, when he was AT&T’s Chief Strategy Officer, responsible
for the company’s corporate strategy, M&A, and business development initiatives.
In his three-decade career with AT&T, a multinational
communications company, John has held a variety of other senior leadership positions, including: President and CEO – AT&T
Business Solutions; President and CEO – AT&T Operations; Group President – Telecom Operations; Chief Technology
Officer; and Chief Information Officer.
Reasons for election to the UPS Board
During his more than 30 year career at AT&T,
John has gained significant experience in technology and communications services, strategic planning and execution, and global
business operations. As a senior leader at one of the world’s largest communications companies, John has extensive experience
managing a large, complex, multi-national business with a large, labor intensive workforce, much of which is unionized. He also
has experience working with a company that has both direct to consumer and business to business offerings.
|
Carol B. Tomé
Former Chief Financial Officer and Executive Vice President — Corporate Services, The Home Depot, Inc. |
Age: 63
Director since 2003
Skills and Experience
- |
Financial expertise |
- |
Strategic business development / e-commerce |
- |
Management of large, complex businesses |
Board Committees
Career
Carol was recently appointed UPS’s Chief Executive Officer,
effective June 1, 2020. She was Chief Financial Officer of The Home Depot, Inc., one of the world’s largest retailers, from
May 2001, and Executive Vice President – Corporate Services from January 2007, until her retirement in August 2019. She provided
leadership in the areas of real estate, financial services and strategic business development. Her corporate finance duties included
financial reporting and operations, financial planning and analysis, internal audit, investor relations, treasury and tax. She
previously served as Senior Vice President — Finance and Accounting / Treasurer from 2000 until 2001, and from 1995 until
2000, she served as Vice President and Treasurer.
Carol served on the Boards of Directors of Cisco Systems, Inc. and
Verizon Communications, Inc. until March 2020. She also previously served as a Trustee of certain Fidelity funds in 2017.
Reasons for election to the UPS Board
Carol has extensive experience in corporate finance gained throughout
her career at The Home Depot. She brings the experience of having served as Chief Financial Officer of a complex, multi-national
business with a large, labor intensive workforce. Carol also has experience with strategic business development, including e-commerce
strategy. Carol’s past role as Chair of the Board of the Federal Reserve Bank of Atlanta also brings valuable financial experience.
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Table of Contents
|
Kevin Warsh
Former Member of the Board of Governors of the Federal Reserve System, Distinguished Visiting
Fellow, Hoover Institution, Stanford University |
Age: 49
Director since 2012
Skills and Experience
- |
Economic and business environment, domestically and internationally |
- |
Private sector |
Board Committees
- |
Compensation |
- |
Nominating and Corporate Governance |
Career
Kevin was a member of the Board of Governors
of the Federal Reserve from 2006 until 2011. He currently serves as the Shepard Family Distinguished Visiting Fellow in Economics
at Stanford University’s Hoover Institution, a public policy think tank, and is a lecturer at its Graduate School of Business.
In addition, Kevin provides strategic 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 that company’s Mergers and Acquisitions department.
Reasons for election to the UPS Board
Kevin has extensive experience in understanding
and analyzing the economic environment, the financial marketplace and monetary policy. He has a deep understanding of the global
economic and business environment. Kevin also brings the experience of working in the private sector for a leading investment bank
gained during his tenure at Morgan Stanley & Co.
|
27 |
Table of Contents
Committees of the Board of Directors
The board has four committees composed entirely of directors meeting
the NYSE’s and our director independence requirements: the Audit Committee, the Compensation Committee, the Nominating and
Corporate Governance Committee, and the Risk Committee. Information about each of these committees is provided below. The board
also has an Executive Committee that 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. David Abney is currently the Chair
of the Executive Committee. In connection with the previously described leadership transitions, Carol Tomé will join the
Executive Committee when she becomes Chief Executive Officer on June 1, 2020 and will become Chair of the Executive Committee when
David ceases to serve as Executive Chairman on September 30, 2020. Independent directors Ann Livermore and Bill Johnson also serve
on the Executive Committee. The Executive Committee did not hold any meetings during 2019.
Audit Committee(1) |
|
Compensation Committee(2) |
|
Nominating and Corporate Governance Committee(2) |
|
Risk Committee |
Rudy Markham, Chair
Michael Burns
John Stankey |
|
Ann Livermore, Chair
Rodney Adkins
Clark Randt, Jr.
Christiana Smith Shi
Kevin Warsh |
|
William Johnson, Chair
Franck Moison
Clark Randt, Jr.
Kevin Warsh |
|
Rodney Adkins, Chair
Ann Livermore
Franck Moison
Christiana Smith Shi |
|
|
|
|
|
|
|
Meetings
in 2019: 10 |
|
Meetings
in 2019: 5 |
|
Meetings
in 2019: 4 |
|
Meetings
in 2019: 4 |
Primary
Responsibilities |
|
Primary
Responsibilities |
|
Primary
Responsibilities |
|
Primary
Responsibilities |
• Assisting
the board in discharging its responsibilities relating to our accounting, reporting and
financial practices
• Overseeing our accounting
and financial reporting processes
• Overseeing the integrity
of our financial statements, our systems of disclosure controls and internal controls and our compliance with legal and
regulatory requirements
• Overseeing the performance
of our internal audit function
• Overseeing the engagement
and performance of our independent accountants
• Discussing with management
policies with respect to financial risk assessment |
|
• Assisting the board in
discharging its responsibilities with respect to compensation of our executive officers
• Reviewing and approving
corporate goals and objectives relevant to the compensation of our Chief Executive Officer
• Evaluating the Chief Executive
Officer’s performance and establishing compensation based on this evaluation
• Reviewing and approving
the compensation of other executive officers
• Overseeing the evaluation
of risk associated with the Company’s total compensation strategy and compensation programs
• Overseeing any outside
consultants retained to advise the Committee
• Recommending to the board
the compensation to be paid to non-management directors |
|
• Considering recommendations
from the Chief Executive Officer and others regarding succession planning
• Assisting the board in
identifying and screening qualified director candidates, including shareowner submitted candidates
• Recommending candidates
for election or reelection to the board or to fill vacancies on the board
• Aiding in attracting qualified
candidates to serve on the board
• Recommending corporate
governance principles, including the structure, composition and functioning of the board and all board committees, the
delegation of authority to subcommittees, board oversight of management actions and reporting duties of management |
|
• Overseeing management’s
identification and evaluation of enterprise risks
• Overseeing and reviewing
with management our risk governance framework
• Overseeing risk identification,
risk tolerance, risk assessment and management practices for strategic enterprise risks
• Reviewing approaches to
risk assessment and mitigation strategies in coordination with the board and other board committees
• Communicating with the
Audit Committee as necessary and appropriate to enable the Audit Committee to perform its statutory, regulatory, and other
responsibilities with respect to oversight of risk assessment and risk management |
(1) |
Carol Tomé served as Chair of the Audit Committee until March 11, 2020. All members of the Audit
Committee have been designated by the Board of Directors as audit committee financial experts. Each member of our Audit Committee
meets the independence requirements of the NYSE and Securities and Exchange Commission (“SEC”) rules and regulations
applicable to audit committee members, and each is financially literate. |
|
|
(2) |
Rudy Markham served as a member of the Compensation Committee and the Nominating and Corporate Governance Committee until
March 11, 2020. Each member of our Compensation Committee meets the NYSE’s independence requirements applicable to compensation
committee members. In addition, each member is a non-employee director as required by Rule 16b-3 under the Securities Exchange
Act of 1934. None of the members of the Compensation Committee is or was during 2019 an employee or former employee of UPS,
and none had any direct or indirect material interest in or relationship with UPS outside of his or her position as a non-employee
director. Compensation Committee Interlocks and Insider Participation: None of our executive officers serves
or served during 2019 as a member of a board of directors or compensation committee of any entity that has one or more executive
officers who serve on our Board of Directors or Compensation Committee. |
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Table of Contents
Director Compensation
We compensate our non-employee directors with a mix of cash and equity.
Equity compensation links director pay to the value of Company stock and aligns the interests of directors more closely with those
of long-term shareowners. Our CEO does not receive any compensation for service as a director. Directors are also reimbursed for
their expenses related to board membership.
The Compensation Committee of the Board of Directors conducts a review
of director compensation generally every other year to ensure the program structure is consistent with best practices and current
trends. The Compensation Committee’s independent compensation consultant, Frederic W. Cook & Co., Inc. (“FW Cook”),
provides advice on the competitiveness of the Company’s non-employee director compensation program and recommends changes
to ensure compensation remains market competitive. During the Compensation Committee’s most recent review of director compensation,
it was determined that total board compensation was below our peer group median.
In May 2019, upon recommendation of the Compensation Committee, our
board increased the annual cash retainer paid to non-employee directors from $105,000 to $110,000, and increased the value of the
annual non-employee director restricted stock unit (“RSU”) awards from $170,000 to $175,000. The Board of Directors
also increased the annual retainer paid to the independent lead director from $25,000 to $35,000. These were the first increases
to non-employee director compensation in the last three years. The chairs of the Compensation,
Nominating and Corporate Governance and Risk Committees receive an
additional annual cash retainer of $20,000, and the Chair of the Audit Committee receives an additional annual cash retainer of
$25,000.
Cash retainers are paid on a quarterly basis. Non-employee directors
may defer retainer fees by participating in the UPS Deferred Compensation Plan, but we do not make any contributions to this plan.
There are no preferential or above-market earnings in the UPS Deferred Compensation Plan. RSUs are fully vested on the date of
grant and are required to be held by the director until he or she separates from the board, at which time the RSUs are paid out
in shares of class A common stock. Dividends earned on shares subject to director RSUs are deemed reinvested in additional units
at each dividend payable date and are subject to the same payment schedule as the original award. This holding period increases
the strength of the alignment of directors’ interests with those of our long-term shareowners.
In connection with the CEO transition, the board designated Bill Johnson
to assume the role of independent Chairman, effective September 30, 2020. Based on the recommendation of FW Cook taking into account,
among other things, benchmarking data and expected commitment, the Compensation Committee recommended and our board approved an
additional annual cash retainer of $160,000 and an additional annual RSU award with a value of $70,000 for the independent Chairman.
|
29 |
Table of Contents
Director Compensation
The following tables set forth the cash compensation paid to our non-employee
directors in 2019 and the aggregate value of stock awards granted to our non-employee directors in 2019, as well as outstanding
equity awards held by current directors as of December 31, 2019.
2019 Director Compensation |
|
Name |
|
Fees
Earned or
Paid in
Cash($) |
|
Stock
Awards($)(1) |
|
Total($) |
Rodney C. Adkins(2) |
|
127,500 |
|
174,902 |
|
302,402 |
Michael J. Burns |
|
107,500 |
|
174,902 |
|
282,402 |
William R. Johnson(2) |
|
157,500 |
|
174,902 |
|
332,402 |
Candace Kendle(3) |
|
52,500 |
|
— |
|
52,500 |
Ann M. Livermore(2) |
|
127,500 |
|
174,902 |
|
302,402 |
Rudy H.P. Markham |
|
107,500 |
|
174,902 |
|
282,402 |
Franck J. Moison |
|
107,500 |
|
174,902 |
|
282,402 |
Clark T. Randt, Jr. |
|
107,500 |
|
174,902 |
|
282,402 |
Christiana Smith Shi |
|
107,500 |
|
174,902 |
|
282,402 |
John T. Stankey |
|
107,500 |
|
174,902 |
|
282,402 |
Carol B. Tomé(2) |
|
132,500 |
|
174,902 |
|
307,402 |
Kevin Warsh |
|
107,500 |
|
174,902 |
|
282,402 |
Outstanding
Director Stock Awards |
(as of December 31, 2019) |
|
|
Stock Awards |
|
|
|
Name |
|
Restricted
Stock
Units (#) |
|
Phantom
Stock
Units (#) |
Rodney C. Adkins |
|
12,999 |
|
— |
Michael J. Burns |
|
23,905 |
|
— |
William R. Johnson |
|
24,963 |
|
— |
Ann M. Livermore |
|
23,905 |
|
2,596 |
Rudy H.P. Markham |
|
23,905 |
|
— |
Franck J. Moison |
|
5,539 |
|
— |
Clark T. Randt, Jr. |
|
20,020 |
|
— |
Christiana Smith Shi |
|
3,777 |
|
— |
John T. Stankey |
|
10,322 |
|
— |
Carol B. Tomé |
|
23,905 |
|
1,227 |
Kevin Warsh |
|
14,925 |
|
— |
(1) |
The values of stock awards in this column represent the grant date fair value of RSUs granted in 2019,
computed in accordance with FASB ASC Topic 718. Information about the assumptions used to value these awards can be found
in Note 12 “Stock-Based Compensation” in our 2019 Annual Report on Form 10-K. RSUs are fully vested on the date
of grant, and will be paid in shares of class A common stock following the director’s separation from service from UPS. |
|
|
(2) |
Includes compensation for committee chair service and/or lead director service. |
|
|
(3) |
Retired from the Board of Directors in May 2019. |
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Table of Contents
Executive Compensation
Compensation Committee Report
The Compensation Committee (as used in this
Executive Compensation section, the “Committee”) is responsible for reviewing and approving compensation for the executive
officers, establishing the performance goals on which the compensation plans and programs are based and setting the overall compensation
principles that guide the Committee’s decision-making. The Committee’s over-arching objective is to maintain an executive
compensation program that supports the long-term interests of our shareowners, including our many employee shareowners. We seek
to align the interests of our executives with those of our shareowners through a program in which a significant portion of compensation
is performance-based and is meaningfully linked to shareowner returns. We seek to attract, retain and motivate executives who make
substantial contributions to the Company’s success and allow them to share in the success of the Company.
The Committee has reviewed the Compensation
Discussion and Analysis and discussed it with management. Based on the review and discussions, the Compensation Committee recommended
to the Board of Directors that the Compensation
Discussion and Analysis be included in the 2020 Proxy Statement and incorporated by reference in the Annual Report on Form 10-K
for the year ended December 31, 2019 filed with the Securities and Exchange Commission.
The following Compensation Discussion and
Analysis describes the Compensation Committee’s decisions regarding our executives’ compensation for 2019.
The Compensation Committee
Ann M. Livermore, Chair
Rodney C. Adkins
Rudy H.P. Markham*
Clark T. Randt, Jr.
Christiana Smith Shi
Kevin Warsh
* |
Effective March 11,
2020, Rudy Markham no longer serves on the Compensation Committee. |
Compensation Discussion and Analysis
UPS’s executive compensation programs
for 2019, and certain aspects of the 2020 programs, are described below. This section explains how and why the Committee made its
2019 compensation decisions for our executive officers, including additional detail with respect to the following Named Executive
Officers (“NEOs”):
Named Executive Officer |
Title |
David P. Abney |
Chief Executive Officer |
Brian O. Newman |
Chief Financial Officer |
Richard N. Peretz |
Retired Chief Financial Officer |
James J. Barber, Jr. |
Retired Chief Operating Officer |
Scott A. Price |
Chief Strategy and Transformation Officer |
Kevin M. Warren |
Chief Marketing Officer |
Executive Compensation Strategy
UPS’s executive compensation programs are designed to:
|
• |
drive organizational performance by tying a significant portion of pay to Company performance; |
|
• |
attract, retain and motivate talent by fairly compensating executive officers; |
|
• |
encourage long-term stock ownership and careers with UPS; and |
|
• |
align the interests of our executives to long-term value creation. |
|
31 |
Table of Contents
As shown below, a substantial majority of
total target direct compensation (base salary, annual incentives, annual ownership incentives and long-term incentives) that can
be earned by the NEOs is “at risk” and only earned by meeting annual or long-term performance goals. The charts below
provide detail on the elements of CEO and other NEO target compensation for 2019:
Roles and Responsibilities
The Committee administers UPS’s executive
compensation program. In carrying out its responsibilities, the Committee is empowered to engage and terminate the services of
outside advisors and other consultants. In 2019, the Committee retained FW Cook to act as the Committee’s independent compensation
advisor. FW Cook reports directly to the
Chair of the Committee and provides no additional services to UPS. The following table summarizes the roles of the key participants
in the executive compensation decision-making process.
Participant and Roles |
Compensation Committee |
|
• |
reviews and approves corporate goals and objectives relevant to the CEO’s
compensation |
|
• |
evaluates the CEO’s performance in light of the goals and objectives |
|
• |
reviews the CEO’s performance assessment of other executive officers |
|
• |
reviews and approves compensation for the executive officers |
|
• |
reviews and approves awards to the executive officers under certain incentive compensation
plans |
|
• |
reviews and approves the design of other benefit plans for executive officers |
|
• |
oversees the risk evaluation associated with the Company’s compensation strategy and
compensation programs |
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considers whether to engage any compensation consultant, and determines their independence
and whether their work raises any conflict of interest |
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reviews and discusses with management the Compensation Discussion and Analysis |
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recommends to the board whether the Compensation Discussion and Analysis should be included
in the Proxy Statement |
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approves the Committee’s report on executive compensation included in the Proxy Statement |
Independent Members of the Board of Directors |
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review the Committee’s assessment of the CEO’s performance |
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complete a separate evaluation of the CEO’s performance |
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determine whether the Compensation Discussion and Analysis should be included in the Proxy
Statement |
Independent Compensation Consultant |
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serves as a resource for market data on pay practices and trends |
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provides independent advice to the Committee |
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provides competitive analysis and advice related to outside director compensation |
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reviews the Compensation Discussion and Analysis |
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conducts an annual risk assessment of the Company’s compensation programs |
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Participant
and Roles |
Executive Officers |
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the CEO makes compensation recommendations to the Committee for the other executive officers with respect
to base salary and individual performance adjustments to annual incentive plan payouts |
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the CEO and CFO make recommendations on performance goals under incentive compensation plans and provide an assessment
as to whether performance goals were achieved |
Compensation Consultant Independence
In November 2019, the Committee requested
and received information regarding FW Cook’s independence and the existence of any potential conflicts of interest. The Committee
evaluated the following factors: (1) other services provided to UPS by the consultant (if any); (2) fees paid by UPS 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 Committee; (5) any Company
stock owned by the individual consultants involved in the engagement; and (6) any business or personal relationships between UPS
executive officers and the consulting firm or the individual consultants involved in the engagement.
After evaluating these factors, the Committee
concluded that FW Cook is independent and that the engagement of FW Cook did not raise any conflict of interest.
Peer Group and Market Data Utilization
In determining and setting compensation targets
and payouts, the Committee evaluates, among other things, pay practices and compensation levels at a peer group of companies. The
Committee considers advice from its independent compensation consultant in determining the peer group. Because of the limited number
of directly comparable companies to UPS – global logistics providers with significant market capitalizations - the companies
included in the peer group typically have global operations, diversified businesses, and annual sales and market
capitalizations comparable to UPS. Other
considerations include percentage of foreign sales, capital intensity, operating margins, size of employee population and whether
the company also includes UPS in their peer group. The Compensation Committee evaluates the peer group annually to determine if
the companies included in the group are the most appropriate comparators for measuring the success of our executives in delivering
shareowner value. The peer group for 2019 compensation purposes (the “2019 Peer Group”) consisted of the following:
The Boeing Company |
The Home Depot, Inc. |
The Procter & Gamble Company |
Caterpillar Inc. |
Johnson & Johnson |
Sysco Corporation |
The Coca-Cola Company |
Lockheed Martin Corporation |
Target Corp. |
Costco Wholesale Corporation |
Lowe’s Companies, Inc. |
United Technologies Corporation |
Delta Airlines, Inc. |
McDonald’s Corp. |
Walgreen Boots Alliance, Inc. |
FedEx Corporation |
PepsiCo, Inc. |
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In addition, the Committee considers other
market data, including general compensation survey data from comparably sized companies. Although the Committee considers this
data in
executing its responsibilities within the
construct of our executive compensation programs, compensation was not targeted to a particular percentile within the 2019 Peer
Group or otherwise.
Internal Compensation Comparisons
The Committee also considers the differentials
between executive officer compensation and the compensation paid for other UPS positions, and considers the additional responsibilities
of the CEO
compared to other executive officers. Internal
comparisons are made to ensure that compensation paid to executive officers is reasonable compared to their direct reports.
Annual Performance Reviews
Each year, the CEO assesses the performance
of all executive officers (other than the CEO) and provides feedback to the Committee. In addition, the Committee evaluates the
CEO’s performance on an annual basis. The Compensation Committee Chair discusses the results of the evaluation with the full
board (other than the CEO) in executive session. During the evaluation,
the board considers the CEO’s strategic
vision and leadership, execution of UPS’s business strategy and achievement of business goals. Other factors include the
CEO’s ability to make long-term decisions that create competitive advantage, and overall effectiveness as a leader.
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Central
Elements of UPS Executive Compensation |
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Other Elements of Compensation
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Benefits |
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Perquisites |
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Retirement Programs |
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NEOs
generally participate in the same plans as other employees.
Includes
medical, dental, and disability plans that mitigate the financial impact of illness, disability or death.
See
further details on page 40.
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Limited
in nature and the benefits from providing perquisites outweigh costs.
Includes
financial planning and executive health services that facilitate the NEOs’ ability to carry out responsibilities, maximize
working time and minimize distractions.
