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| Other Compensation and Governance Policies |
Stock Ownership Guidelines
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| CEO | = 8x annual salary |
| Other Executive Officers | = 5x annual salary |
| Directors | = 5x annual retainer |
Our stock ownership guidelines apply to executive officers and members of the board. 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 of the date that the executive officer or director became subject to the guideline.
As of December 31, 2022, all of the NEOs who have been subject to the guidelines for at least five years exceeded their target stock ownership. In addition, all non-employee directors who have been subject to the guidelines for at least five years exceeded their target stock ownership. RSUs are required to be held by non-employee directors until separation 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 prohibit 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. Furthermore, our employees, officers and directors are prohibited from engaging in short sales of UPS stock.
Clawback Policies
Our incentive compensation plans contain clawback provisions applicable to all outstanding awards. 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, the Committee is entitled to seek repayment or recovery of the award from that executive officer. In connection with the SEC’s recent rulemaking related to clawback policies, we expect to review and consider changes to our clawback provisions.
Employment and Severance Arrangements; Change in Control Payments
UPS has created a culture where long tenure for executives is the norm. Consequently, we do not enter into agreements providing for the continuation of employment, 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, to attract and retain senior executive talent and in furtherance of the board’s succession planning efforts, we have entered into various employment offer letters, transition agreements, retention arrangements and non-compete agreements in favor of UPS. These arrangements may provide for compensation to an executive, but do not guarantee an employment term; employment is on an at-will basis. Some of the agreements were designed to compensate the
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46 | | Notice of Annual Meeting of Shareowners and 2023 Proxy Statement |
individuals for compensation forfeited at their prior employers, to transition them into our incentive programs or to provide consideration for their agreement not to compete with UPS following their potential separation. In addition, retention arrangements are intended to incentivize those individuals to maintain their employment with UPS.
Employment Offer Letters
In connection with his appointment as Chief Digital and Technology Officer, on May 24, 2022, the Company entered into an employment offer letter with Bala Subramanian providing for: (i) an annual base salary of $725,000 (subject to future increase); (ii) a MIP award target for 2022 of 130% of base salary; (iii) an LTIP program award target of 450% of base salary (his final 2022 LTIP award payout will be prorated based on his July 2022 start date); (iv) a stock option grant target of 50% of base salary (commencing in 2023); (v) an initial grant of RSUs valued at $3,000,000, which generally vests 50% in July 2023 and 50% in July 2024; (vi) cash transition payments of $250,000 in each of August 2022, January 2023, July 2023 and January 2024; and (vii) an initial RPU grant valued at $1,000,000, generally vesting in December 2023, with the final number of RPUs subject to performance under the 2021 LTIP award. Payments are subject to his continued employment through the applicable vesting or payment dates, or termination without cause. Certain of these amounts are subject to repayment on a prorated basis if he is terminated for cause within 36 months following his July 2022 start date.
In connection with her appointment as Chief Executive Officer, on March 11, 2020, the Company entered into an employment offer letter with Carol Tomé which set out the terms of her initial compensation as previously disclosed. In connection with his appointment as Chief Financial Officer, on August 7, 2019, the Company entered into an employment offer letter with Brian Newman which set out the terms of his initial compensation as previously disclosed.
Protective Covenant Agreements
Bala Subramanian, Carol Tomé and Brian Newman have entered into protective covenant agreements with the Company, which protect UPS’s confidential information and include non-competition and non-solicitation covenants in favor of UPS. In the event that either Carol or Brian is terminated without cause, the Company is obligated to make separation payments equal to two years’ salary if it elects to enforce the post-termination non-compete covenants.
Under the terms of retention arrangements with Nando Cesarone and Kate Gutmann, each entered into customary non-competition, non-solicitation and
non-disclosure agreements in favor of the Company. If either of them is terminated without cause or resigns for “good reason”, their RSU awards will continue to vest on the schedule above.
Key Employee Severance Plan
In May 2022, the Committee approved the UPS Key Employee Severance Plan (the “Plan”). The Plan provides for severance compensation and benefits upon certain terminations of employment of key employees, including the NEOs. The severance protections under the Plan replace cash severance benefits (if any) to which a participating employee would have otherwise been