Considered
necessary or appropriate to attract and retain executive talent.
See
further details on page 40.
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NEOs
and most non-union U.S. employees participate in the same plans with the same formulas.
Includes
pension, retirement savings and deferred compensation plans.
See
further details on page 49.
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Base Salary
Base salaries provide our NEOs with a fixed
level of cash compensation, and are designed to provide an appropriate level of financial certainty. The Committee considers a
number of factors in determining the annual base salaries of the NEOs. Base salaries are typically set in March and become effective
in April. While Company performance is the most important factor, scope of responsibility, leadership, market data and internal
compensation comparisons are all considered. No single factor is weighted more heavily than another.
In March 2019, the Committee approved a 3.0%
base salary increase for our CEO. The 2019 base salary increases for the other NEOs were generally aligned with the salary increase
budget for other salaried employees.
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Annual Incentive Awards
Management Incentive Program Performance Incentive Award —
Overview
Management Incentive Program (“MIP”)
performance incentive awards are designed to incent towards and align pay with annual Company performance by linking payouts to
the achievement of pre-established financial and non-financial metrics, with adjustments for individual performance. Target MIP
performance incentive awards are determined as a percentage of base salary, subject to a $5 million maximum. Awards are determined
by the Committee, taking into consideration the following:
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actual performance compared to MIP performance metric targets (described below); |
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the MIP factor (payout as a percent of target) applied to payments to non-executive officer MIP participants; |
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individual performance; |
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overall Company performance; and |
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business environment and economic trends. |
A specific weight is not assigned to any
of the factors considered by the Committee when determining award payouts. MIP performance incentive awards for executive officers
are considered performance-based compensation fully at risk based on Company performance.
The earned award, if any, is paid two-thirds
in the form of restricted performance units (“RPUs”) and one-third in cash. The number of RPUs granted is determined
by dividing the dollar value of the portion of the MIP award paid in RPUs by the closing price of our class B common stock on the
NYSE on the date of the award. Generally, RPUs paid as MIP performance incentive awards vest on the first anniversary of the grant
date, furthering the retention component of the award. To further our stock ownership mindset, MIP incentive awards paid to newly
hired employees are paid entirely in the form of class A shares, with no cash component. These shares are vested upon grant.
When dividends are paid on UPS common stock,
an equivalent value is credited to the participant’s bookkeeping account in additional RPUs. The additional RPUs are subject
to the same vesting schedule as the original MIP RPUs.
2019 MIP Performance Incentive Awards
The financial performance metrics considered
by the Committee for the NEOs’ MIP performance incentive awards in 2019 were:
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Adjusted Consolidated Revenue Growth, which is measured as year-over-year growth in revenue from all products and services worldwide. Revenue growth is calculated on a currency constant basis. Revenue growth is important to generating current profits and maintaining our long-term competitive positioning and viability. |
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Adjusted Consolidated Earnings Per Share Growth, which is measured as year-over-year growth in total profits on an after tax, per share basis. For purposes of measuring this |
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growth, EPS was determined by reference to our publicly reported adjusted earnings per share for each of 2018 and 2019. Growth in adjusted EPS is directly impacted by our effectiveness in achieving our targets in other key performance elements, including volume and revenue growth and operating leverage. |
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Consolidated Average Daily Package Volume Growth, which is measured as year-over-year growth in consolidated package volume divided by the number of operating weekdays during the year. |
The 2019 MIP financial performance metrics
targets and results were as follows:
2019 MIP Financial Performance Metric |
Target |
Actual |
Adjusted Consolidated Revenue Growth(1) |
5.4% |
3.3% |
Adjusted Consolidated Earnings Per Share Growth(1) |
5.0% |
4.0% |
Consolidated Average Daily Package Volume Growth |
2.2% |
5.8% |
(1) |
Non-GAAP financial measures as described above. See footnote on page 38. |
The Committee maintains discretion to adjust
awards earned under the MIP up (but not above the maximum amount for each NEO) or down based on its assessment of each NEO’s
individual performance. For evaluation of the CEO’s performance, the Committee considers the results of the board’s
annual evaluation of the CEO, which includes ratings on:
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leadership qualities; |
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strategic planning and execution; |
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managing for financial results; |
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retaining and developing a diverse top management group; |
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providing equal opportunity employment, and understanding and addressing issues facing employees; |
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ensuring the Company contributes to the well-being of the communities in which it operates; |
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promoting compliance and ethical behavior; and |
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board relations. |
For NEOs other than the CEO, the Committee
takes into consideration the recommendations of the CEO. Individual accomplishments during 2019 that were considered by the Committee
when determining final awards are described below.
David Abney, Chief Executive Officer
David and the leadership team continued their
focus on enterprise-wide transformation resulting in increased productivity and positive operating leverage through strategic capital
investments and network improvements. Overcoming declines in industrial production in 2019, UPS launched more new services and
operational innovations than in any year in the Company’s recent
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history. The multi-year investment strategy championed by David
has positioned UPS well to support the needs of customers, generate profitable revenue growth, reward our shareowners and create
opportunities for our employees.
Brian Newman, Chief Financial Officer
Brian joined the UPS Management Committee in September 2019 as
Chief Financial Officer. Brian is focused on driving finance and accounting group organizational alignment, leveraging capital
investments to maximize profit growth and margin expansion.
Richard Peretz, Retired Chief Financial Officer
Richard was instrumental in assisting the organization to successfully
leverage capital investments to grow profits and expand margins. His guidance helped UPS’s transformation investments generate
higher total revenue, operating profit growth and margin expansion in all segments. Richard also provided oversight for a smooth
Chief Financial Officer transition to Brian Newman.
James Barber, Retired Chief Operating Officer
Jim made significant contributions, along with the segment presidents,
to successfully execute UPS’s 2019 strategies. The U.S. Domestic segment experienced strong volume and operating profit growth
as well as margin expansion, driven in part by the structural shift to faster delivery in retail and e-commerce. Additionally,
UPS successfully grew operating profit and expanded margins in the International and Supply Chain and Freight segments despite
a challenging macro environment. Jim also played a role in the execution of another successful peak holiday season during which
UPS provided industry leading service to our customers.
Scott Price, Chief Strategy and Transformation Officer
Scott led the development of new and innovative growth strategies
for the business. In addition, he was instrumental in implementing our network improvements driven by transformation that enabled
UPS to increase productivity and generate positive operating leverage.
Kevin Warren, Chief Marketing Officer
Kevin provided key leadership in the organization embracing the
e-commerce structural shift which drove the surge in Next Day Air volume in 2019. The Marketing team continued to introduce new
SMB-centric solutions to enhance services and solutions utilizing digital technology, global product innovation and continuing
to adapt to the changing environment.
2019 MIP Performance Incentive Awards
After assessing the above-described considerations, the Compensation
Committee approved the following 2019 MIP performance incentive awards for each NEO.
Name | |
Target (% of
Base Salary) | |
Target($) | |
Actual($) |
David P. Abney | |
165% | |
2,114,264 | |
845,706 |
Brian O. Newman(1) | |
130% | |
942,505 | |
125,667 |
Richard N. Peretz | |
130% | |
744,541 | |
297,816 |
James J. Barber, Jr. | |
130% | |
968,760 | |
387,504 |
Scott A. Price | |
130% | |
827,502 | |
331,001 |
Kevin M. Warren | |
130% | |
803,400 | |
321,360 |
(1) |
Award was prorated based on his 2019 hire date. As described above, award was
paid entirely in vested class A shares. |
MIP Ownership Incentive Award
We encourage employees to maintain substantial ownership of UPS
stock through our MIP ownership incentive award. All MIP participants are eligible for an additional incentive award up to the
equivalent of one month’s salary by maintaining significant ownership of UPS equity securities. The amount of the award is
equal to the value of the participant’s equity ownership as of December 31 of each year, multiplied by an ownership incentive
award percentage. The ownership incentive award percentage is 1.25% for the CEO and 1.50% for the other NEOs, up to a maximum award
of one month’s salary. The MIP ownership incentive award, to the extent earned, is paid in the same proportion of cash and
equity as the MIP performance incentive award.
Ownership levels are determined by totaling the number of UPS
shares in the participant’s family group accounts and the participant’s eligible unvested restricted units and deferred
compensation shares. The number of UPS shares determined for purposes of an NEO’s ownership level is multiplied by the closing
price of a class B share on the NYSE on December 31, 2019.
Name | |
Award
Percentage | |
Maximum
Ownership
Incentive($) | |
2019
MIP Ownership
Incentive Award($) |
David P. Abney | |
1.25% | |
106,781 | |
106,781 |
Brian O. Newman | |
1.50% | |
60,417 | |
60,417 |
Richard N. Peretz | |
1.50% | |
47,727 | |
47,727 |
James J. Barber, Jr. | |
1.50% | |
62,100 | |
62,100 |
Scott A. Price | |
1.50% | |
53,045 | |
53,045 |
Kevin M. Warren | |
1.50% | |
51,500 | |
47,361 |
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Long-Term Incentive Awards
Our two long-term incentive programs, the Long-Term Incentive
Performance (“LTIP”) award program and the Stock Option program, provide participants with grants of equity-based incentives
that are intended to reward performance over a multi-year period and serve as a retention mechanism. The
overlapping performance
cycles under the LTIP program incentivize sustained financial performance, while the Stock Option program rewards stock price appreciation
which has a direct link to shareowner returns.
Program | |
Payment
Form and Program Type | |
Performance
Measures and/or Value Proposition | |
Program
Objectives |
LTIP | |
If earned, Restricted Performance Units (“RPUs”) are settled in stock If
earned, award vests at the end of the three year performance period | |
Growth in Adjusted Consolidated Revenue Adjusted Operating Return on Invested Capital
Relative Total Shareowner Return Value increases or decreases with stock price | |
Supports long-term operating plan and business strategy Provides significant link to
shareowner interests |
Stock Option | |
Stock options vest 20% per year over five years and have a ten-year term | |
Value recognized only if stock price appreciates | |
Provides a significant link to shareowner interests Enhances stock ownership and shareowner
alignment |
Total Long-Term Equity Incentive Award Target Values
LTIP target values are determined based on internal pay comparison
considerations and market data regarding total compensation for comparable positions at similarly situated companies. Differences
in the target award values are based on increasing levels of responsibility among the executive officers. The total long-term incentive
opportunity granted to eligible NEOs in 2019, based upon a percentage of annualized base salary, is shown below. Brian Newman,
our CFO who joined UPS in September 2019, was not eligible for a 2019 long-term incentive opportunity under these plans because
he was not employed by UPS on the grant dates.
Name | |
LTIP RPUs
(% Base Salary) | |
Options
(% Base Salary) | |
Total
(% Base Salary) |
David P. Abney | |
750 | |
90 | |
840 |
Richard N. Peretz | |
450 | |
50 | |
500 |
James J. Barber, Jr. | |
575 | |
50 | |
625 |
Scott A. Price | |
450 | |
50 | |
500 |
Kevin M. Warren | |
350 | |
30 | |
380 |
LTIP Program
The LTIP program is designed to strengthen the performance-based
component of our executive compensation package, enhance retention of key talent, and align the interests of shareowners with the
incentive compensation opportunity for executives. Approximately 500 members of our senior management team, including the NEOs,
participate in this program. The program improves shareowner alignment and further enhances the long-term focus of the award by
establishing three-year performance goals.
A target award of RPUs is granted to participants at the beginning
of the three-year performance period. The threshold, target and maximum number of RPUs that can be earned by the NEOs under the
2019 LTIP award is shown in the Grants of Plan-Based Awards table. The actual number of RPUs that NEOs will receive will be determined
following the completion of the performance period ending December 31, 2021, based on achievement of the performance measures described
below. The maximum LTIP award that can be earned is 200% of target.
Dividends payable on the number of shares underlying participants’
RPUs are allocated in the form of dividend equivalent units (“DEUs”). DEUs are subject to the same vesting conditions
as the underlying Award. Awards that vest are distributed in shares of class A common stock. Special vesting rules apply to terminations
by reason of death, disability or retirement during the performance period, as discussed in greater detail under “Potential
Payments Upon Termination or Change in Control.”
The performance measures selected by the Committee for the 2019
LTIP awards were growth in adjusted consolidated revenue, adjusted operating return on invested capital (“ROIC”), and
relative total shareowner return (“TSR”). Each goal is measured independently and applied equally in determining final
payouts. This design combined internal and external relative business performance measures. This combination balanced efforts to
motivate and reward the management team for operational and financial success, while also having rewards aligned with shareowner
interests and returns. A description of each performance measure follows:
Growth in Adjusted Consolidated Revenue1
Growth in adjusted consolidated revenue measures the Company’s
long-term success in growing our business as compared with targets adopted at the beginning of the performance period. In
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2019, the Committee approved an average adjusted consolidated
revenue growth target for the three-year performance period equal to the average annual adjusted consolidated revenue growth target
for each year in the three-year performance period. For purposes of calculating adjusted consolidated revenue, U.S. Generally Accepted
Accounting Principles (“GAAP”) total revenue is subject to adjustment to exclude the effect of unusual or infrequently
occurring items, charges for restructurings, extraordinary items and the cumulative effect of changes in accounting treatment.
Consolidated revenue is calculated on a constant currency basis. Following the performance period, the Committee will confirm any
adjustments and certify the actual adjusted consolidated revenue growth and the performance result compared to the target (each
year’s growth percentage will be compared to the target and assigned a payout percentage; the average of the three payout
percentages will be the final performance result).
Adjusted Operating Return on Invested Capital1
Adjusted operating return on invested capital measures the Company’s
ability to generate long-term returns on its capital allocation decisions. In 2019, the Committee approved a three-year performance
period ROIC target equal to the average of each of the three years’ projected operating ROIC (operating income for each of
the three years during the performance period, divided by the sum of average invested capital for each of the three-years during
the performance period). For purposes of determining the performance results, GAAP operating income is subject to adjustment to
exclude the effect of unusual or infrequently
occurring items, charges for restructurings (employee severance liabilities, asset
impairment costs and exit costs), discontinued operations, extraordinary items and the cumulative effect of changes in accounting
treatment; and GAAP invested capital is adjusted to exclude the impacts of certain items that were not anticipated in establishing
the ROIC target, such as incremental invested capital from business acquisitions, the effect of unusual or infrequently occurring
items, restructuring reserves, or other extraordinary items. Following the performance period, the Committee will confirm any adjustments
and certify the actual adjusted operating ROIC and the comparison of actual adjusted operating ROIC with the target.
Relative Total Shareowner Return
Relative TSR is measured by comparing our TSR to the TSR of the
2019 Peer Group over a three-year performance period, with payouts as shown in the table below:
Three-Year
TSR Compared
to 2019 Peer Group | |
Percentage
of Target Earned for TSR Portion of LTIP Award |
Greater than 75th Percentile | |
200% |
Median | |
100% |
25th Percentile | |
50% |
Less than 25th Percentile | |
0% |
The maximum payout of the TSR portion of the award is capped at
200% of target. If our TSR over the three-year measurement period is negative, even if it exceeds the median of the peer group,
the maximum payout percentage for the TSR portion of LTIP awards is capped at 100% of target.
1 |
Non-GAAP financial measures. We believe that these non-GAAP measures are appropriate
for the determination of our incentive compensation award results because they exclude items that may not be indicative of,
or are unrelated to, our underlying operations and provide a useful baseline for analyzing trends in our underlying business.
Non-GAAP financial measures should be considered in addition to, and not as an alternative for, our reported results prepared
in accordance with GAAP. Our non-GAAP financial information does not represent a comprehensive basis of accounting. Therefore,
our non-GAAP financial information may not be comparable to similarly titled measures reported by other companies. |
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2017 LTIP Award Results
In 2017, the Committee granted LTIP awards to the NEOs who were
employees of the Company at that time. The performance metrics for the 2017 LTIP awards were the same as those described above
under “LTIP Program.” The performance targets and actual results for the completed performance period for the 2017
LTIP awards are set out below. The total payout for the 2017 LTIP award was 82% of target. RPUs awarded under the 2017 LTIP are
considered earned and vested.
* |
Growth in adjusted consolidated revenue was calculated on a constant currency
basis using 2017 levels as the baseline. Adjusted consolidated revenue excluded the impact of a new revenue recognition standard
under GAAP. Adjusted ROIC was adjusted for the impact of new pension accounting standards, new lease accounting standards,
legal contingency and expense charges, and capital expenditures associated primarily with network expansion. |
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Stock Option Program and 2019 Stock Option Awards
The Committee believes that stock options provide a significant
link to Company performance and motivate recipients to maximize shareowner value. The option holder receives value only if our
stock price increases. Stock options also have retention value; the option holder will not receive value from the options unless
he or she
remains employed during the vesting period. Stock options generally vest 20% per year over five years and expire ten
years from the date of grant. Unvested stock options vest automatically upon termination of employment because of death, disability
or retirement. In light of the five-year vesting schedule, we do not maintain additional holding period requirements. Grants do
not include dividend equivalents or any reload features. The number of stock options granted to the NEOs in 2019 is shown in the
Grants of Plan-Based Awards table.
Employment Transition Payments
Generally, we do not pay discretionary bonuses in cash or stock,
or make other discretionary payments, to our executives. In recent periods, however, including in connection with the leadership
transition described above, and in order to attract external senior executive talent to participate in the transformation of our
business, including the September 2019 hiring of our CFO, the Committee has determined it was appropriate to make certain limited
payments to external executive hires to the Company’s Management Committee. Certain of these payments were made to compensate
the executives for compensation forfeited at their prior employers and transition them into our incentive programs.
In connection with his announced retirement and in order to assist
with the transition of matters through his retirement date and in view of his ongoing services, on March 11, 2020, UPS entered
into an agreement (the “Transition Agreement”) with David Abney. Pursuant to the Transition Agreement, he will continue
to be entitled to his current base salary through his retirement date and he will receive a 2020 MIP target award valued at 165%
of base salary. In addition, he will receive a 2020 LTIP target award valued at 300% of base salary. The Transition Agreement also
includes customary noncompetition, nonsolicitation and non-disparagement covenants in favor of the Company.
Under the terms of his employment offer letter described below,
Brian Newman was entitled to: (i) a grant of RSUs with a value of $5,500,000, which vested in March 2020; (ii) a performance-based
cash award with a target value of $3,000,000, payable in equal installments in March 2021 and March 2022, with the actual
payout
based on the Company’s performance under the LTIP for periods ending December 31, 2020 and December 31, 2021; and (iii) a
cash transition payment of $600,000 paid in March 2020. These amounts are subject to repayment on a prorated basis if Brian Newman
resigns without “good reason” or is terminated for “cause” within 36 months following his start date.
Under the terms of his employment offer letter described below,
in 2019 Scott Price received a cash transition payment of $2.0 million and in 2018 he received a one-time RSU grant valued at $4.0
million vesting in 20% equal annual increments beginning January 2018, subject to his continued employment through each applicable
vesting date or termination without cause.
Under the terms of his employment offer letter described below,
in 2019 Kevin Warren received a cash transition payment of $750,000 and in 2018 he received a one-time RSU grant valued at $3.0
million vesting in one-third equal annual increments beginning January 2019, subject to his continued employment through each applicable
vesting date or termination without cause.
In addition, in connection with retirement announcement of Jim
Barber, who was serving as our Chief Operating Officer, in October 2019, the Committee determined it was appropriate for the Company
to enter into a transition agreement with him in order to incent him to assist with the transition of matters through his retirement
date. Under the terms thereof, he was entitled to a $1,000,000 transition payment for his continued service through January 2,
2020.
Benefits and Perquisites
The benefits and perquisites provided to our NEOs are not a material
part of executive compensation and are largely limited to those offered to our employees generally, or that we otherwise believe
are necessary or appropriate to attract and retain executive talent. We believe certain perquisites help facilitate our NEOs’
ability to carry out their responsibilities, maximize working time and minimize distractions. 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 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 generally 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, 100% of up to 3.5% of eligible pay contributed to the plan for eligible
employees hired on or after
January 1, 2008, and 50% of up to 6% of eligible pay contributed to the plan for employees hired on or after July 1, 2016.
The match is paid in shares of class A common stock. Effective for newly eligible plan participants on or after July 1, 2016,
we also generally provide a Retirement Contribution based on years of service and expressed as a percentage of eligible
compensation (5% for 0-4 years, 6% for 5-9 years, 7% for 10-14 years and 8% for 15 or more years).
Qualified and Non-Qualified Pension Plans
Certain executive officers are eligible to participate in our
qualified retirement program, the UPS Retirement Plan. 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
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plan designed to replace the amount of benefits limited under
the tax-qualified plan. Without the Excess Coordinating Benefit Plan, the 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.
Financial Planning Services
Our executive officers are eligible for a financial services benefit.
The Company reimburses fees from financial and tax service 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. In 2019, executive officers were offered certain
executive health services, including comprehensive physical examinations.
Discounted Employee Stock Purchase Plan
We have maintained a Discounted Employee Stock Purchase Plan since
2001. The plan provides all U.S.-based employees, including the NEOs, 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 complies
with Section 423 of the Internal Revenue Code. Our class A common stock may be acquired under the plan at a purchase price 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.
Other Compensation and Governance Policies
Stock Ownership Guidelines
CEO |
= 8x annual salary |
Other Executive Officers |
= 5x annual salary |
Directors |
= 5x annual retainer |
We maintain stock ownership guidelines that apply to executive
officers and members of the board. The guidelines further our core philosophy that executive officers and directors should also
be long-term owners of our Company. Target ownership is eight times annual salary for our CEO and five times annual salary for
our other executive officers. The target for our non-employee directors is five times their annual retainer. Shares of class A
common stock (excluding any pledged shares), deferred units and vested and unvested RSUs and RPUs awarded under our equity incentive
plans are considered owned for purposes of calculating ownership. Executive officers and directors are expected to reach target
ownership within five years or the date that the executive officer or director became subject to the guideline.
As of December 31, 2019, all of the NEOs who have been subject
to the guidelines for at least five years exceeded their target stock ownership. In addition, all of our non-employee directors
who have been subject to the stock ownership guidelines for at least five years exceeded their target stock ownership. RSUs are
required to be held by a non-employee director until he or she separates from the board.
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, we have adopted a policy prohibiting
our directors and executive officers from entering into pledges of UPS securities,
including using UPS securities as collateral for a loan and holding UPS securities in margin accounts. Executive officers are encouraged
(but not required) to unwind any existing pledges. Furthermore, our employees, officers and directors are prohibited from engaging
in short sales of UPS stock.
Clawback Policy
Our incentive compensation plans contain clawback provisions for
all awards granted under the plans. If the Committee determines that financial results used to determine the amount of any award
are materially restated, and that an executive officer engaged in fraud or intentional misconduct, we will seek repayment or recovery
of the award from that executive officer. This clawback applies to all awards granted under the 2018 Omnibus Incentive Compensation
Plan (“2018 Plan”), the 2015 Omnibus Incentive Compensation Plan (“2015 Plan”), the 2012 Omnibus Incentive
Compensation Plan (“2012 Plan”) and the 2009 Incentive Compensation Plan (“2009 Plan”).
Employment and Severance Arrangements; Change in Control Payments
The board believes that UPS has created a culture where long tenure
for executives is the norm. As a result, we do not enter into agreements providing for the continuation of employment of an executive,
or separate change in control agreements with any of our executive officers, including our NEOs, or other U.S.-based non-union
employees.
However, in recent periods, in order to attract senior executive
talent from outside the Company to participate in the transformation of our business and in furtherance of the board’s succession
planning efforts, we have deemed it
|
41 |
Table of Contents
appropriate to enter into a limited number of employment offer
letters and transition agreements. These offer letters set out certain compensation terms in connection with the individual’s
employment by UPS, but provide that employment is on an at-will basis. Some of the compensation described in the employment offer
letters was designed to compensate the executives for compensation forfeited at their prior employers and transition them into
our incentive programs. Transition agreements have been utilized as a part of our succession planning process to help enable smooth
leadership transitions.
In connection with her appointment as Chief Executive Officer,
on March 11, 2020, the Company entered into an employment offer letter with Carol Tomé. Pursuant to the offer letter, beginning
June 1, 2020 she will be entitled to an annual: (i) base salary of $1,250,000; (ii) MIP award with a target of 165% of her base
salary, which for 2020 will be prorated and payable in vested Class A common stock; (iii) LTIP program award with a target of 735%
of her base salary; and (iv) stock option grant with a target of 90% of her base salary. She also entered into a protective covenant
agreement, which protects UPS’s confidential information and includes noncompetition and nonsolicitation covenants in favor
of UPS. It also provides her with continued payment of her base salary for up to 24 months if her employment is terminated by UPS
without “cause” within two years following her start date.
For a description of the transition agreement entered into with
David Abney, see “Employment Transition Payments” above.
On August 7, 2019, we entered into an employment offer letter
with Brian Newman pursuant to which he agreed to join UPS as our Senior Vice President, CFO and Treasurer. In 2018, we executed
an employment offer letter with Kevin Warren in connection with his hiring as our Chief Marketing Officer, and in 2017 we executed
an employment offer letter with Scott Price in connection with his hiring as our Chief Transformation Officer.
Under Brian Newman’s offer letter, he became entitled to:
(i) a grant of UPS restricted stock units with a value of $5,500,000, which vested in March 2020; (ii) a performance-based cash
award with a target value of $3,000,000, payable in equal installments in March 2021 and March 2022, with the actual payout based
on the Company’s performance under the LTIP for periods ending December 31, 2020 and December 31, 2021; and (iii) a cash
transition payment of $600,000 paid in March 2020. These amounts are subject to repayment on a prorated basis if he resigns without
“good reason” or is terminated for “cause” within 36 months following his start date.
Under Scott Price’s offer letter, he became entitled to,
among other things, the cash transition and equity payments described above under “Employment Transition Payments,”
as well as a similar cash transition payment in March 2020, subject to his continued employment. He also received, among other
things, a cash transition payment of $500,000 in 2018.
Under the terms of Kevin Warren’s offer letter, he became
entitled to, among other things, the cash transition and equity payments described above under “Employment Transition Payments,”
as well as a similar cash transition payment in June 2020, subject to his continued employment. He received a cash transition payment
of $950,000 in 2018. Scott Price’s and Kevin Warren’s offer letters also provide that the equity payments described
in the “Employment Transition Payments” section above will continue to vest in the event that the NEO is terminated
without cause.
These offer letters also set out annual base salary levels, eligibility
to participate in the MIP, LTIP and Stock Option programs, and eligibility for relocation benefits and other employee benefits,
all consistent with those received by our other senior executives.
In connection with the entry into the offer letters with each
of Brian Newman, Scott Price and Kevin Warren, each of them entered into protective covenant agreements with us which, in the event
they are terminated without cause during the first two years of employment, provide for separation pay equal to two years’
salary. In the event any of them are terminated without cause after the first two years of employment, the Company is obligated
to make such payments if it elects to enforce post-termination non-compete covenants connected to those agreements. In addition,
in the event any of them are terminated without cause, they are entitled to the continued vesting of their one-time RSU grants.
Brian Newman and Kevin Warren are also entitled to the payment of any unpaid transition payments, and Brian Newman is entitled
to the continued vesting of his performance-based cash award (see “Employment Transition Payments” described above).
Equity awards made after May 7, 2009 require a “double trigger”
— both a change in control and a qualifying termination of employment — prior to the acceleration of vesting of awards
that are not continued or assumed by a successor entity. Equity awards granted to executive officers prior to May 7, 2009 require
only a single trigger to accelerate the vesting thereof.
Equity Grant Practices
Grants of awards to executive officers under all of our equity
incentive programs are approved by the Compensation Committee. Stock options have an exercise price equal to the NYSE closing market
price on the date of grant.
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Notice of Annual Meeting of Shareowners and 2020 Proxy Statement |
Table of Contents
Consideration of Previous “Say on Pay” Voting Results
We regularly engage with our shareowners on ESG matters, including
executive compensation matters. We use the results of these engagements to inform board discussions on our corporate governance
policies. Historically, our shareowners have had the opportunity to vote, on an advisory basis, on the compensation of our NEOs
as set out in our proxy statement every three years. In November 2019, we announced that we were amending our policy on the frequency
of shareowner advisory votes to approve UPS’s executive compensation. Beginning with the Annual Meeting, shareowners will
now have the opportunity to vote, on an advisory basis, on the compensation of the NEOs, as described in the Compensation Discussion
and Analysis section and in the
compensation tables and accompanying narrative disclosure in the proxy statement, on an annual
basis. See “Proposal 2 – Advisory Vote on Executive Compensation.”
At the most recent advisory vote on executive compensation, taken
at the 2017 annual meeting of shareowners, over 88% of votes cast approved our compensation program as described in our 2017 proxy
statement. The Compensation Committee carefully considered the results of this vote as well as many other factors in determining
the structure and operation of our executive compensation programs.
Tax Implications of Executive Compensation
The Committee previously structured annual and long-term incentive
compensation awards with the intention of complying with the performance-based compensation exemption from Section 162(m) of the
Internal Revenue Code, which allows a tax deduction for compensation paid to certain NEOs in excess of $1 million. The Committee
did, however, reserve the right to modify compensation that was initially intended to be exempt from Section 162(m) and to pay
compensation that was not deductible under Section 162(m) if it determined that such modifications or payments were needed to attract,
retain, or provide incentives to our NEOs, and were consistent with the Company’s best interests.
Now that the exemption from Section 162(m)’s deduction limit
for performance-based compensation has been repealed by the Tax Cuts and Jobs Act of 2017, the Compensation Committee expects that
compensation granted or paid to our NEOs will not be fully deductible for income tax purposes. The Committee intends to maintain
the strong pay-for-performance alignment of our incentive compensation programs and believes the interests of our shareowners are
best served by not limiting the Committee’s discretion and flexibility in crafting compensation plans and arrangements, even
though some compensation awards may result in non-deductible compensation expenses.
|
43 |
Table of Contents
Summary Compensation Table
The following table sets forth the compensation of our NEOs for the
years ended December 31, 2019, 2018 and 2017.
Name and Principal Position | |
Year | |
Salary
($)(4) | |
Bonus ($) | |
Stock
Awards ($)(5) | |
Option
Awards ($)(6) | |
Non-Equity
Incentive Plan
Compensation ($)(7) | |
Change in
Pension Value
($)(8) | |
All Other
Compensation
($)(9) | |
Total
($) |
David P. Abney | |
2019 | |
1,272,042 | |
— | |
11,670,956 | |
1,119,650 | |
317,496 | |
3,619,574 | |
31,207 | |
18,030,925 |
Chief Executive Officer | |
2018 | |
1,234,992 | |
— | |
10,459,956 | |
1,087,039 | |
937,739 | |
1,311,718 | |
29,432 | |
15,060,876 |
| |
2017 | |
1,199,016 | |
— | |
9,354,699 | |
1,055,372 | |
672,046 | |
2,296,315 | |
31,284 | |
14,608,732 |
Brian O. Newman(1) Chief Financial Officer | |
2019 | |
212,898 | |
— | |
5,500,084 | |
— | |
— | |
— | |
27,139 | |
5,740,121 |
Richard N. Peretz | |
2019 | |
568,554 | |
— | |
3,187,917 | |
278,024 | |
115,181 | |
1,725,531 | |
17,501 | |
5,892,708 |
Retired Chief | |
2018 | |
552,654 | |
— | |
3,032,070 | |
271,257 | |
280,493 | |
480,713 | |
18,055 | |
4,635,242 |
Financial Officer | |
2017 | |
538,533 | |
— | |
2,769,256 | |
263,351 | |
199,934 | |
917,550 | |
13,516 | |
4,702,140 |
James J. Barber, Jr. | |
2019 | |
738,900 | |
— | |
5,244,457 | |
360,006 | |
149,868 | |
2,035,092 | |
29,958 | |
8,558,281 |
Retired Chief | |
2018 | |
693,676 | |
— | |
5,003,423 | |
281,041 | |
449,000 | |
586,464 | |
31,900 | |
7,045,504 |
Operating Officer | |
2017 | |
557,304 | |
— | |
2,871,021 | |
271,538 | |
269,759 | |
1,040,771 | |
25,150 | |
5,035,543 |
Scott A. Price(2) | |
2019 | |
631,905 | |
2,000,000 | |
3,979,882 | |
309,001 | |
128,015 | |
— | |
85,103 | |
7,133,906 |
Chief Strategy and Transformation Officer | |
2018 | |
613,500 | |
500,000 | |
6,911,263 | |
300,015 | |
— | |
— | |
155,619 | |
8,480,397 |
Kevin M. Warren(3) | |
2019 | |
613,500 | |
750,000 | |
2,792,270 | |
180,011 | |
122,907 | |
— | |
119,262 | |
4,577,950 |
Chief Marketing Officer | |
2018 | |
350,000 | |
950,000 | |
3,000,030 | |
— | |
— | |
— | |
124,613 | |
4,424,643 |
(1) |
Joined the Company in September 2019. See “Employment
Transition Payments” and “Employment and Severance Arrangements; Change in Control Payments” in the Compensation
Discussion and Analysis for a description of compensation in connection with his hiring. |
(2) |
Joined the Company in December 2017. See “Employment Transition
Payments” and “Employment and Severance Arrangements; Change in Control Payments” in the Compensation Discussion
and Analysis for a description of compensation in connection with his hiring. |
(3) |
Joined the Company in June 2018. See “Employment Transition
Payments” and “Employment and Severance Arrangements; Change in Control Payments” in the Compensation Discussion
and Analysis for a description of compensation in connection with his hiring. |
(4) |
This column represents the salary earned from January 1 through December
31 of the applicable year. Base salary increases generally are effective in April of the relevant fiscal year. |
(5) |
The values for stock awards in this column represent the aggregate
grant date fair value for the stock awards granted in the applicable year, computed in accordance with FASB ASC Topic 718.
These awards include LTIP, MIP RPUs, MIP class A shares and the one-time grant of RSUs made to Brian Newman, Scott Price and
Kevin Warren. Awards with performance conditions are valued based on the probable outcome of the performance condition as
of the grant date for the award. Information about the assumptions used to value these awards can be found in Note 12 “Stock-Based
Compensation” in our 2019 Annual Report on Form 10-K. The amounts reported for these awards may not represent the amounts
that the individuals will actually receive. The amounts received, if any, ultimately will depend on Company performance and
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.” |
|
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
2019 LTIP RPU awards, assuming maximum performance, is as follows: Abney — $19,590,798; Peretz — $5,253,809; Barber
—$8,692,735; Price — $5,839,181; and Warren – $4,409,485. |
(6) |
The values for stock option awards represent the aggregate grant date
fair value for the option awards granted in the applicable year, computed in accordance with FASB ASC Topic 718. The assumptions
used to value these awards can be found in Note 12 “Stock-Based Compensation” in our 2019 Annual Report on Form
10-K. The amounts reported for these awards may not represent the amounts that the individuals will actually receive. The
amounts received, if any, ultimately will depend on the change in our stock price over time. An overview of the features of
these awards can be found in the “Compensation Discussion and Analysis” section. |
(7) |
This column shows the cash portion of the MIP Performance Incentive
award and the MIP Ownership Incentive award. For a description of the MIP, see “Compensation Discussion and Analysis.”
The MIP Ownership Incentive award was paid at 100% of target (one month’s salary) for each eligible NEO who met or exceeded
his or her target ownership level in the same proportion that the MIP award is paid. |
(8) |
This column represents an estimate of the annual increase in the actuarial
present value of the NEOs’ accrued benefit under our retirement plans for the applicable year, assuming retirement at
age 60 (or current age if greater). See “Executive Compensation — 2019 Pension Benefits” for additional
information, including assumptions used in this calculation. The change in pension value can be impacted by a number of factors,
including additional credited service, changes in amounts of compensation covered by the benefit formula, plan amendments
and assumption changes. |
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Notice of Annual Meeting of Shareowners and 2020 Proxy Statement |
Table of Contents
(9) |
All other compensation consisted of the following in 2019: |
Name | |
401(k) Plan Retirement
Contribution(1)($) | |
Restoration Savings Plan
Contribution(2)($) | |
401(k) Plan Match ($) | |
Life Insurance ($) | |
Financial Planning ($) | |
Healthcare Benefits ($) | |
Other(3)($) | |
Total ($) |
David P. Abney | |
— | |
— | |
7,000 | |
9,679 | |
8,773 | |
5,755 | |
— | |
31,207 |
Brian O. Newman | |
— | |
— | |
— | |
621 | |
12,500 | |
— | |
14,018 | |
27,139 |
Richard N. Peretz | |
— | |
— | |
7,000 | |
2,676 | |
2,070 | |
5,755 | |
— | |
17,501 |
James J. Barber, Jr. | |
— | |
— | |
7,000 | |
3,355 | |
13,848 | |
5,755 | |
— | |
29,958 |
Scott A. Price | |
13,750 | |
17,349 | |
8,400 | |
3,003 | |
8,355 | |
5,755 | |
28,491 | |
85,103 |
Kevin M. Warren | |
13,750 | |
16,110 | |
8,400 | |
2,908 | |
15,000 | |
5,755 | |
57,339 | |
119,262 |
(1) |
For eligible plan participants hired after July 1, 2016, we generally
provide a retirement contribution based on years of service. |
(2) |
For eligible plan participants hired after July 1, 2016, benefits
payable under the UPS 401(k) Savings Plan are subject to the maximum compensation limits and the annual benefit limits for
a tax-qualified defined contribution plan as established by the Internal Revenue Service. Amounts exceeding these limits are
paid pursuant to the UPS Restoration Savings Plan. |
(3) |
Consists of relocation expenses. These amounts were valued on the
basis of the aggregate incremental cost to the Company and represent the amount accrued for payment or paid to the service
provider or the individual, as applicable. |
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45 |
Table of Contents
Grants of Plan-Based Awards
The following table provides information about awards granted during
2019 to each of the NEOs.
| |
| |
Estimated
Possible Payouts Under Non-Equity Incentive Plan Awards(1) | |
Estimated
Future Payouts Under Equity Incentive Plan Awards(2) | |
All Other Stock Awards: Number
of Shares of Stock | |
All Other Option Awards: Number
of Securities Underlying | |
Exercise or Base Price of Option | |
Grant Date Fair Value of Stock
and Option |
Name | |
Grant
Date | |
Threshold
($) | |
Target
($) | |
Maximum
($) | |
Threshold
(#) | |
Target
(#) | |
Maximum
(#) | |
or Units
(#)(3) | |
Options
(#)(4) | |
Awards
($/Sh) | |
Awards
($)(5) |
David P. Abney | |
— | |
— | |
704,755 | |
1,666,667 | |
— | |
— | |
— | |
— | |
— | |
— | |
— |
| |
3/22/2019 | |
— | |
— | |
— | |
0 | |
86,916 | |
173,832 | |
— | |
— | |
— | |
9,795,399 |
| |
2/14/2019 | |
— | |
— | |
— | |
— | |
— | |
— | |
— | |
68,313 | |
111.80 | |
1,119,650 |
| |
2/14/2019 | |
— | |
— | |
— | |
— | |
— | |
— | |
16,776 | |
— | |
— | |
1,875,557 |
Brian O. Newman | |
— | |
— | |
— | |
— | |
— | |
— | |
— | |
— | |
— | |
— | |
— |
| |
— | |
— | |
— | |
— | |
— | |
— | |
— | |
— | |
— | |
— | |
— |
| |
— | |
— | |
— | |
— | |
— | |
— | |
— | |
— | |
— | |
— | |
— |
| |
9/16/2019 | |
— | |
— | |
— | |
— | |
— | |
— | |
44,873 | |
— | |
— | |
5,500,084 |
Richard N. Peretz | |
— | |
— | |
248,180 | |
1,666,667 | |
— | |
— | |
— | |
— | |
— | |
— | |
— |
| |
3/22/2019 | |
— | |
— | |
— | |
0 | |
23,309 | |
46,618 | |
— | |
— | |
— | |
2,626,904 |
| |
2/14/2019 | |
— | |
— | |
— | |
— | |
— | |
— | |
— | |
16,963 | |
111.80 | |
278,024 |
| |
2/14/2019 | |
— | |
— | |
— | |
— | |
— | |
— | |
5,018 | |
— | |
— | |
561,012 |
James J. Barber, Jr. | |
— | |
— | |
322,920 | |
1,666,667 | |
— | |
— | |
— | |
— | |
— | |
— | |
— |
| |
3/22/2019 | |
— | |
— | |
— | |
0 | |
38,566 | |
77,132 | |
— | |
— | |
— | |
4,346,368 |
| |
2/14/2019 | |
— | |
— | |
— | |
— | |
— | |
— | |
— | |
21,965 | |
111.80 | |
360,006 |
| |
2/14/2019 | |
— | |
— | |
— | |
— | |
— | |
— | |
8,033 | |
— | |
— | |
898,089 |
Scott A. Price | |
— | |
— | |
275,834 | |
1,666,667 | |
— | |
— | |
— | |
— | |
— | |
— | |
— |
| |
3/22/2019 | |
— | |
— | |
— | |
0 | |
25,906 | |
51,812 | |
— | |
— | |
— | |
2,919,591 |
| |
2/14/2019 | |
— | |
— | |
— | |
— | |
— | |
— | |
— | |
18,853 | |
111.80 | |
309,001 |
| |
2/14/2019 | |
— | |
— | |
— | |
— | |
— | |
— | |
9,484 | |
— | |
— | |
1,060,291 |
Kevin M. Warren | |
— | |
— | |
267,800 | |
1,666,667 | |
— | |
— | |
— | |
— | |
— | |
— | |
— |
| |
3/22/2019 | |
— | |
— | |
— | |
0 | |
19,563 | |
39,126 | |
— | |
— | |
— | |
2,204,742 |
| |
2/14/2019 | |
— | |
— | |
— | |
— | |
— | |
— | |
— | |
10,983 | |
111.80 | |
180,011 |
| |
2/14/2019 | |
— | |
— | |
— | |
— | |
— | |
— | |
5,255 | |
— | |
— | |
587,527 |
(1) |
Reflects the target and maximum values of the
cash portion of the 2019 MIP performance incentive award for each NEO. A participant’s first MIP performance
incentive award is paid entirely in vested class A stock. Does not include the MIP ownership incentive award: Abney
— $35,594; Peretz — $15,909; Barber — $20,700; Price — $17,682; and Warren — $17,167. The
potential payments for the MIP performance incentive award are performance-based and therefore at risk. The MIP program
is described in the “Compensation Discussion and Analysis.” |
(2) |
Potential number of units that would be awarded under the 2019 LTIP
at the end of the applicable three-year performance period if the threshold, target or maximum performance goals are attained.
Brian Newman was not eligible to participate in the 2019 LTIP because he was not employed when the awards were made. |
(3) |
For Brian Newman, represents a one-time grant of RSUs. For all other
NEOs, represents the number of RPUs or class A stock granted under the 2018 MIP. |
(4) |
Number of stock options granted under the Stock Option program on
February 14, 2019. Brian Newman was not eligible for a stock option award because he was not employed when the awards were
made. |
(5) |
Grant date fair value under FASB ASC Topic 718 of the LTIP RPUs, MIP
RPUs, stock options and the one-time RSUs awards granted to each of the NEOs in 2019. Fair values are calculated using the
NYSE closing price of UPS stock on the date of grant for RPUs and RSUs, and the Black-Scholes option pricing model for stock
options. The grant date fair value of the units granted under the 2019 LTIP, which have performance conditions, are computed
based on the probable outcome of the performance condition for the 2019 LTIP performance period. There can be no assurance
that any value will ever be realized. |
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Notice of Annual Meeting of Shareowners and 2020 Proxy Statement |
Table of Contents
Outstanding Equity Awards at Fiscal Year-End
The following table shows the number of shares
covered by exercisable options, unexercisable options, and unvested RPUs held by the NEOs on December 31, 2019.
| |
Option
Awards | |
Stock
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 ($)(3) | |
Equity Incentive Plan
Awards: Number of Unearned Shares, Units or Other Rights
That Have Not Vested (#)(4) | |
Equity Incentive Plan
Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not
Vested ($)(3) |
David P. Abney | |
9,461 | |
— | |
82.87 | |
3/1/2013 | |
3/1/2023 | |
| |
| |
| |
|
| |
7,372 | |
— | |
96.98 | |
3/4/2014 | |
3/4/2024 | |
| |
| |
| |
|
| |
19,925 | |
4,982 | |
101.93 | |
3/2/2015 | |
3/2/2025 | |
| |
| |
| |
|
| |
15,979 | |
10,653 | |
98.77 | |
3/2/2016 | |
3/2/2026 | |
| |
| |
| |
|
| |
22,569 | |
15,047 | |
106.86 | |
9/16/2016 | |
9/16/2026 | |
| |
| |
| |
|
| |
28,717 | |
43,077 | |
106.87 | |
3/1/2017 | |
3/1/2027 | |
| |
| |
| |
|
| |
14,265 | |
57,063 | |
106.43 | |
3/1/2018 | |
3/1/2028 | |
| |
| |
| |
|
| |
— | |
68,313 | |
111.80 | |
2/14/2019 | |
2/14/2029 | |
| |
| |
| |
|
| |
| |
| |
| |
| |
| |
40,743 | |
4,769,376 | |
169,607 | |
19,854,187 |
Brian O. Newman | |
— | |
— | |
— | |
— | |
— | |
| |
| |
| |
|
| |
| |
| |
| |
| |
| |
45,241 | |
5,295,959 | |
— | |
— |
Richard N. Peretz | |
2,695 | |
674 | |
101.93 | |
3/2/2015 | |
3/2/2025 | |
| |
| |
| |
|
| |
4,739 | |
3,160 | |
98.77 | |
3/2/2016 | |
3/2/2026 | |
| |
| |
| |
|
| |
4,684 | |
3,123 | |
106.86 | |
9/16/2016 | |
9/16/2026 | |
| |
| |
| |
|
| |
7,166 | |
10,749 | |
106.87 | |
3/1/2017 | |
3/1/2027 | |
| |
| |
| |
|
| |
3,559 | |
14,240 | |
106.43 | |
3/1/2018 | |
3/1/2028 | |
| |
| |
| |
|
| |
— | |
16,963 | |
111.80 | |
2/14/2019 | |
2/14/2029 | |
| |
| |
| |
|
| |
| |
| |
| |
| |
| |
12,480 | |
1,460,899 | |
47,138 | |
5,517,973 |
James J. Barber, Jr. | |
3,714 | |
— | |
76.89 | |
3/1/2012 | |
3/1/2022 | |
| |
| |
| |
|
| |
8,135 | |
— | |
82.87 | |
3/1/2013 | |
3/1/2023 | |
| |
| |
| |
|
| |
6,339 | |
— | |
96.98 | |
3/4/2014 | |
3/4/2024 | |
| |
| |
| |
|
| |
6,034 | |
1,509 | |
101.93 | |
3/2/2015 | |
3/2/2025 | |
| |
| |
| |
|
| |
4,909 | |
3,274 | |
98.77 | |
3/2/2016 | |
3/2/2026 | |
| |
| |
| |
|
| |
4,684 | |
3,123 | |
106.86 | |
9/16/2016 | |
9/16/2026 | |
| |
| |
| |
|
| |
7,388 | |
11,084 | |
106.87 | |
3/1/2017 | |
3/1/2027 | |
| |
| |
| |
|
| |
3,688 | |
14,753 | |
106.43 | |
3/1/2018 | |
3/1/2028 | |
| |
| |
| |
|
| |
— | |
21,965 | |
111.80 | |
2/14/2019 | |
2/14/2029 | |
| |
| |
| |
|
| |
| |
| |
| |
| |
| |
17,394 | |
2,036,191 | |
78,952 | |
9,242,138 |
Scott A. Price | |
3,937 | |
15,749 | |
106.43 | |
3/1/2018 | |
3/1/2028 | |
| |
| |
| |
|
| |
— | |
18,853 | |
111.80 | |
2/14/2019 | |
2/14/2029 | |
| |
| |
| |
|
| |
| |
| |
| |
| |
| |
20,103 | |
2,353,293 | |
52,264 | |
6,118,062 |
Kevin M. Warren | |
— | |
10,983 | |
111.80 | |
2/14/2019 | |
2/14/2029 | |
| |
| |
| |
|
| |
| |
| |
| |
| |
| |
17,449 | |
2,042,615 | |
20,080 | |
2,350,619 |
(1) |
Stock options generally vest over a five-year period with 20% of the
option vesting at each anniversary date of the grant. All options expire ten years from the date of grant. Under the terms
of our 2012 Plan, 2015 Plan and 2018 Plan, unvested stock options become fully vested on the date of termination due to retirement
for the NEOs if they meet certain service requirements. Brian Newman was not eligible to participate in the 2019 Stock Option
program because he was not employed when the awards were made. |
|
47 |
Table of Contents
(2) |
Unvested stock awards in this column include RPUs granted as part
of the MIP in 2015, 2016, 2017 and 2018 that vest over a five-year period with approximately 20% of the award vesting on January
15 of each year. The RPUs granted as part of the MIP in 2019 vest one year after the grant date. Also includes the one-time
grant of RSUs to Brian Newman on September 16, 2019 that had not vested at December 31, 2019. Values are rounded to the closest
unit. |
(3) |
Market value based on NYSE closing price of the class B common stock
on December 31, 2019 of $117.06. |
(4) |
Represents the potential units to be earned under the 2018 LTIP award
(for the three-year performance period ending 12/31/2020), the 2019 LTIP award (for the three-year performance period ending
12/31/2021), and any dividend equivalent units allocated since the grants were made. Assumes target performance goals will
be met for all performance periods. |
Option Exercises and Stock Vested
The following table sets forth the number and
corresponding value realized during 2019 with respect to options that were exercised, and restricted stock units and restricted
performance units that vested, for each NEO.
| |
Option
Awards | |
Stock
Awards |
Name | |
Number of Shares Acquired
on Exercise
(#) | |
Value Realized on Exercise ($) | |
Number of Shares Acquired
on Vesting (#)(1) | |
Value Realized on Vesting
($)(2) |
David P. Abney | |
28,722 | |
1,374,191 | |
95,110 | |
10,942,951 |
Brian O. Newman | |
— | |
— | |
— | |
— |
Richard N. Peretz | |
— | |
— | |
27,585 | |
3,171,711 |
James J. Barber, Jr. | |
— | |
— | |
29,499 | |
3,373,292 |
Scott A. Price | |
— | |
— | |
6,471 | |
631,312 |
Kevin M. Warren | |
— | |
— | |
8,425 | |
821,913 |
(1) |
The value in this column represents the 2017 LTIP award granted in
the form of RPUs that vested on December 31, 2019; approximately 20% of the MIP RPUs granted in each of 2014, 2015, 2016,
2017 and 2018 that vested on January 15, 2019; and the portion of the RSU award to each of Scott Price and Kevin Warren that
vested in 2019. Vested RPU awards are distributed to participants in an equivalent number of shares of class A common stock. |
(2) |
The value shown is based on the NYSE closing prices of the class B
common stock on December 31, 2019, the date the RPUs granted under the 2017 LTIP award vested, of $117.06 per share; and January
15, 2019, the date the RPUs granted under MIP vested and the date a portion of the one-time RSU awards to Scott Price and
Kevin Warren vested, of $97.56 per share. If the vesting date is not a NYSE trading day, the prior trading day’s closing
price is used. |
48 |
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Notice of Annual Meeting of Shareowners and 2020 Proxy Statement |
Table of Contents
Pension Benefits
The following table quantifies the pension benefits expected to
be paid to each NEO from the UPS Retirement Plan and the UPS Excess Coordinating Benefit Plan as of December 31, 2019. The terms
of each are described below.
Name | |
Plan Name | |
Number of Years
Credited
Service(#)(2) | |
Present Value of Accumulated
Benefit($)(3) | |
Payments During Last Fiscal
Year($) |
David P. Abney | |
UPS Retirement Plan | |
45.8 | |
2,463,254 | |
— |
| |
UPS Excess Coordinating Benefit Plan | |
— | |
14,391,563 | |
— |
| |
Total | |
— | |
16,854,817 | |
— |
Brian O. Newman(1) | |
UPS Retirement Plan | |
— | |
— | |
— |
| |
UPS Excess Coordinating Benefit Plan | |
— | |
— | |
— |
| |
Total | |
— | |
— | |
— |
Richard N. Peretz | |
UPS Retirement Plan | |
38.6 | |
2,141,307 | |
— |
| |
UPS Excess Coordinating Benefit Plan | |
— | |
3,815,883 | |
— |
| |
Total | |
— | |
5,957,190 | |
— |
James J. Barber, Jr. | |
UPS Retirement Plan | |
35.4 | |
2,094,243 | |
— |
| |
UPS Excess Coordinating Benefit Plan | |
— | |
5,102,416 | |
— |
| |
Total | |
— | |
7,196,659 | |
— |
Scott A. Price(1) | |
UPS Retirement Plan | |
— | |
— | |
— |
| |
UPS Excess Coordinating Benefit Plan | |
— | |
— | |
— |
| |
Total | |
— | |
— | |
— |
Kevin M. Warren(1) | |
UPS Retirement Plan | |
— | |
— | |
— |
| |
UPS Excess Coordinating Benefit Plan | |
— | |
— | |
— |
| |
Total | |
— | |
— | |
— |
(1) |
Not eligible to participate in the UPS Retirement Plan or the UPS Excess Coordinating
Benefit Plan. |
|
|
(2) |
This column represents years of service as of December 31, 2019 for all plans. |
|
|
(3) |
This column represents the total discounted value of the monthly lifetime benefit earned at
December 31, 2019, assuming the executive continues in service and retires at age 60 or at the executive’s actual age,
if later. The present value is not the monthly or annual lifetime benefit that would be paid to the executive. The present
values are based on discount rates of 3.52% and 3.66% for the UPS Retirement Plan, and UPS Excess Coordinating Benefit Plan,
respectively, at December 31, 2019. The present values assume no pre-retirement mortality and utilize the Pri-2012 healthy
mortality table with adjusted mortality improvement after 2012 (no collar for the Retirement Plan and white collar for the
Excess Plan), with mortality improvements after 2012 using the MP-2019 projection scale adjusted to converge to 0.5% in 2024
on the RPEC model. |
Pension Benefits
The UPS Retirement Plan is noncontributory and includes substantially
all eligible employees of participating domestic subsidiaries who are not members of a collective bargaining unit, as well as certain
employees covered by a collective bargaining agreement. The UPS Retirement Plan was closed to new entrants as of July 1, 2016.
UPS also sponsors a non-qualified defined benefit plan, the UPS
Excess Coordinating Benefit Plan, for non-union employees whose pay and benefits in the qualified plan are limited by the Internal
Revenue Service. An employee must be at least age 55 with 10 years of service to be eligible to participate in this plan. In the
year that an individual first becomes eligible to participate in the UPS Excess Coordinating Benefit Plan, there is an increase
for the participant for that year equal to the full present value of the participant’s accrued benefit in the plan.
The Compensation Committee believes that the retirement, deferred
compensation and/or savings plans offered at UPS are important for the long-term economic well-being of our
employees, and are
important elements of attracting and retaining the key talent necessary to compete. The UPS Retirement Plan and UPS Excess Coordinating
Benefit Plan provide monthly lifetime benefits to participants and their eligible beneficiaries based on final average compensation
at retirement, service with UPS and age at retirement. Participants may choose to receive a reduced benefit payable in an optional
form of annuity that is equivalent to the single lifetime benefit.
The plans provide monthly benefits based on the results from up
to four benefit formulas. Participants receive the largest benefit from among the applicable benefit formulas. For James Barber,
the formula that results in the largest benefit is called the “grandfathered integrated formula.” This formula provides
retirement income equal to 58.33% of final average compensation, offset by a portion of the Social Security benefit. A participant
with less than 35 years of benefit service receives a proportionately lesser amount. For David Abney and Richard Peretz, the formula
that results in the largest benefit is called the “integrated account formula.” This formula provides retirement
|
49 |
Table of Contents
income equal to 1.2% of final average compensation plus 0.4% of
final average compensation in excess of the Social Security Wage Base times years of benefit service.
Participants earn benefit service for the time they work as an
eligible UPS employee. For purposes of the formulas, compensation includes salary and an eligible portion of the MIP award. The
average final compensation for each participant in the plans is the average covered compensation of the participant during the
five highest consecutive years out of the last ten full calendar years of service.
Benefits payable under the UPS Retirement Plan are subject to
the maximum compensation limits and the annual benefit limits for a tax-qualified defined benefit plan as prescribed and adjusted
from time to time by the Internal Revenue Service. Eligible
amounts exceeding these limits will be paid from the UPS Excess Coordinating
Benefit Plan. Under this plan, participants receive the benefit in the form of a life annuity.
The plans permit participants with 25 or more years of benefit
service to retire as early as age 55 with only a limited reduction in the amount of their monthly benefits. Each of the NEOs would
be eligible to retire at age 60 and receive unreduced benefits from the plans. In addition, the plans allow participants with ten
years or more of service to retire at age 55 with a larger reduction in the amount of their benefit. As of December 31, 2019, Richard
Peretz and James Barber were eligible for early retirement with reduced benefits. If they had retired on December 31, 2019, their
benefits would be reduced by 6% (Peretz) and 1.5% (Barber). David Abney is currently eligible for early retirement with unreduced
benefits.
Non-Qualified Deferred Compensation
The following table shows the
executive and Company contributions or credits, earnings and account balances for the NEOs in the UPS Deferred Compensation
Plan and UPS Restoration Savings Plan for 2019.
Name | |
Executive Contributions
in Last FY ($)(1) | |
Registrant Contributions
in Last FY ($)(2) | |
Aggregate Earnings in Last FY
($) | |
Aggregate Withdrawals/ Distributions
($) | |
Aggregate Balance at Last FYE
($)(3) |
David P. Abney | |
— | |
— | |
589,761 | |
— | |
3,127,880 |
Brian O. Newman | |
— | |
— | |
— | |
— | |
— |
Richard N. Peretz | |
— | |
— | |
153,069 | |
— | |
880,490 |
James J. Barber, Jr. | |
— | |
— | |
109,079 | |
— | |
656,489 |
Scott A. Price | |
— | |
17,349 | |
— | |
— | |
17,349 |
Kevin M. Warren | |
— | |
16,110 | |
— | |
— | |
16,110 |
(1) |
Executive contributions represent deferral of base salary, which amounts are also
disclosed in the salary column of the Summary Compensation Table. |
|
|
(2) |
Amount of Company credits to the UPS Restoration Savings Plan, which amounts are also disclosed
in the all other compensation column of the Summary Compensation Table. |
|
|
(3) |
Certain amounts in this column represent salary, bonus or stock options contributed by the
NEO to the plan in prior years as follows: Abney —$1,122,198; Newman – $0; Peretz — $339,973; Barber —
$300,419; Price — $0; Warren — $0. |
The deferred compensation vehicles in
the UPS Deferred Compensation Plan and the UPS Restoration Savings Plan are described below. Not all of the NEOs participate
in each feature of the UPS Deferred Compensation Plan.
Salary Deferral Feature
• |
Prior to December 31, 2004, contributions could be deferred from executive officers’
monthly salary and from their half-month bonus. |
|
|
• |
Prior to December 31, 2004, non-employee directors could defer retainer and meeting fees quarterly.
Assets from the discontinued UPS Retirement Plan for Outside Directors were transferred to the 2004 and Before Salary Deferral
Feature in 2003. |
|
|
• |
No contributions were permitted after December 31, 2004, except as described below. |
• |
After December 31, 2004, executive officers may defer 1% to 35% of their monthly salary and
1% to 100% of the cash portion of the MIP award. They may also defer excess pre-tax contributions if the UPS 401(k) Savings
Plan fails the annual average deferral percentage test. |
|
|
• |
Non-employee directors may defer retainer fees quarterly. |
|
|
• |
Elections are made annually for the following calendar year. |
50 |
|
Notice of Annual Meeting of Shareowners and 2020 Proxy Statement |
Table of Contents
Stock Option Deferral Feature
• |
Assets are invested solely in shares of UPS stock. |
|
|
• |
Non-qualified or incentive stock options which vested prior to December 31, 2004 were deferrable
during the annual enrollment period for the following calendar year. Participants deferred receipt of UPS stock that would
otherwise be taxable upon the exercise of the stock option. |
|
|
• |
The shares received upon exercise of these options are deferred into a rabbi trust. The shares
held in this trust are classified as treasury stock, and the liability to participating employees is classified as “deferred
compensation obligations” in the shareowners’ equity section of the balance sheet. |
• |
No deferrals of stock options were permitted after December 31, 2004. |
|
|
• |
As a result of the requirements applicable to non-qualified deferred compensation arrangements
under Section 409A of the Internal Revenue Code and related guidance, deferral of stock options is no longer offered under
the UPS Deferred Compensation Plan for options that vested after December 31, 2004. |
Withdrawals and Distributions under the UPS Deferred Compensation
Plan
• |
For the 2004 and Before Salary Deferral Feature, participants may elect to receive
the funds in a lump sum or up to a 10 year installment (of 120 monthly payments), subject to restrictions if the balance is
less than $20,000. |
|
|
• |
For the 2005 and Beyond Salary Deferral Feature, participants may elect to receive funds in
a lump sum or up to a 10 year installment (120 monthly payments), subject to restrictions if the balance, plus the total balance
in any other account which must be aggregated with the 2005 and Beyond Salary Deferral Account under Section 409A of the Internal
Revenue Code, is less than the Internal Revenue Code Section 402(g) annual limit in effect for qualified 401(k) plans on the
date the participant becomes eligible for a distribution. |
|
|
• |
For the Stock Option Deferral Feature, participants may elect to receive shares in a lump
sum or up to 10 annual installments, subject to restrictions if the balance is less than $20,000. The distribution of shares
will occur pro-rata based on the type of stock options (non-qualified or incentive) that were originally deferred. |
|
|
• |
The distribution election under the 2005 and Beyond Salary Deferral Feature may be changed
one time only, but may be changed more frequently under the 2004 and Before Salary Deferral Feature and the Stock Option Deferral
Feature. |
• |
Hardship distributions are permitted under all three features of the UPS Deferred Compensation
Plan. |
|
|
• |
Withdrawals are not permitted under the 2005 and Beyond Salary Deferral Feature, but withdrawals
are permitted for 100% of the account under the 2004 and Before Salary Deferral Feature and Stock Option Deferral Feature.
However, withdrawals will result in a forfeiture of 10% of the participant’s total account balances. |
|
|
No Company contributions are made to any of the three features
of the UPS Deferred Compensation Plan. The aggregate balances shown in the table above represent amounts that the NEOs have earned
but elected to defer, plus earnings (or less losses). There are no above-market or preferential earnings in the UPS Deferred Compensation
Plan. The investment options mirror those in the UPS 401(k) Savings Plan. Dividends earned on shares of UPS stock in the UPS Deferred
Compensation Plan are earned at the same rate as all other class A and class B shares of common stock. Dividends are added to the
participant’s deferred compensation balance. Deferral elections made under the UPS Deferred Compensation Plan are irrevocable
once made.
UPS Restoration Savings Plan
Benefits payable under the UPS 401(k) Savings Plan are subject
to the maximum compensation limits and the annual benefit limits for a tax-qualified defined contribution plan as established by
the Internal Revenue Service. Amounts exceeding these limits are paid pursuant to the UPS Restoration Savings Plan, which is
a
non-qualified restoration plan designed to replace the amount of benefits limited under the tax-qualified plan. Without the UPS
Restoration Savings Plan, executive officers would receive a lower benefit as a percent of eligible compensation than the benefit
received by other participants in the UPS Savings Plan.
|
51 |
Table of Contents
Potential Payments on Termination or Change in
Control
We have not entered into any agreements with our executive officers
that provide for continuation of employment of an executive. Our Compensation Committee believes that UPS has created a culture
where long tenure for executives is the norm. As a result, executive officers serve without employment contracts, as do most of
our other U.S.-based non-union employees.
In connection with the hiring of each of Brian Newman, Scott Price
and Kevin Warren, we entered into protective covenant agreements with each of them which, in the event they are terminated without
cause during the first two years of employment, provide for separation pay equal to two years’ salary. In addition, with
respect to Scott and Kevin only, in the event they are terminated without cause during the first two years of employment their
protective covenant agreements provide for (ii) continued vesting of their one-time RSU grants, and (iii) with respect to Kevin
Warren, the payment of any unpaid transition payments (see “Employment Transition Payments” described above). In the
event any of them are terminated without cause after the first two years of employment, the Company is obligated to make such payments
and continue vesting such grants if it elects to enforce post-termination non-compete covenants connected to those agreements.
Furthermore, under the terms of their offer letters, each is entitled
to continue to vest in the one-time RSU awards granted to them in the event any of them are terminated without cause. With respect
to Brian Newman and Kevin Warren only, in the event they are terminated without cause, their offer letters provide that they will
continue to vest in their cash transition payments; and with respect to Brian Newman only, he will continue to vest in his performance-based
cash award. Termination for cause will result in the loss of these payments.
The equity awards granted between May 7, 2009 and May 2, 2012
were made pursuant to the 2009 Plan; equity awards granted on or after May 3, 2012 were made pursuant to the 2012 Plan; equity
awards granted on or after May 7, 2015 were made pursuant to the 2015 Plan; and equity awards granted on or after January 1, 2018
were made pursuant to the 2018 Plan. The plans and the related award certificates contain provisions that affect outstanding awards
to all plan participants, including the NEOs, in the event of a change in control (as defined below) of the Company and a participant’s
retirement, death or disability. Upon a participant’s retirement, death or disability:
• |
Options will become immediately exercisable; |
|
|
• |
Restrictions imposed on shares of restricted stock, RSUs or RPUs that are not performance-based
lapse; and |
|
|
• |
Target payout opportunities attainable under all outstanding awards of performance-based restricted
stock, RSUs and RPUs are deemed to have been fully earned for the applicable performance periods. Payment of an award (in
cash or stock, as applicable) is made to the participant based upon an assumed achievement of all relevant targeted performance
goals and the length of time within the applicable performance period which has elapsed. |
|
|
In the event of a change in control, if the successor company
continues, assumes or substitutes other grants for outstanding awards, and within two years following the change in control the
participant is terminated by the successor without cause or the participant resigns for good reason, then:
• |
Options will become immediately exercisable as of the termination or resignation;
|
|
|
• |
Restrictions imposed on restricted stock or RSUs that are not performance-based will lapse;
and |
|
|
• |
Performance-based awards will vest with respect to each performance measurement tranche completed
during the performance period prior to the termination or resignation (or, if the performance period is not divided into separate
performance measurement tranches, proportionately based on the portion of the performance period completed prior to such resignation
or termination). |
|
|
In the event of a change in control, if the successor company
does not continue, assume or substitute other grants for outstanding awards, or in the case of a dissolution or liquidation of
UPS, then options will be fully vested and exercisable and the Compensation Committee will either give a participant a reasonable
opportunity to exercise the option before the transaction resulting in the change in control, or pay the participant the difference
between the exercise price for the option and the consideration provided to other similarly situated shareowners.
Other Outstanding Awards
Other outstanding awards will vest and be paid generally as described
in the bullet points above (except, where applicable, timing of payment generally will be tied to such change in control, rather
than termination or resignation). Our 1999 Incentive Compensation plan provided for tax gross-ups upon a
change in control in certain
situations. However, all awards made under the 1999 Plan have already vested and are not subject to the change in control provisions.
The 2018 Plan, 2015 Plan, 2012 Plan and 2009 Plan do not provide for the payment of tax gross-ups.
52 |
|
Notice of Annual Meeting of Shareowners and 2020 Proxy Statement |
Table of Contents
The following table shows the potential payments to the NEOs upon
a termination of employment under various circumstances. In preparing the table, we assumed the event occurred on December 31,
2019. The closing price per share of our class B common stock on the NYSE on December 31, 2019 was $117.06. The actual amounts
to be paid under any of the scenarios can only be determined at the time of such NEO’s separation from the Company.
Name | |
Separation Pay(1)
($) | |
Accelerated Vesting of Equity Awards(2)
($) | |
Benefits(3)
($) | |
Total ($) |
David P. Abney | |
| |
| |
| |
|
Termination (voluntary or involuntary for cause) | |
— | |
— | |
— | |
— |
Termination (involuntary without cause) | |
— | |
— | |
— | |
— |
Change in Control (with termination) | |
— | |
26,452,124 | |
— | |
26,452,124 |
Retirement | |
— | |
26,452,124 | |
— | |
26,452,124 |
Death | |
— | |
26,452,124 | |
— | |
26,452,124 |
Disability | |
— | |
26,452,124 | |
— | |
26,452,124 |
Brian O. Newman | |
| |
| |
| |
|
Termination (voluntary or involuntary for cause) | |
— | |
— | |
— | |
— |
Termination (involuntary without cause) | |
1,450,008 | |
5,295,959 | |
— | |
6,745,967 |
Change in Control (with termination) | |
— | |
5,295,959 | |
— | |
5,295,959 |
Retirement | |
— | |
5,295,959 | |
— | |
5,295,959 |
Death | |
— | |
5,295,959 | |
— | |
5,295,959 |
Disability | |
— | |
5,295,959 | |
— | |
5,295,959 |
Richard N. Peretz | |
| |
| |
| |
|
Termination (voluntary or involuntary for cause) | |
— | |
— | |
— | |
— |
Termination (involuntary without cause) | |
— | |
— | |
— | |
— |
Change in Control (with termination) | |
— | |
7,428,849 | |
— | |
7,428,849 |
Retirement | |
— | |
7,428,849 | |
201,229 | |
7,630,078 |
Death | |
— | |
7,428,849 | |
— | |
7,428,849 |
Disability | |
— | |
7,428,849 | |
— | |
7,428,849 |
James J. Barber, Jr. | |
| |
| |
| |
|
Termination (voluntary or involuntary for cause) | |
— | |
— | |
— | |
— |
Termination (involuntary without cause) | |
— | |
— | |
— | |
— |
Change in Control (with termination) | |
— | |
11,778,202 | |
— | |
11,778,202 |
Retirement | |
— | |
11,778,202 | |
89,657 | |
11,867,859 |
Death | |
— | |
11,778,202 | |
— | |
11,778,202 |
Disability | |
— | |
11,778,202 | |
— | |
11,778,202 |
Scott A. Price | |
| |
| |
| |
|
Termination (voluntary or involuntary for cause) | |
— | |
— | |
— | |
— |
Termination (involuntary without cause) | |
1,273,080 | |
2,353,293 | |
— | |
3,626,373 |
Change in Control (with termination) | |
— | |
8,737,933 | |
— | |
8,737,933 |
Retirement | |
— | |
8,737,933 | |
— | |
8,737,933 |
Death | |
— | |
8,737,933 | |
— | |
8,737,933 |
Disability | |
— | |
8,737,933 | |
— | |
8,737,933 |
Kevin M. Warren | |
| |
| |
| |
|
Termination (voluntary or involuntary for cause) | |
— | |
— | |
— | |
— |
Termination (involuntary without cause) | |
1,986,000 | |
2,042,615 | |
— | |
4,028,615 |
Change in Control (with termination) | |
— | |
4,451,005 | |
— | |
4,451,005 |
Retirement | |
— | |
4,451,005 | |
— | |
4,451,005 |
Death | |
— | |
4,451,005 | |
— | |
4,451,005 |
Disability | |
— | |
4,451,005 | |
— | |
4,451,005 |
(1) |
Represents the value of separation pay, and with respect to Kevin Warren and Brian
Newman, the payment of unpaid cash transition payments and unpaid performance-based cash award as applicable (see “Employment
Transition Payments” above). |
|
|
(2) |
Represents the value of accelerated vesting of stock options and RPUs in accordance with the
terms of the 2009 Plan, the 2012 Plan, the 2015 Plan, the 2018 Plan and the applicable award certificates. Also includes the
2018 and 2019 LTIP awards calculated at target. The performance measurement period for the 2018 LTIP award ends December 31,
2020, and performance measurement period for the 2019 LTIP award ends December 31, 2021. With respect to Brian Newman, Scott
Price and Kevin Warren, includes the continued vesting of the one-time RSU awards to each as described in “Employment
Transition Payments” above. |
|
53 |
Table of Contents
(3) |
Represents the actuarial present value
of the incremental non-qualified amounts payable upon change in control, early retirement, death and disability from the UPS
Excess Coordinating Benefit Plan. For information about the UPS Excess Coordinating Benefit Plan, see the Pension Benefits
table and related narrative. The same assumptions were used to calculate the present value of the amounts in this table that
were used for the Pension Benefits table except that benefits are assumed to be payable immediately as of December 31, 2019
(or age 55 if later) instead of as of age 60. Only individuals eligible for early retirement (55 with 10 years of service)
who are not yet age 60 will have an early retirement value in the table. |
Other Amounts
The previous table does not include payments
and benefits to the extent they are generally provided on a non-discriminatory basis to salaried employees not subject to a collective
bargaining agreement upon termination of employment. These include:
• |
Life insurance upon death in the amount of 12 times the employee’s monthly
base salary, with a December 31, 2019 maximum benefit payable of $1 million; |
• |
A death benefit in the amount of three times the employee’s monthly salary; |
• |
Disability benefits; and |
• |
Accrued vacation amounts. |
The tables also do not include amounts to
which the executives would be entitled to receive that are already described in the compensation tables that appear earlier in
this proxy statement, including:
• |
The value of equity awards that are already vested; |
• |
Amounts payable under defined benefit pension plans; and |
• |
Amounts previously deferred into the deferred compensation plan. |
Definition of a Change in Control
A change in control of the Company as defined
in the 2018 Plan is deemed to have occurred as of the first day that any one or more of the following conditions shall have been
satisfied:
• |
The consummation of a reorganization, merger, share exchange or consolidation,
in each case, where persons who were shareowners of UPS immediately prior to such reorganization, merger, share exchange or
consolidation do not, immediately thereafter, own more than fifty percent (50%) of the combined voting power of the reorganized,
merged, surviving or consolidated company’s then outstanding securities entitled to vote generally in the election of
directors in substantially the same proportions as immediately prior to the transaction; or a liquidation or dissolution of
UPS or the sale of substantially all of UPS’s assets; or |
• |
Individuals who, as of any date (the “Beginning Date”), constitute the Board of
Directors (the “Incumbent Board”) and who, as of the end of the two-year period beginning on such Beginning Date,
cease for any reason to constitute at least a majority of the Board of Directors, provided that any person becoming a director
subsequent to the Beginning Date whose election, or nomination for election by UPS’s shareowners, was approved by a
vote of at least a majority of the directors then comprising the Incumbent Board (other than an election or nomination of
an individual whose initial assumption of office is in connection with an actual or threatened election contest relating to
the election of the directors of UPS, as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange
Act) shall be considered as though such person were a member of the Incumbent Board. |
Equity Compensation Plans
The following table sets forth information
as of December 31, 2019 concerning shares of our common stock authorized for issuance under all of our equity compensation plans.
Plan category | |
Number
of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (a) | |
Weighted-Average
Exercise Price of Outstanding Options, Warrants and Rights (b) | |
Number
of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities
Reflected in Column (a)) (c) | |
Equity compensation plans approved by security holders(1) | |
17,203,002 | |
8.88 | |
25,147,765 | (2) |
Equity compensation plans not approved by security holders | |
— | |
N/A | |
— | |
Total | |
17,203,002 | |
8.88 | |
25,147,765 | |
(1) |
Includes the 1999 Plan, the 2009 Plan, the 2012 Plan, the 2015 Plan, the 2018
Plan and the Discounted Employee Stock Purchase Plan, each of which has been approved by our shareowners. Effective with the
approval of the 2018 Plan in May 2018, no additional securities may be issued under the 1999 Plan, the 2009 Plan, the 2012
Plan or the 2015 Plan. Awards that do not entitle the holder to receive or purchase shares and awards that are settled in
cash are not counted against the aggregate number of shares available for awards under the 2018 Plan. |
54 |
|
Notice of Annual Meeting of Shareowners and 2020 Proxy Statement |
Table of Contents
(2) |
In addition to grants of options, warrants or rights, this number includes up to 12,423,652 shares
of common stock or other stock-based awards that may be issued under the 2018 Plan, and up to 12,724,113 shares of common
stock that may be issued under the Discounted Employee Stock Purchase Plan. This number does not include shares under the
1999 Plan, the 2009 Plan, the 2012 Plan or the 2015 Plan because no new awards may be made under those plans. |
Median Employee to CEO Pay Ratio
As required by Item 402(u) of Regulation
S-K, pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, we are providing the following ratio of the annual
total compensation of our CEO to the annual total compensation of our median employee.
The annual total compensation of the median
compensated employee, was $74,395; our CEO’s annual total compensation was $18,040,841, and the ratio of these amounts was
243-to-one.
Items related to healthcare benefits, which
are available generally to all salaried employees of the Company, are included in the annual total compensation numbers above.
The CEO’s and median employee’s Company-paid healthcare benefit amounts were $9,917 and $4,842 respectively. For the
CEO, this amount is not included in the Summary Compensation Table as permitted by SEC regulations.
The SEC’s rules for identifying the
median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow companies
to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect
their employee populations and compensation practices. As a result, the pay ratio reported by other companies may not be comparable
to the pay ratio reported above, as other companies have different employee populations and compensation practices and may utilize
different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios.
The pay ratio reported above is a reasonable
estimate calculated in a manner consistent with SEC rules based on our payroll and employment records and the methodology described
below. As permitted by SEC rules, for our 2019 pay ratio reported above, we used the same median employee that we used for our
2017 pay ratio, as we believe there has been no change in our employee population or employee compensation arrangements that would
significantly impact our pay ratio disclosure, including as a result of the acquisitions described below. For these purposes, we
identified the median compensated employee from our employee population as of October 1, 2017, using total taxable wages (Form
W-2 Box 1 or equivalent) paid to our employees in fiscal year 2017. We determined our total workforce as of
October 1, 2017 to consist of 466,707 employees.
During the fiscal year 2017, UPS purchased Zone Solutions, LLC and Freightex Ltd. These companies employed 14 and 133 employees
respectively. Also, as permitted by SEC rules, under the 5% “De Minimis Exemption,” we excluded 22,909 non-U.S. employees,
or 4.9% of our total workforce. As a result of these exclusions, our median employee was identified from an employee population
of 443,651 employees.
The excluded countries and their employee
populations are as follows: Albania (1 employee), Argentina (243 employees), Australia (430 employees), Austria (190 employees),
Bahrain (23 employees), Barbados (12 employees), Belarus (30 employees), Belgium (1,208 employees), Bolivia (4 employees), Brazil
(772 employees), Chile (184 employees), Colombia (478 employees), Costa Rica (272 employees), Czech Republic (457 employees), Denmark
(590 employees), Dominican Republic (135 employees), Ecuador (85 employees), Egypt (36 employees), El Salvador (34 employees),
Finland (205 employees), Greece (138 employees), Guam (1 employee), Guatemala (82 employees), Honduras (48 employees), Hong Kong
(1,117 employees), Hungary (377 employees), India (1,924 employees), Indonesia (182 employees), Ireland (857 employees), Italy
(1,258 employees), Jamaica (8 employees), Japan (660 employees), Kazakhstan (39 employees), Kenya (1 employee), Kuwait (47 employees),
Luxembourg (6 employees), Macau (24 employees), Malaysia (512 employees), Morocco (61 employees), Nepal (2 employees), New Zealand
(32 employees), Nicaragua (43 employees), Nigeria (352 employees), Norway (107 employees), Pakistan (68 employees), Panama (39
employees), Peru (93 employees), Philippines (1,236 employees), Portugal (182 employees), Puerto Rico (475 employees), Romania
(158 employees), Russia (553 employees), Singapore (1,108 employees), Slovakia (29 employees), Slovenia (48 employees), South Africa
(326 employees), South Korea (510 employees), Spain (1,242 employees), Sri Lanka (8 employees), Sweden (991 employees), Switzerland
(478 employees), Taiwan (873 employees), Thailand (465 employees), Uganda (1 employee), Ukraine (90 employees), United Arab Emirates
(379 employees), Uruguay (13 employees), Venezuela (6 employees), Vietnam (259 employees), Virgin Islands (12 employees).
|
55 |
Table of Contents
Ownership of Our Securities
Securities Ownership of Certain Beneficial Owners
and Management
The following table sets forth information
as of December 31, 2019 as to each person known to us to be the beneficial owner of more than five percent of either our class
A or class B common stock, based on SEC filings by such persons. Class A shares have ten votes per share and class B shares have
one vote per share on each matter acted upon. Class A shares are held by current and former employees and are not publicly traded.
As of February 24, 2020 there were 156,203,673 outstanding shares of class A common stock and 702,308,157 outstanding shares of
class B common stock.
Name and address | |
Number of Shares of Class B Stock Beneficially Owned | |
Percent of Class B Stock | |
BlackRock, Inc.(1) | |
| |
| |
55 East 52nd Street | |
44,176,915 | |
6.3 | % |
New York, NY 10055 | |
| |
| |
The Vanguard Group(2) | |
| |
| |
100 Vanguard Blvd. | |
56,561,755 | |
8.1 | % |
Malvern, PA 19355 | |
| |
| |
(1) |
According to a Schedule 13G/A filed with the SEC on February
6, 2020, BlackRock Inc. has sole voting power with respect to 37,287,237 shares and sole dispositive power with respect to
44,176,915 shares. |
(2) |
According to a Schedule 13G/A filed with the SEC on February 12, 2020, The Vanguard Group
has sole voting power with respect to 1,081,326 shares, shared voting power with respect to 188,901 shares, sole dispositive
power with respect to 55,351,627 shares and shared dispositive power with respect to 1,210,128 shares. |
The following table sets forth the beneficial
ownership of our class A and class B common stock as of February 24, 2020 by each of our NEOs, each of our directors, and all of
our current executive officers and directors as a group. Ownership is calculated in accordance with SEC rules and regulations.
| |
Number
of Shares
Beneficially Owned(1)(2) | |
Additional Shares in Which the Beneficial Owner Has or Participates in the Voting or | |
Total Shares Beneficially |
| |
Class A Shares(3)(4) | |
Class B Shares | |
Investment Power(5) | |
Owned(6) |
Named
Executive Officers | |
| | |
| |
| | |
| |
David P. Abney | |
724,021 | | |
1,452 | |
3,460,520 | (7) | |
4,185,993 | (7) |
Brian O. Newman | |
46,440 | (8) | |
— | |
— | | |
46,440 | (8) |
Richard N. Peretz | |
115,300 | | |
— | |
— | | |
115,300 | |
James J. Barber, Jr. | |
166,364 | | |
75 | |
— | | |
166,439 | |
Scott A. Price | |
84,448 | | |
— | |
— | | |
84,448 | |
Kevin M. Warren | |
42,169 | | |
— | |
— | | |
42,169 | |
Non-Employee Directors | |
| | |
| |
| | |
| |
Rodney C. Adkins | |
12,999 | | |
— | |
— | | |
12,999 | |
Michael J. Burns | |
28,753 | | |
— | |
— | | |
28,753 | |
William R. Johnson | |
24,963 | | |
160 | |
— | | |
25,123 | |
Ann M. Livermore | |
51,509 | | |
— | |
— | | |
51,509 | |
Rudy H.P. Markham | |
25,422 | | |
— | |
— | | |
25,422 | |
Franck J. Moison | |
5,539 | | |
— | |
— | | |
5,539 | |
Clark T. Randt, Jr. | |
20,020 | | |
— | |
— | | |
20,020 | |
Christiana Smith Shi | |
3,777 | | |
— | |
— | | |
3,777 | |
John T. Stankey | |
10,322 | | |
— | |
— | | |
10,322 | |
Carol B. Tomé | |
29,452 | | |
2,936 | |
— | | |
32,388 | |
Kevin Warsh | |
14,925 | | |
— | |
— | | |
14,925 | |
Current Executive Officers and Directors as a Group
(22 persons) | |
1,433,937 | | |
4,549 | |
3,460,520 | (7) | |
4,899,006 | (7)(9) |
56 |
|
Notice of Annual Meeting of Shareowners and 2020 Proxy Statement |
Table of Contents
(1) |
Includes shares for which the named person has sole voting or investment power
or has shared voting or investment power with his or her spouse. Includes shares held by immediate family members as follows:
Abney — 26,500; Newman – 0; Peretz — 220; Barber — 0; Price — 0; Warren — 0; and all current
executive officers and directors as a group — 26,500. Each named individual disclaims all beneficial ownership of the
shares held by immediate family members. |
(2) |
Includes shares pledged prior to the 2014 adoption of a policy prohibiting our executive officers
and directors from entering into pledges of their UPS stock. The aggregate number of shares pledged by executive officers
and directors as a group represents significantly less than 1% of our issued and outstanding shares of common stock. Pledged
shares are as follows: Barber — 14,490; and all current executive officers and directors as a group — 1,764. Shares
pledged are not counted for purposes of compliance with our stock ownership guidelines. All of the executive officers that
had existing pledges comply with our stock ownership guidelines after excluding the shares subject to pledge. None of our
directors have pledged any shares of UPS stock. |
(3) |
Includes class A shares that may be acquired by directors upon the conversion of RSUs following
separation from the UPS Board of Directors. These RSUs are also reported in the additional ownership table below. |
(4) |
Includes class A shares that may be acquired through stock options exercisable through April
24, 2020 as follows: Abney — 414,090; Newman – 0; Peretz — 71,752; Barber — 100,599; Price —
65,218; Warren — 26,524; and all current directors and executive officers as a group — 641,269. |
(5) |
None of the individuals listed, nor members of their immediate families, has any direct ownership
rights in the shares in this column. See footnotes 7 and 8. |
(6) |
All current directors and executive officers individually and as a group held less than one
percent of outstanding shares of each of class A and class B common stock outstanding as of February 24, 2020. Assumes that
all options exercisable and RSUs through April 24, 2020 owned by the named individual are exercised. The total number of shares
outstanding used in calculating this percentage also assumes that none of the options owned by other named individuals are
exercised. |
(7) |
Includes 3,444,484 class A shares and 16,036 class B shares owned by the Annie E. Casey Foundation,
Inc., which are considered under SEC rules to be beneficially owned by David Abney because he serves on the Board of Trustees. |
(8) |
Includes 45,241 RSUs that vest and convert to class A common stock prior to April 24, 2020. |
(9) |
Includes 46,973 RSUs and RPUs for all current executive officers and directors as a group
that vest and convert to class A common stock prior to April 24, 2020. |
Additional Ownership
Our directors and executive officers hold
equity instruments that, in accordance with SEC reporting rules, are not reported in the beneficial ownership table above (with
the exception of RSUs for directors) because the named persons do not have the right to acquire beneficial ownership of the underlying
shares of common
stock within 60 days of February 24, 2020.
These equity interests represent additional financial interests in UPS that are subject to the same market risk as ownership of
our common stock. The number of shares of class A common stock to which these equity instruments are equivalent as of February
24, 2020 is as follows.
|
|
Restricted
Stock Units(1) |
|
Phantom
Stock Units(2) |
|
Restricted
Performance
Units(3) |
|
Stock
Option
Deferral
Shares(4) |
|
Other
Deferred
Compensation
Plan Shares(5) |
|
Total |
Named Executive Officers |
|
|
|
|
|
|
|
|
|
|
|
|
David P. Abney |
|
— |
|
— |
|
20,111 |
|
20,262 |
|
— |
|
40,373 |
Brian O. Newman |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
Richard N. Peretz |
|
— |
|
— |
|
6,753 |
|
8,015 |
|
— |
|
14,768 |
James J. Barber, Jr. |
|
— |
|
— |
|
5,567 |
|
4,624 |
|
— |
|
10,191 |
Scott A. Price |
|
13,402 |
|
— |
|
2,426 |
|
— |
|
150 |
|
15,978 |
Kevin M. Warren |
|
8,726 |
|
— |
|
2,330 |
|
— |
|
139 |
|
11,195 |
Non-Employee Directors |
|
|
|
|
|
|
|
|
|
|
|
|
Rodney C. Adkins |
|
12,999 |
|
— |
|
— |
|
— |
|
— |
|
12,999 |
Michael J. Burns |
|
23,905 |
|
— |
|
— |
|
— |
|
5,023 |
|
28,928 |
William R. Johnson |
|
24,963 |
|
— |
|
— |
|
— |
|
— |
|
24,963 |
Ann M. Livermore |
|
23,905 |
|
2,595 |
|
— |
|
— |
|
— |
|
26,500 |
Rudy H.P. Markham |
|
23,905 |
|
— |
|
— |
|
— |
|
— |
|
23,905 |
Franck J. Moison |
|
5,539 |
|
— |
|
— |
|
— |
|
— |
|
5,539 |
Clark T. Randt, Jr. |
|
20,020 |
|
— |
|
— |
|
— |
|
— |
|
20,020 |
Christiana Smith Shi |
|
3,777 |
|
— |
|
— |
|
— |
|
— |
|
3,777 |
John T. Stankey |
|
10,322 |
|
— |
|
— |
|
— |
|
— |
|
10,322 |
Carol B. Tomé |
|
23,905 |
|
1,227 |
|
— |
|
— |
|
— |
|
25,132 |
Kevin Warsh |
|
14,925 |
|
— |
|
— |
|
— |
|
6,690 |
|
21,615 |
|
57 |
Table of Contents
(1) |
Bookkeeping units, the value of each of which corresponds to one share of UPS
class B common stock. RSUs are granted to non-employee directors on an annual basis. Dividends paid on UPS common stock are
added to the director’s RSU balance. Upon termination of the individual’s service as a director, the RSUs convert
to class A shares. RSUs for directors are also reported in the previous table and are counted toward the total shares beneficially
owned. |
(2) |
Bookkeeping units, the value of each of which corresponds to one share of UPS class B 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. |
(3) |
Bookkeeping units, the value of each of which corresponds to one share of UPS class B common
stock. We grant RPUs under the MIP and the LTIP award program. |
(4) |
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. |
(5) |
Includes non-employee directors’ retainer fees that have been deferred and allocated
to UPS common stock within the UPS Deferred Compensation Plan. Also includes Company credits under the UPS Restoration Savings
Plan that are allocated to UPS common stock. See Non-Qualified Deferred Compensation table above for more information. |
58 |
|
Notice of Annual Meeting of Shareowners and 2020 Proxy Statement |
Table of Contents
Proposal 2 — Advisory
Vote on Executive Compensation
What am I voting on? Whether you approve, on an advisory basis, the compensation of the NEOs as disclosed in this Proxy Statement. |
|
Voting Recommendation: Our Board of Directors recommends that shareowners vote FOR this proposal. |
|
Vote Required: The proposal must be approved by a majority of the voting power of the shares present in person or by proxy. |
Pay that reflects performance and alignment
of pay with the long-term interests of our shareowners are key principles that underlie our compensation programs. In accordance
with the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) and Section 14A of the Exchange
Act, shareowners have the opportunity to vote, on an advisory basis, to approve the compensation of our NEOs. This is often referred
to as a “say on pay” vote and provides you, as a shareowner, with the ability to cast a vote with respect to our 2019
executive compensation programs and policies and the compensation paid to the NEOs as disclosed in this proxy statement through
the following resolution:
“RESOLVED, that the shareowners approve,
on an advisory basis, the compensation of the NEOs, as described in the Compensation Discussion and Analysis section and in the
compensation tables and accompanying narrative disclosure in the Company’s Proxy Statement for the 2020 Annual Meeting of
Shareowners.”
As discussed in the Compensation Discussion
and Analysis section, the compensation paid to our NEOs reflects the following principles of our compensation program:
|
• |
encouraging executive decision-making that is aligned with the long-term interests of our shareowners; |
|
• |
tying a significant portion of executive pay to Company performance over a multi-year period; |
|
|
|
|
• |
promoting UPS’s long-standing culture of owner-management; and |
|
|
|
|
• |
using a balance of short- and long-term performance metrics to encourage the efficient management of our business and
minimize excessive risk-taking. |
Although this vote is non-binding, the Compensation
Committee and the board value our shareowners’ views and will consider the voting results. To the extent there is a significant
negative vote, we expect that we will consult directly with shareowners to better understand the concerns that influenced the vote.
As they currently do, the Compensation Committee and the board would consider the constructive feedback obtained through this process
in making decisions about future compensation arrangements for our NEOs. The next say on pay vote is expected to occur at the 2021
Annual Meeting.
In accordance with the Dodd-Frank Act, this
vote does not overrule any decisions by the board, will not create or imply any change to or any additional fiduciary duties of
the board and will not restrict or limit the ability of shareowners generally to make proposals for inclusion in proxy materials
related to executive compensation.
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Audit Committee
Matters
Proposal 3 — Ratification
of Auditors
What am I voting
on? Shareowners are being asked to ratify the Audit Committee’s appointment of Deloitte & Touche LLP to serve as
our independent registered public accounting firm for 2020.
Voting Recommendation:
Our Board of Directors recommends that shareowners vote FOR the ratification of the appointment of Deloitte & Touche
LLP as our independent registered public accounting firm for 2020.
Vote Required:
The proposal must be approved by a majority of the voting power of the shares present in person or by proxy.
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Deloitte & Touche LLP (“Deloitte”)
has been our independent auditor since we became a publicly-traded entity in 1999. Prior to becoming a publicly-traded entity,
Deloitte also served as the independent auditor of our privately held parent company since 1969. Deloitte audited our 2019 consolidated
financial statements and our internal control over financial reporting. As discussed below, our Audit Committee considers Deloitte
to be well qualified and has appointed Deloitte as our independent registered public accounting firm for the year ending December
31, 2020.
This proposal asks you to ratify the appointment
of Deloitte as our independent registered public accounting firm for 2020. Although we are not required to obtain such ratification
from our shareowners, the Board of Directors believes it is sound
corporate governance practice to do so. If
the appointment of Deloitte is not ratified, the Audit Committee will reconsider the appointment. Even if the appointment of Deloitte
is ratified, the Audit Committee, in its discretion, may change the appointment at any time during the year if it determines that
such a change would be in the best interests of UPS and its shareowners.
A representative of Deloitte is expected
to be at the Annual Meeting, will have the opportunity to make a statement and is expected to be available to respond to appropriate
questions by shareowners. The following sections provide additional information about our Audit Committee, its selection of Deloitte,
Deloitte’s fees and related matters.
Report of the Audit Committee
Roles and Responsibilities. The key
responsibilities of the Audit Committee are set forth in its charter, which was approved by the board and is available on the governance
section of the UPS Investor Relations website at www.investors.ups.com. Pursuant to its charter, the Audit Committee’s purposes,
duties and responsibilities include:
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assisting the board in discharging its responsibilities relating to the accounting, reporting and financial practices of UPS; |
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overseeing the accounting and financial reporting processes, including reviewing earnings or annual report press releases, overseeing the integrity of UPS’s financial statements and evaluating major financial risks; |
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having sole authority to appoint, oversee, determine the compensation of and terminate the Company’s independent registered public accounting firm; and |
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overseeing the Company’s systems of disclosure controls and internal controls, the Company’s compliance with legal and regulatory requirements as well as the Company’s Code of Business Conduct. |
Management has primary responsibility for
preparing UPS’s financial statements and establishing effective internal control over financial reporting. Deloitte is responsible
for auditing those financial statements and UPS’s internal control over financial reporting and expressing an opinion on
the conformity of UPS’s audited financial statements with generally accepted accounting principles and on the effectiveness
of UPS’s internal control over financial reporting based on criteria established by the Committee of Sponsoring Organizations
of the Treadway Commission.
The Audit Committee is responsible for appointing
the independent registered public accounting firm, understanding the terms of the audit engagement, negotiating the fees for the
audit engagement and approving the terms of the audit engagement. In this context, the Audit Committee discussed with Deloitte
the terms of the audit engagement, the overall scope and plan for the audit, and the other matters required to be discussed by
the applicable requirements of the Public Company Accounting Oversight Board (“PCAOB”) and the SEC. The Audit Committee
had the opportunity to ask Deloitte questions relating to such matters.
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Committee Oversight of Financial Statements.
The Audit Committee met with management and Deloitte to review and discuss the Company’s audited financial statements
and the Company’s internal control over financial reporting. The Audit Committee discussed with management and Deloitte the
critical accounting policies applied by UPS in the preparation of its financial statements, the quality, and not just the acceptability,
of the accounting principles utilized, the reasonableness of significant accounting judgments, and the clarity of disclosures in
the financial statements.
The Audit Committee met with Deloitte and
UPS’s internal auditors, in each case with and without other members of management present, to discuss the results of their
respective examinations, the evaluations of the Company’s internal control and the overall quality and integrity of the Company’s
financial reporting. Additionally, the Audit Committee reviewed UPS’s internal audit plan and the performance, responsibilities,
budget and staffing of UPS’s internal auditors.
The Audit Committee met with members of management
to discuss the Company’s legal and ethical compliance programs. The Audit Committee also oversaw compliance with and procedures
for UPS’s receipt, retention and treatment of complaints regarding accounting, internal accounting controls, auditing and
other federal securities law matters, including confidential and anonymous submissions of these complaints.
Auditor Independence. Deloitte has
provided the Audit Committee with the written disclosures and the letter required by the applicable requirements of the PCAOB regarding
the independent registered public accountants’ communications with the Audit Committee concerning independence, and the Audit
Committee has discussed with Deloitte that firm’s independence. The Audit Committee also considered whether Deloitte’s
provision of non-audit services to UPS was compatible with the independence of the independent registered public accountants. The
Audit Committee has established a policy, discussed below, requiring the pre-approval of all audit and non-audit services provided
to UPS by Deloitte. The Audit Committee reviewed and pre-approved all fees paid to Deloitte. These fees are described in the next
section of this proxy statement.
Committee Assessment of Deloitte. In
addition, as in prior years, the Audit Committee, along with management and UPS’s internal auditors, reviewed Deloitte’s
2019 performance as part of its consideration of whether to appoint Deloitte as UPS’s independent registered public accounting
firm for 2020 and to recommend to the board that shareowners ratify this appointment. As part
of this review, the Audit Committee considered
the continued independence, objectivity and professional skepticism of Deloitte. The Audit Committee also considered, among other
things, the length of time that Deloitte has served as UPS’s independent auditors, the breadth and complexity of UPS’s
business and its global footprint and the resulting demands placed on its auditing firm in terms of expertise in UPS’s business,
external data and management’s perception relating to the depth and breadth of Deloitte’s auditing qualification and
experience, the quantity and quality of Deloitte’s staff and global reach, the appropriateness of Deloitte’s fees,
the communication and interaction with the Deloitte team over the course of the prior year, PCAOB reports on Deloitte, and the
potential impact of changing our independent registered public accounting firm.
The Audit Committee recognized the ability
of Deloitte to provide both the necessary expertise to audit UPS’s business and the matching global footprint to audit UPS
worldwide, as well as the efficiencies to UPS resulting from Deloitte’s long-standing and deep understanding of our business.
The Audit Committee also considered the policies that Deloitte follows with respect to rotation of its key audit personnel, so
that there is a new partner-in-charge at least every five years. The Audit Committee is involved in the selection of the new partner-in-charge
of the audit engagement when there is a rotation required under applicable rules. Additionally, the Audit Committee considered
Deloitte’s focus on independence, their quality control policies, the quality and efficiency of the work performed, and the
quality of discussions and feedback sessions. Based on the results of its review, the Audit Committee concluded that Deloitte is
independent and that it is in the best interests of UPS and its shareowners to appoint Deloitte to serve as UPS’s independent
registered accounting firm for 2020. Consequently, the Audit Committee has appointed Deloitte as UPS’s independent auditors
for 2020, and the board is recommending that UPS’s shareowners ratify this appointment.
Recommendation. Based on the review
and the discussions described above, the Audit Committee recommended to the Board of Directors that the audited financial statements
be included in UPS’s Annual Report on Form 10-K for the year ended December 31, 2019 for filing with the SEC.
The Audit Committee
Carol B. Tomé, Chair*
Michael J. Burns
John T. Stankey
* Carol Tomé participated in the Audit Committee’s consideration of the matters reflected above during her service
on the Audit Committee. Rudy Markham subsequently replaced Carol as a member and Chair of the Audit Committee in March 2020 in
connection with our previously described leadership transitions.
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Principal Accounting Firm
Fees
The Audit Committee, with the ratification
of the shareowners, engaged Deloitte to perform the annual audit of the Company’s financial statements for the fiscal year
ended December 31, 2019. The aggregate fees billed to us for the fiscal years ended December 31, 2019 and 2018 by Deloitte, the
member firms of Deloitte Touche Tohmatsu Limited, and their respective affiliates are below:
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2019 |
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2018 |
Audit Fees(1) | |
$ | 16,464,000 | | |
$ | 14,558,000 |
Audit-Related Fees(2) | |
$ | 1,266,000 | | |
$ | 968,000 |
Total Audit and Audit-Related Fees | |
$ | 17,730,000 | | |
$ | 15,526,000 |
Tax Fees(3) | |
$ | 631,000 | | |
$ | 825,000 |
All Other Fees | |
$ | — | | |
$ | — |
Total Fees | |
$ | 18,361,000 | | |
$ | 16,351,000 |
(1) |
Fees for professional services performed by Deloitte for the audit of our annual
financial statements and review of financial statements included in our Form 10-Q filings, internal control attestation procedures,
statutory audits of foreign subsidiary financial statements and other services that are normally provided in connection with
statutory and regulatory filings or engagements. |
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(2) |
Fees for assurance and related services performed by Deloitte that are reasonably related
to the performance of the audit or review of our financial statements. This includes employee benefit plan and compensation
plan audits, independent service auditors’ reports, attestation procedures related to securities offerings, and other
attestations by Deloitte. |
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(3) |
Fees for professional services performed by Deloitte with respect to tax compliance work and
tax planning and advice services. This includes review of original and amended tax returns for the Company and its consolidated
subsidiaries, refund claims, and payment planning and tax audit assistance. |
Services Provided by Deloitte
All services provided by Deloitte are permissible
under applicable laws and regulations. The Audit Committee has established a policy requiring the pre-approval of all audit and
non-audit services performed by Deloitte in order to help assure that the provision of such services does not impair Deloitte’s
independence.
Proposed services may be pre-approved through
the application of detailed policies and procedures (“general pre-approval”) or by specific review of each service
(“specific pre-approval”). Unless a type of service to be provided by Deloitte has received general pre-approval, it
requires specific pre-approval by the Audit Committee. Any proposed services exceeding pre-approved cost levels also requires specific
approval by the Audit Committee.
The Audit, Audit-Related, Tax and All Other
services that have received general pre-approval of the Committee, and those services that are prohibited, are described in the
policy along
with the corresponding cost levels. The term
of any general pre-approval is twelve months from the date of pre-approval, unless otherwise stated. The Committee annually reviews
and pre-approves the services that may be provided by Deloitte without obtaining specific pre-approval, and may revise the list
from time to time based on subsequent determinations.
The Audit Committee has delegated to its
Chair the authority to pre-approve certain permitted services between the Audit Committee’s regularly scheduled meetings,
and the Chair must report any pre-approval decisions to the Audit Committee at its next scheduled meeting for review by the Audit
Committee. The policy prohibits the Audit Committee from delegating its responsibilities to management for pre-approving Deloitte’s
permitted services.
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Shareowner Proposals
In accordance with SEC rules, we have set
forth below certain shareowner proposals, along with the supporting statements of the shareowner proponents. Each shareowner proposal
is required to be voted on at our Annual Meeting only if properly presented. The Company is not responsible for any inaccuracies
they may contain.
Proposal 4 — Shareowner
Proposal Requesting the Board Prepare an Annual Report on Lobbying Activities
What am I voting on? Whether you want
to require the board to prepare an annual report on UPS lobbying activities.
Voting Recommendation: Our board of
directors recommends that shareowners vote AGAINST this proposal because:
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UPS is transparent and accountable with respect to lobbying and political activities, including providing
significant disclosures |
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UPS has consistently been named a top company for political transparency and accountability |
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UPS protects and promotes shareowner value by participating in the political process |
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The board provides independent oversight of UPS’s lobbying and political activities |
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Additional lobbying disclosure is unnecessary |
Vote Required: The proposal must be
approved by a majority of the voting power of the shares present in person or by proxy.
Shareowner Proposal
Walden Asset Management, One Beacon Street,
Boston, MA 02108, has advised us that it is the holder of at least 272,000 shares of our class B common stock and that it, along
with co-proponents whose names, addresses and share ownership will be promptly provided upon oral or written request to the UPS
Corporate Secretary, intends to submit the proposal set forth below for consideration at the Annual Meeting.
Whereas, we believe in full disclosure
of UPS’s lobbying activities and expenditures to assess whether its lobbying is consistent with UPS’s expressed goals
and in the best interests of shareowners.
Resolved: the shareholders of UPS
request the Board prepare a report, updated annually, disclosing:
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Company policy and procedures governing lobbying, both direct and indirect, and grassroots lobbying communications. |
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2. |
Payments by UPS used for (a) direct or indirect lobbying or (b) grassroots lobbying communications, in each case including
the amount of the payment and the recipient. |
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UPS’s membership in and payments to any tax-exempt organization that writes and endorses model legislation. |
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4. |
Description of management’s and the Board’s decision making process and oversight for making payments described
in sections 2 and 3 above. |
For purposes of this proposal, a “grassroots
lobbying communication” is a communication directed to the general public that (a) refers to specific legislation or regulation,
(b) reflects a view on the legislation or regulation and (c) encourages the recipient of the communication to take action with
respect to the legislation or regulation. “Indirect lobbying” is lobbying engaged in by a trade association or other
organization of which UPS is a member.
“Direct and indirect lobbying”
and “grassroots lobbying communications” include efforts at the local, state and federal levels.
The report shall be presented to the Nominating
and Corporate Governance Committee and posted on UPS’s website.
Shareowner’s Supporting Statement
We encourage transparency in UPS’s
use of funds to lobby. We appreciate UPS’ website disclosure on political contributions, but UPS’s lobbying payments
through trade associations remain secret.
UPS spent $60.7 million from 2010 - 2018
on federal lobbying. This does not include state lobbying, where UPS also lobbies but disclosure is uneven or absent. One study
found UPS spent $1,587,609 lobbying in six states from 2012 - 2015 (Sustainable Investments Institute, February 2017).
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UPS sits on the board of the Chamber of Commerce,
which has spent over $1.5 billion lobbying since 1998, and belongs to the Business Roundtable, which is lobbying against shareholder
rights to file resolutions. UPS does not disclose its memberships in, or payments to trade associations, or the amounts for lobbying.
And UPS does not disclose its membership
in tax-exempt organizations that write and endorse model legislation, such as sitting on the Private Enterprise Advisory Council
of the American Legislative Exchange Council (ALEC). UPS’s ALEC membership has drawn press scrutiny (“UPS and Pfizer’s
Dirty Little Secret,” Washington Post, December 5, 2017). Over 110 companies have left ALEC, including ExxonMobil,
Home Depot, Pepsi and Walmart.
We believe UPS’s lack of trade association
disclosure presents reputational risks. For example, UPS strongly supports efforts to mitigate the impact of climate change, yet
the Chamber opposed the Paris climate accord. UPS uses the Global Reporting Initiative (GRI) for sustainability reporting, yet
currently fails to report “any differences between its lobbying positions and any stated policies, goals, or other public
positions” under GRI Standard 415.
We urge UPS to expand its lobbying disclosure.
Response of UPS’s Board
This requested report is unnecessary because
of UPS’s already extensive disclosures regarding lobbying and political activities, the oversight provided by the board of
directors, and the Company’s existing policies. Preparing an additional special report beyond UPS’s current voluntary
and mandatory disclosures is not an efficient use of resources. Additionally, UPS’s shareowners previously rejected this
proposal in 2012, 2013, 2014, 2015, 2016, 2017, 2018 and 2019.
UPS is transparent and accountable
UPS complies with all applicable laws with
respect to disclosing political and lobbying activities and, in some cases, goes beyond what is required. The following examples
demonstrate UPS’s commitment to political transparency and accountability:
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UPS provides significant disclosures about political spending: UPS publishes
semi-annual reports disclosing the amounts and recipients of any federal and state political contributions and expenditures
made with corporate funds in the United States. UPS also discloses any payments to trade associations that receive $50,000
or more from the Company and that use a portion of the payment for political expenditures pursuant to 26 U.S.C. § 162(e)(1)
(B). These reports can be found at www.investors.ups.com. As disclosed in our most recent report, UPS did not make any federal
or state contributions or non-deductible political payments to covered trade associations during the July 1 – December
31, 2019 time period. |
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UPS provides detailed information about lobbying activities: UPS files publicly available
federal Lobbying Disclosure Act Reports each quarter. Links to these reports can be found on UPS’s web site at www.investors.ups.com.
The reports provide information about expenditures for the quarter, describe the specific pieces of legislation that were
the topic of communications, and identify the employees who lobbied on UPS’s behalf. UPS files similar periodic reports
with state agencies reflecting state lobbying activities. |
UPS has consistently been named a top
company for political transparency and accountability
The Center for Political Accountability Zicklin
Index of Corporate Political Accountability and Disclosure ranked UPS among the top of S&P 500 companies for political transparency
and accountability in 2019. This is the ninth year in a row that UPS was named as one of the top companies. A copy of the 2019
ranking can be found at www.politicalaccountability.net.
UPS protects and promotes shareowner value
by participating in the political process
UPS’s business is subject to extensive
regulation at the federal, state and local levels. We believe that we have a responsibility to our shareowners and employees to
be engaged in the political process, including lobbying activities. We understand that individual shareowners may disagree with
one or more positions expressed by certain organizations. In fact, given the variety of business issues in which many trade associations
and other groups are engaged, we do not necessarily agree with all positions taken by every organization in which we are a member.
In these circumstances, we weigh the utility of continued membership against the consequences of differing positions or opinions.
The Board provides independent oversight
of UPS’s lobbying and political activities
The President of UPS’s Public Affairs
department regularly reports to the Board of Directors and the Nominating and Corporate Governance Committee regarding UPS’s
lobbying and political activities. In addition, the Nominating and Corporate Governance Committee, which is composed entirely of
independent directors, reviews and approves UPS’s semi-annual political contribution report.
The board also monitors UPS’s memberships
in trade associations and other tax exempt organizations that engage in lobbying. UPS must often decide whether to participate
in a variety of trade associations and other tax exempt organizations. The Company may participate when involvement is consistent
with specific UPS business objectives. These decisions are subject to board oversight and are regularly reviewed by the Nominating
and Corporate Governance Committee.
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Furthermore, UPS’s decision-making
process for lobbying activities is transparent. UPS’s Public Affairs department works with senior management on furthering
business objectives and on protecting and enhancing long-term shareowner value. This is accomplished by focused involvement at
all levels of government. Moreover, the UPS Public Affairs department must approve all lobbying activities and any payments to
trade associations or other tax-exempt organizations that engage in lobbying activities.
Additional lobbying disclosure is unnecessary
UPS participates in the political process
in accordance with good corporate governance practices. The board believes UPS’s lobbying activities are transparent, and
the approval of this proposal is unnecessary given the information that is already publicly available. In addition, approval of
this proposal is not an efficient use of resources and will only serve to benefit the limited interests of a small group of shareowners.
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Proposal 5 — Shareowner Proposal to Reduce
the Voting Power of Class A Stock from 10 Votes Per Share to One Vote Per Share
What am I voting on? Whether you want the board to take steps
to reduce the voting power of the Company’s class A stock from 10 votes per share to one vote per share.
Voting Recommendation: Our board of directors recommends that
you vote AGAINST this proposal because:
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UPS’s ownership structure has contributed to its long-term success |
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UPS’s dual-class structure is unique in that class A shares are widely held by over
155,000 class A shareowners, and there is no concentration of voting power |
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Elimination of this structure will not improve the corporate governance or the long-term
financial performance of UPS |
Vote Required: The proposal must be approved by a majority
of the voting power of the shares present in person or by proxy.
Shareowner Proposal
John Chevedden, 2215 Nelson Avenue, No. 205, Redondo Beach, CA 90278,
has advised us that he is the holder of not less than 50 shares of our class B common stock and that he intends to submit the proposal
set forth below for consideration at the Annual Meeting.
Proposal 5 — Equal Voting Rights for Each Shareholder
RESOLVED: Shareholders request that our Board take steps to
ensure that all of our company’s outstanding stock has an equal one-vote per share in each shareholder voting situation.
This would encompass all practicable steps including encouragement and negotiation with current and future shareholders, who have
more than one-vote per share, to request that they relinquish, for the common good of all shareholders, any preexisting rights,
if necessary.
This proposal is not intended to unnecessarily limit our Board’s
judgment in crafting the requested change in accordance with applicable laws and existing contracts. This proposal is important
because certain shares have super-sized voting power with 10-votes per share compared to the weakling one-vote per share for other
shareholders.
With stock having 10-times more voting power our company takes our
shareholder money but does not give us in return an equal voice in our company’s management. Without a voice, shareholders
cannot hold management accountable. Plus, with the UPS shareholder-unfriendly brand of corporate governance, we had no right to
call a special meeting or act by written
consent. And we were restricted by provisions mandating an 80%-vote
in order to make a certain improvements to our corporate governance. Plus in a 5-year period our stock showed little gain: $109
to $116.
And to top bad things off our management recommended that they get
a 3-year holiday on a shareholder vote on their executive pay. The vast majority of Fortune 500 companies recommended an annual
vote on executive pay. Excellent corporate governance is a cost-effective way to improve company stock performance.
As an example for UPS, social and mobile-game maker Zynga announced
moving to a single-class share structure in 2018. At Zynga Class C shares had 70-votes per share and Class B shares had 7-votes
a share while Class A shares had one-vote per share.
Zynga executives said that a single-class share structure simplifies
the company’s stock structure and gives parity to shareholders. In its 2018 annual report, Zynga said its old multi-class
share system could limit the ability of its other stockholders to influence the company and could negatively impact its share price.
Corporate governance advocates as well as many investors and index
managers have pushed back on the UPS-type dual-class structures. S&P Dow Jones Indices said that companies with multiple classes
of shares would be barred from entering its flagship S&P 500 index.
Please vote yes: Equal Voting Rights for
Each Shareholder — Proposal 5
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Response of UPS’s Board
UPS has a unique employee ownership culture that has helped it grow
and thrive over the last 113 years. Current and former employees and their families have been significant shareowners of the Company
since its founding in 1907. This culture was instilled in the Company by UPS founder Jim Casey who always urged his partners to
run their centers and departments like their own small business. Our employee ownership culture creates a significant incentive
for our employees to help facilitate UPS’s long-term success.
The Company’s current ownership structure, which has been in
place since UPS became a public company in 1999, includes class A and class B common stock. The class A shares are held by current
and former UPS employees and their families, many of whom owned UPS shares before the Company’s initial public offering.
The Company’s class B shares are publicly traded.
“The
basic principle which I believe has contributed more than any other to the building of our business as it exists today…is
the ownership of our company by the people employed in it.”
Jim Casey, UPS Plant Managers Conference,
1955
UPS’s ownership structure has contributed to its long-term
success
Our ownership structure allows the Company to pursue long-term growth
strategies and avoid the drawbacks associated with excessive emphasis on short-term goals. In this regard, the interests of UPS
employees and class B shareowners are aligned. Management is able to run the Company with a sense of purpose by focusing on sustainable
value creation that benefits all of the Company’s constituents. We believe that the benefits of our ownership structure are
reflected in various financial metrics used to measure UPS, especially when compared with our competitors.
Our class A shareowners’ interests go well beyond UPS’s
current stock price and focus on the long-term success of the Company. Since its humble beginnings in 1907, UPS has become the
world’s largest package delivery company, a leader in the U.S. less-than-truckload industry and the premier provider of global
supply chain management solutions. We owe our success, to a significant degree, to the commitment our ownership structure inspires
in our employee owners.
UPS’s dual-class structure is unique in that class A shares
are widely held, and ownership is not concentrated in any one holder or a few holders
The board strongly disagrees with this proposal’s characterization
of UPS’s ownership structure. Some companies maintain multiple classes of stock in order to concentrate voting power with
a limited number of people (such as company founders) who have unique interests that may not necessarily align with those of other
shareowners. In contrast, UPS’s dual-class structure is unique in that the class A shares are widely held by approximately
155,000 current and former employees, from hourly employees to executive officers. Our current executive officers and directors,
collectively, hold less than 1% of the total voting power of our class A and class B common stock.
Elimination of this structure will not improve the corporate governance
or the long-term financial performance of the Company
UPS’s ownership structure should be considered in light of our
strong corporate governance practices, as discussed beginning on page 10 of this proxy statement. All but two UPS director nominees
are independent, all UPS directors are elected annually by a majority of votes cast in uncontested director elections, only independent
directors serve on the board’s Audit Committee, Compensation Committee, Nominating and Corporate Governance Committee and
Risk Committee, and we have a strong lead independent director. In addition, as part of our ongoing commitment to strong corporate
governance practices, the board regularly reviews and updates the Company’s governance policies and practices, including
the recent voluntary adoption of annual say on pay voting and a proxy access bylaw.
For the reasons discussed above, the board believes that UPS’s
ownership structure continues to be in the best interests of the Company and its shareowners. Elimination of this structure will
not improve the corporate governance or the long-term financial performance of the Company. The board also believes that our shareowners
agreed with this assessment when they rejected similar proposals in 2013, 2014, 2015, 2016, 2017, 2018 and 2019.
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Proposal 6 — Shareowner Proposal Requesting
that the Company Prepare a Report on How it Plans to Reduce its Total Contribution to Climate Change
What am I voting on? Whether you want to require the
Company to prepare a report on how it plans to reduce its total contribution to climate change and align its operations with
the Paris Agreement.
Voting Recommendation: Our Board of Directors recommends that
you vote AGAINST this proposal because:
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UPS already publishes a comprehensive and detailed annual sustainability report |
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UPS is widely recognized for its sustainability practices |
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• |
UPS has already adopted and published ambitious goals to reduce GHG emissions |
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UPS is taking steps to address our airline fuel emissions |
Vote Required: The proposal must be approved by a majority
of the voting power of the shares present in person or by proxy.
Shareowner Proposal
Trillium Asset Management, LLC, 721 NW Ninth Ave, Suite 250, Portland,
OR 97209 and Zevin Asset Management, LLC, 2 Oliver Street, Suite 806, Boston, MA 02109, have advised us that they intend to submit
the proposal set forth below for consideration at the Annual Meeting on behalf of the Trillium P21 Global Equity Fund, holder of
40,000, shares of our class B common stock, the Sundance Family Foundation, holder of 32 shares of our class B common stock, Mayberry,
LLC, holder of 130 shares of our class B common stock, Persephone, LLC, holder of 87 shares of our class B common stock, and the
Richard Voelbel Rev Trust dtd 2/21/08, holder of 85 shares of our class B common stock.
Whereas: In 2018, the Intergovernmental Panel on Climate
Change advised that net carbon emissions must fall 45 percent by 2030 and reach net zero by 2050 to limit warming below 1.5 degrees
Celsius, thereby preventing the worst consequences of climate change.
The Fourth National Climate Assessment report (2018) finds that with
continued growth in emissions, “annual losses in some U.S. economic sectors are projected to reach hundreds of billions of
dollars by 2100.”
Climate change impacts present risks to investors. A warming climate
is associated with increased supply chain disruptions, reduced resource availability, lost production, commodity price volatility,
infrastructure damage, political instability, and reduced worker efficiency, among other factors that can disrupt company operations.
The U.S. Energy Information Administration identifies the transportation
sector as the largest producer of greenhouse gas (GHG) emissions and its emissions are steadily increasing.
While UPS has implemented various initiatives to improve efficiency and reduce emissions, its total emissions have increased nearly thirteen percent since 2015. UPS does not have a goal to reduce absolute emissions from its airline which accounts for nearly 60 percent of UPS’s total emissions. UPS has not stated an intention to align its total carbon footprint with the goals of the 2015 Paris Climate Agreement — the landmark effort to limit global temperature increases to well below 2 degrees Celsius, ideally striving for 1.5 degrees above pre-industrial levels.
More than 690 leading companies, including UPS’s peer DHL Group, have committed to reduce their emissions in line with the goals of the Paris Agreement. Amazon plans to purchase 100,000 electric delivery vehicles by 2030 as part of its ambition to achieve the Paris goals ten years early.
Ramping up the scale, pace, and rigor of climate-related efforts may help unlock opportunities for growth as major business customers are increasingly demanding environmental accountability from suppliers. It may also help prepare UPS for future carbon-related regulations.
Given the impact of climate change on the economy, the environment, and human systems, and the short amount of time in which to address it, proponents believe UPS has a clear responsibility to its investors and stakeholders to clearly account for whether, and how, it plans to reduce its ongoing climate contributions.
Resolved: Shareholders request UPS issue a report, at reasonable cost and omitting proprietary information, describing if, and how, it plans to reduce its total contribution to climate change and align its operations with the Paris Agreement’s goal of maintaining global temperature increases well below 2 degrees Celsius.
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Supporting Statement: In the report, shareholders seek
information, among other issues at board and management discretion, on the relative benefits and drawbacks of integrating the following
actions:
|
• |
Adopting overall short-, medium-, and long-term, absolute GHG emissions reduction targets for the Company’s full carbon footprint, including its airline, aligned with the Paris Agreement; |
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• |
Increasing the scale, pace, and rigor of initiatives aimed at reducing the carbon intensity of UPS’s services and operations; |
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• |
Increasing investments in renewable energy resources. |
Response of UPS’s Board
UPS supports global efforts to mitigate the impact of climate change.
Sustainability is an inherent part of UPS’s strategy and business operations. We take a comprehensive, global approach to
reducing energy use and GHG emissions within our networks, as well as major portions of our value chain. As a global leader in
logistics and supply chain solutions, we transport packages and freight, facilitate international trade, and apply advanced technology
to efficiently manage the world of business. In this role, we have the opportunity to reduce GHG emissions for the supply chains
of many businesses.
“At
UPS, we’re choosing to create a future that is connected, sustainable, and inclusive.”
David Abney, UPS 2018 Corporate Sustainability Report
UPS already publishes a comprehensive and detailed annual sustainability
report
UPS is committed to sustainable business practices and transparent
sustainability reporting. We published our first Corporate Sustainability Report in 2003, and we continue to lead the way with
the adoption of new sustainability reporting standards. UPS’s annual Corporate Sustainability Report, available at www.ups.com/sustainabilityreport,
is comprehensive and already provides shareowners the information they need to assess the Company’s sustainability efforts.
This inclusive report chronicles UPS’s sustainability strategy, performance, initiatives, and engagements. We also present
data in accordance with the Global Reporting Initiative (“GRI”) Standards Comprehensive level. Producing another report
around the Company’s sustainability practices is unnecessary, not an efficient use of resources, and not in the best interests
of the Company or its shareowners.
UPS is widely recognized for its sustainability practices
We have been repeatedly and widely recognized for our sustainability
leadership. Some of the accomplishments in this area that we are most proud of include:
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• |
Listed on the Dow Jones Sustainability World Index for the seventh consecutive year and the Dow Jones Sustainability North America Index for the 15th straight year; and |
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• |
Barron’s annual list of the 100 most sustainable companies ranked UPS as No. 5 in the industrials segment and 18th overall. |
We have already adopted and published ambitious goals to reduce
GHG emissions
UPS’s senior executives effectively manage for sustainability
and are highly motivated to meet the Company’s sustainability goals. In fact, after we achieved many of our previous sustainability
goals with a 2016 target date, we set more challenging goals around topics including the environment, our workforce, and communities.
Achieving these new goals – including a goal to reduce our absolute
GHG emissions by 12% across our global ground operations by 2025 – will not be easy. We are pushing ourselves with longer-term
targets that support our sustainability vision and reinforce our commitment to create innovative solutions for global sustainability
challenges. We have established three targets to accelerate the use of renewable energy across our fleet and facilities and intend
to invest additional resources to help us meet these targets:
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• |
source 25% of total electricity needs from renewable sources by 2025; |
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• |
source 40% of ground fuel from low carbon or alternative fuels by 2025; and |
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• |
expand our rolling laboratory – 25% of annual vehicle purchases by 2020 will be alternative fuel and advanced technology vehicles. |
It is also important to note that these ambitious goals were set at
a time when our carbon footprint would be expected to increase due to the rapid growth in e-commerce volume, which is requiring
us to expand our physical network around the world. And we continue to evaluate longer-term GHG emission reduction projects beyond
2025, including projects that will address challenges associated with our airline fuel emissions.
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We are taking steps to address our airline fuel emissions
UPS is actively engaged with airline industry and non-governmental
organizations to evaluate the availability and commercial feasibility of sustainable aviation fuel. Looking beyond 2025, we are
evaluating adopting additional, enterprise-wide short-, medium- and long-term emission reduction targets that will result in additional
GHG reductions, including targets related to our airline fuel emissions.
In 2018, airline fuel made up 59% of our total Scope 1 and Scope 2
GHG emissions. Our Fuel Analytics and Sustainability Group continuously evaluates opportunities to further reduce our emissions
in this area, including accelerating efforts to reduce the carbon intensity of our fleet. We have one of the youngest fleets in
the industry with fuel-efficient aircraft, and our existing older models have been retrofitted to make them more efficient, all
to have a lower carbon footprint.
We continue to make significant capital investments in new, more fuel-efficient
aircraft. For example, we have been addressing growing U.S. and international demand by taking delivery of additional Boeing 747-8
freighter jets. The new wing and engine design on the 747-8 reduces fuel consumption and carbon emissions by 16 percent over the
747-400F. The aircraft also operates 52 percent below the International Civil Aviation Organization’s nitrous oxide limits
and is 30 percent quieter than other jumbo cargo jets.
Adding these freighters will progressively increase our ability to
optimize our air network, opening up more capacity as we reassign equipment to operations across the world. UPS also lowers flight
speeds, reduces weight where possible, optimizes flight paths, washes aircraft engines regularly and uses technology to increase
precision of aircraft departures, arrivals and taxi times.
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Important
Information About Voting at the 2020 Annual Meeting
What is included in the proxy materials, and why am I receiving
them?
The proxy materials for our Annual Meeting include this Proxy Statement
and notice of the 2020 Annual Meeting, as well as our 2019 Annual Report. If you received paper copies of these materials, you
also received a proxy card or voting instruction form. We began distributing the Proxy Statement, Annual Meeting notice and proxy
card, and Notice of Internet Availability of Proxy Materials (the “Notice”) on March 20, 2020.
When you vote, you appoint each of David P. Abney and Norman M. Brothers,
Jr. to vote your shares at the Annual Meeting as you have instructed them. If a matter that is not on the form of proxy is voted
on, then you appoint them to vote your shares in accordance with their best judgment. This allows your shares to be voted whether
or not you attend the Annual Meeting.
Why did some shareowners receive a Notice of Internet Availability
of Proxy Materials while others received a printed set of proxy materials?
We are allowed to furnish our proxy materials to requesting shareowners
over the Internet, rather than by mailing printed copies, so long as we send them a Notice. The Notice explains how to access and
review the Proxy Statement and Annual Report and vote over the Internet at www.proxyvote.com. If you received the Notice and would
like to receive printed proxy materials, follow the instructions in the Notice.
If you received printed proxy materials, you will not receive the
Notice, but you may still access our proxy materials and submit your proxy over the Internet at www.proxyvote.com.
Can I receive future proxy materials and annual reports electronically?
Yes. This Proxy Statement and the 2019 Annual Report are available
on our investor relations website 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 emails that provide links to our future annual reports and proxy materials on the
Internet. Opting to receive your proxy materials electronically will reduce costs and 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. If you
hold class B shares through a bank or broker, please refer to your voting instruction form, the Notice or other information provided
by your bank or broker for instructions on how to elect this option.
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 16, 2020 are entitled to vote. This is referred to as the “Record Date.”
A list of shareowners entitled to vote at the Annual Meeting will
be available in electronic form at the Annual Meeting on May 14, 2020 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, 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 10 votes per share.
Holders of class B common stock are entitled to one vote per share. On the Record Date, there were 155,905,943 shares of our class
A common stock and 702,540,740 shares of our class B common stock outstanding and entitled to vote.
The voting rights of any shareowner or group of shareowners, other
than any of our employee benefit plans, that beneficially owns 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.
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How do I vote?
If you hold class B shares through a bank or broker, please refer
to your voting instruction form, the Notice or other information forwarded by your bank or broker to see which voting options are
available to you. Shareowners of record may vote as described below:
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In Person. You may vote in person if you attend the Annual Meeting. Each shareowner may appoint only one proxy holder or representative to attend the meeting on his or her behalf. |
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Through the Internet. You can vote in advance of the Annual Meeting via the Internet at www.proxyvote.com. Internet voting is available 24 hours a day and will be accessible until 11:59 p.m. Eastern Time on May 13, 2020. |
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By Telephone. If you received a proxy card by mail, the toll-free telephone number is noted on your proxy card. Telephone voting is available 24 hours a day at 1-800-690-6903 and will be accessible until 11:59 p.m. Eastern Time on May 13, 2020. |
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By Mail. If you received a proxy card by mail and choose to vote in advance by mail, simply mark your proxy card, date and sign it, and return it in the postage-paid envelope. |
If you hold class A shares in the UPS Stock Fund in the UPS 401(k)
Savings Plan, you may vote your shares through the Internet, by telephone, by mail or in person at the Annual Meeting as if you
were a registered shareowner. To allow sufficient time for voting by the Plan trustee, your voting instructions must be received
by 11:59 Eastern Time on May 11, 2020.
Even if you plan to attend the Annual Meeting, we encourage you
to vote in advance. If you vote through the Internet or by telephone, you do not need to return your proxy card.
The method you use to vote in advance 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 through a bank, broker or other holder of record, you must obtain a proxy, executed
in your favor, from the bank, broker or other holder of record to be able to vote at the Annual Meeting.
BENEFICIAL SHAREOWNERS VOTING OPTIONS
If you are a beneficial owner, you will receive instructions from
your bank, broker or other nominee that you must follow in order for your shares to be voted. Many of these institutions offer
telephone and Internet voting. |
Can I revoke my proxy or change my vote?
Shareowners of record may revoke their proxy or change their vote
at any time before the polls close at the Annual Meeting by:
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submitting a subsequent proxy through the Internet, by telephone or by mail with a later date; |
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sending a written notice to our Corporate Secretary at 55 Glenlake Parkway, N.E., Atlanta, Georgia 30328; or |
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voting in person at the Annual Meeting. |
If you hold class B shares through a bank or broker, please refer
to your proxy card, the Notice or other information forwarded by your bank or broker to see how you can revoke your proxy and change
your vote.
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. A quorum is necessary to hold the Annual Meeting
and conduct business. If a quorum is not present, the Annual Meeting may be adjourned from time to time until a quorum is present.
What happens if I do not provide voting instructions or if a nominee
is unable to stand for election?
If you sign and return a proxy but do not provide voting instructions,
your shares will be voted as recommended by the board.
If a director nominee is unable to stand for election, the board may
either reduce the number of directors that serve on the board or designate a substitute nominee. 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.
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Will my shares be voted if I do not vote through 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, then your shares will not count in deciding the matters presented for shareowner
consideration at the Annual Meeting.
If your class A shares are held in the UPS Stock
Fund in the UPS 401(k) Savings Plan and you do not vote by 11:59 p.m. Eastern Time on May 11, 2020, then the Plan trustee will
vote your shares for each proposal in the same proportion as the shares held under the 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. These circumstances include voting your shares on “routine matters”
as defined by NYSE rules related to voting by banks and brokers, 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, the brokerage firm cannot vote the shares on that proposal. Shares that banks and brokerage
firms are not authorized to vote are called “broker non-votes.” Broker non-votes that are represented at the Annual
Meeting will be counted for purposes of establishing a quorum but not for determining the number of shares voted for or against
a 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 Annual 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 each of the proposals?
Our Bylaws provide for majority voting in uncontested
director elections. Therefore, 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. See “Corporate Governance – Majority Voting and Director Resignation
Policy” for an explanation of what would happen if more votes are cast against a nominee than for the nominee. Abstentions
are not considered votes cast for or against the nominee. 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 votes required
for each proposal to pass and the effect of abstentions and uninstructed shares on each proposal.
Proposal
Number |
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Item |
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Votes Required
for
Approval |
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Abstentions |
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Uninstructed
shares |
1. |
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Election of 12 directors |
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Majority of votes cast |
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No effect |
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No effect |
2. |
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Advisory vote on executive compensation |
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Majority of the voting power of the shares present in person
or by proxy |
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Same as votes against |
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No effect |
3. |
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Ratification of independent registered public accounting firm |
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Majority of the voting power of the shares present in person
or by proxy |
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Same as votes against |
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Discretionary voting by broker permitted |
4. - 6. |
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Shareowner proposals |
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Majority of the voting power of the shares present in person
or by proxy |
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Same as votes against |
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No effect |
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What do I need to bring to attend the Annual Meeting in person?
You need proof of your share ownership (such
as a recent brokerage statement or a letter 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 Annual Meeting.
Could emerging developments regarding the coronavirus
affect our ability to hold an in-person Annual Meeting?
We are closely monitoring the coronavirus situation
and if we determine that holding an in-person Annual Meeting could pose a risk to the health and safety of our shareowners, employees,
or directors, UPS may decide instead to hold a Virtual Annual Meeting. If we decide to use that format, we will make a public announcement
as soon as practicable prior to the meeting.
In the event we make arrangements to hold a Virtual
Annual Meeting, to attend and participate in the Virtual Annual Meeting, shareowners will need to access the live audio webcast
of the meeting. To do so, shareowners of record will need to visit www.virtualshareholdermeeting.com/UPS2020 and use their 16-digit
control number provided in the Notice or proxy card to log in to this website, and beneficial owners of shares held
in street name will need to follow the instructions
provided to them in the Notice, voting instruction form or other information provided by the broker, bank or other nominee that
holds their shares. We would encourage shareowners to log in to this website and access the webcast before the Virtual Annual Meeting’s
start time. Further instructions on how to attend, participate in and vote at the Virtual Annual Meeting, including how to demonstrate
your ownership of our common stock as of the record date, are available at www.virtualshareholdermeeting.com/UPS2020. Please
note you will only be able to participate in the meeting using this website if UPS decides to hold a Virtual Annual Meeting, instead
of holding an in-person Annual Meeting in Delaware.
What does it mean if I receive more than one
Notice, proxy card or voting instruction form?
This means that your shares are registered in
different names or are held in more than one account. To ensure that all shares are voted, please vote each account by using one
of the voting methods as described above.
When and where will I be able to find the voting
results?
You can find the official results of the voting
at the Annual Meeting in our Current Report on Form 8-K that we will file with the SEC within four business days after the Annual
Meeting. If
the official results are not available at that
time, we will provide preliminary voting results in the Form 8-K and will provide the final results in an amendment as soon as
they become available.
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Other
Information for Shareowners
Solicitation of Proxies
We will pay our costs of soliciting proxies.
Directors, officers and other employees, acting without special compensation, may solicit proxies by mail, email, in person or
by telephone. We will reimburse brokers, fiduciaries, custodians and other nominees for out-of-pocket expenses incurred in sending
our proxy materials
and Notice to, and obtaining voting instructions
relating to the proxy materials and Notice from, shareowners. In addition, we have retained Georgeson to assist in the solicitation
of proxies for the Annual Meeting at a fee of approximately $10,000 plus associated costs and expenses.
Eliminating Duplicative Proxy
Materials
We have adopted a procedure approved by the SEC
called “householding” under which multiple shareowners who share the same last name and address and do not participate
in electronic delivery will receive only one copy of the annual proxy materials or Notice unless we receive contrary instructions
from one or more of the shareowners. If you wish to opt out of householding and continue to receive multiple copies of the proxy
materials or Notice at the same address, or if you have
previously opted out and wish to participate
in householding, you may do so by notifying us in writing or by telephone at: UPS Investor Relations, 55 Glenlake Parkway, N.E.,
Atlanta, Georgia 30328, (404) 828-6059, and we will promptly deliver the requested materials. You also may request additional copies
of the proxy materials or Notice by notifying us in writing or by telephone at the same address or telephone number.
Submission of Shareowner Proposals
and Director Nominations
Rule 14a-8 Proposals for Inclusion in the Proxy
Statement for the 2021 Annual Meeting
Shareowners who, in accordance with Rule 14a-8
under the Securities Exchange Act of 1934, wish to present proposals for inclusion in the proxy materials to be distributed in
connection with the 2021 Annual Meeting of Shareowners must submit their proposals so that they are received by our Corporate Secretary
at 55 Glenlake Parkway, N.E., Atlanta, Georgia 30328 no later
than the close of business on November 20, 2020.
Any proposal will need to comply with SEC regulations regarding the inclusion of shareowner proposals in Company-sponsored proxy
material. As the rules of the SEC make clear, simply submitting a proposal does not guarantee its inclusion.
Proxy Access Director Nominations for Inclusion
in the Proxy Statement for the 2021 Annual Meeting
Shareowner notice of the intent to use proxy
access must be delivered by a shareowner to the Corporate Secretary at 55 Glenlake Parkway, N.E., Atlanta, Georgia 30328
not later than the close of business on the 120th day, nor earlier than the close of business on the 150th day, prior to the first
anniversary of the date the definitive proxy statement was first released to shareowners in connection with the preceding year’s
annual meeting of shareowners; provided, however, that in the event the annual meeting is more than 30 days before or after the
anniversary of the preceding year’s annual meeting, or if no annual meeting was held in the preceding year, to be timely,
the notice must be so delivered not earlier than the close of business on the 150th day prior to such annual meeting, and not later
than the close of business on the later of the 120th day prior to such annual meeting, or the 10th day following the day on which
public announcement of the date of such meeting
is first made by the Company. Therefore, any notice of the intent to use proxy access must be delivered to our Corporate Secretary
no later than the close of business on November 20, 2020 and no earlier than the close of business on October 21, 2020. However,
if the date of our 2021 Annual Meeting occurs more than 30 days before or 30 days after May 14, 2021, the anniversary of the 2020
Annual Meeting, a shareowner notice will be timely if it is delivered to our Corporate Secretary by the later of (a) the close
of business on the 120th day prior to the date of the 2021 Annual Meeting and (b) the 10th day following the day on which we first
make a public announcement of the date of the 2021 Annual Meeting. As our Bylaws make clear, simply submitting a nomination does
not guarantee its inclusion.
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Other Proposals or Director Nominations for
Presentation at the 2021 Annual Meeting
Shareowners who wish to propose business or nominate
persons for election to the Board of Directors at the 2021 Annual Meeting of Shareowners, and the proposal or nomination is not
intended to be included in our 2021 proxy materials, must provide a notice of shareowner business or nomination in accordance with
Article II, Section 10 of our Bylaws. In order to be properly brought before the 2021 Annual Meeting of Shareowners, Article II,
Section 10 of our Bylaws requires that a notice of a matter the shareowner wishes to present (other than a matter brought pursuant
to Rule 14a-8), or the person or persons the shareowner wishes to nominate as a director, must be received by our Corporate Secretary
not later than the close of business on the 90th day, nor earlier than the close of business on the 150th day, prior to the first
anniversary of the preceding year’s annual meeting. Therefore, any notice intended to be given for a proposal or nomination
not intended to be included in our 2021 proxy materials must be received by our Corporate Secretary
at 55 Glenlake Parkway, N.E., Atlanta, Georgia
30328 no later than the close of business on February 13, 2021, and no earlier than the close of business on December 15, 2020.
However, if the date of our 2021 Annual Meeting occurs more than 30 days before or 30 days after May 14, 2021, the anniversary
of the 2020 Annual Meeting, a shareowner notice will be timely if it is delivered to our Corporate Secretary by the later of (a)
the close of business on the 90th day prior to the date of the 2021 Annual Meeting and (b) the 10th day following the day on which
we first make a public announcement of the date of the 2021 Annual Meeting.
To be in proper form, a shareowner’s notice
must be a proper subject for shareowner action at the Annual Meeting and must include the specified information concerning the
proposal or nominee as described in Section 10 of our Bylaws. Our Bylaws are available on the governance page of our investor relations
website at www.investors.ups.com.
2019 Annual Report on Form
10-K
A copy of our 2019 Annual Report on Form 10-K,
including financial statements, as filed with the SEC may be obtained without charge upon written request to: Corporate Secretary,
55 Glenlake Parkway, N.E., Atlanta, Georgia 30328. It is also available on our investor relations website at www.investors.ups.com.
Other Business
Our Board of Directors is not aware of any business
to be conducted at the Annual Meeting other than the proposals described in this Proxy Statement. Should any other matter requiring
a vote of the shareowners arise, the persons named in the accompanying proxy card will vote in accordance with their
best judgment. A proxy granted by a shareowner
in connection with the Annual Meeting will give discretionary authority to the named proxy holders to vote on any such matters
that are properly presented at the Annual Meeting, subject to SEC rules.
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ANNUAL MEETING OF SHAREOWNERS |
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Thursday, May 14, 2020, 8:00 a.m. Eastern Time |
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Hotel du Pont
11th and Market Streets
Wilmington, Delaware 19801 |
Table of Contents
UNITED PARCEL SERVICE, INC.
INVESTOR RELATIONS B1F7
55 GLENLAKE PARKWAY, N.E.
ATLANTA, GA 30328
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SCAN TO VIEW MATERIALS & VOTE |
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VOTE BY INTERNET - www.proxyvote.com or scan the
QR Barcode above
Use the Internet to transmit your voting instructions and for electronic delivery of information.
Vote by 11:59 P.M. Eastern Time on May 13, 2020. Shares held in the UPS Stock Fund in
the UPS 401(k) Savings Plan must be voted by 11:59 P.M. Eastern Time on May 11, 2020.
Have your proxy card in hand when you access the website and follow the instructions to
obtain your records and to create an electronic voting instruction form.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions. Vote by 11:59 P.M. Eastern Time on May 13, 2020. Shares held in the UPS Stock Fund in the UPS 401(k) Savings Plan must be voted by 11:59 P.M. Eastern Time on May 11, 2020. Have your proxy card in hand when you call and follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope provided or
return it to United Parcel Service, Inc., c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
ELECTRONIC DELIVERY OF FUTURE SHAREOWNER COMMUNICATIONS
If you would like to reduce the mailing costs incurred by United Parcel Service, Inc., you can
consent to receiving all future proxy statements, proxy cards and annual reports electronically
via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions
above to vote by Internet and, when prompted, indicate your agreement to receive or access
shareowner communications electronically in the future.
If you vote by Internet or phone, you do not need to return this card.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: |
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E97308-P33026-Z76327 |
KEEP THIS PORTION FOR YOUR RECORDS |
DETACH AND RETURN THIS PORTION ONLY |
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. |
UNITED PARCEL SERVICE, INC. |
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The board of directors recommends you vote FOR all 12 director
nominees. |
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1. |
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To elect 12 directors nominated by the board of directors to serve
until the 2021 annual meeting of shareowners or their earlier
resignation, removal or retirement. |
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Nominees: |
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For |
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Against |
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Abstain |
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1a) |
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David P. Abney |
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o |
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o |
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o |
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1b) |
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Rodney C. Adkins |
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o |
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o |
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o |
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1c) |
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Michael J. Burns |
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o |
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o |
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o |
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1d) |
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William R. Johnson |
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o |
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o |
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o |
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1e) |
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Ann M. Livermore |
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o |
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o |
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o |
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1f) |
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Rudy H.P. Markham |
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o |
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o |
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o |
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1g) |
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Franck J. Moison |
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o |
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o |
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o |
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1h) |
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Clark T. Randt, Jr. |
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o |
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o |
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o |
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1i) |
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Christiana Smith Shi |
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o |
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o |
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o |
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1j) |
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John T. Stankey |
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o |
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o |
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o |
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1k) |
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Carol B. Tomé |
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o |
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o |
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o |
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1l) |
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Kevin M. Warsh |
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o |
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o |
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o |
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The board of directors recommends you vote FOR the following proposal: |
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For |
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Against |
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Abstain |
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2. |
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Approve on an advisory basis a resolution on executive
compensation. |
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o |
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o |
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o |
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The board of directors recommends you vote FOR the
following proposal: |
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3. |
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To ratify the appointment of Deloitte & Touche LLP as UPS’s
independent registered public accounting firm for the year ending
December 31, 2020. |
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o |
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o |
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o |
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The board of directors recommends you vote AGAINST
the following proposal: |
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4. |
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To prepare an annual report on lobbying activities. |
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o |
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o |
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o |
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The board of directors recommends you vote AGAINST
the following proposal: |
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5. |
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To reduce the voting power of class A stock from 10 votes per
share to one vote per share. |
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o |
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o |
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o |
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The board of directors recommends you vote AGAINST
the following proposal: |
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6. |
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To prepare a report on reducing UPS’s total contribution to climate
change. |
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o |
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o |
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o |
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In their discretion upon such other matters as may properly come before
the meeting or any adjournments or postponements thereof. |
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Yes |
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No |
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Please indicate if you plan to attend this meeting.* |
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o |
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o |
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Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign
personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. |
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Signature [PLEASE SIGN WITHIN
BOX] |
Date |
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Signature (Joint Owners) |
Date |
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Table of Contents
Annual Meeting of Shareowners*
Thursday, May 14, 2020, 8:00 a.m. (Eastern Time)
Hotel du Pont
11th and Market Streets
Wilmington, Delaware 19801
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The Notice and Proxy Statement and Annual Report are available at www.proxyvote.com.
*Depending on concerns about the coronavirus, or COVID-19,
we might hold a Virtual Annual Meeting instead of holding the meeting in Delaware. The Company would publicly announce a determination
to hold a Virtual Annual Meeting in a press release available at www.investors.ups.com as soon as practicable before the
meeting. In that event, the 2020 Annual Meeting would be conducted solely virtually, at the above date and time, via live audio
webcast. You or your proxyholder could participate, vote and examine a list of stockholders at the Virtual Annual Meeting by visiting
www.virtualshareholdermeeting.com/UPS2020 and using your 16 digit control number, but only if the meeting is not held in
Delaware.
UNITED PARCEL SERVICE, INC.
This proxy is solicited by the Board of Directors
for the Annual Meeting of Shareowners to be held on May 14, 2020
I hereby
appoint DAVID P. ABNEY and NORMAN M. BROTHERS, JR., or either of them, with power of substitution, as attorneys and proxies to
vote all of the shares of stock outstanding in my name as of March 16, 2020, at the Annual Meeting of Shareowners of United Parcel
Service, Inc. to be held at the Hotel du Pont, 11th and Market Streets, Wilmington, Delaware 19801, on May 14, 2020, and at any
or all adjournments or postponements thereof, as stated on the reverse side and with discretionary authority on all other matters
that properly come before the meeting. If this proxy is signed and returned but no direction is made, this proxy will be voted
as the Board of Directors recommends and in the discretion of the proxies on all other matters that may properly come before the
meeting.
If
my shares are held in the UPS Stock Fund in the UPS 401(k) Savings Plan, I direct the Trustee to vote the stock in the manner
stated on the reverse side. If this proxy is signed and returned but no direction is made, the Trustee will vote the shares
as the Board of Directors recommends and in the discretion of the Trustee on all other matters that may properly come before the
meeting. If this card is not returned by 11:59 P.M. Eastern Time on May 11, 2020 or is returned unsigned, then the Trustee
will vote the shares in the same proportion as the shares for which voting instructions are received from other participants.
The results of the voting will be held in strict confidence by the Trustee.
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)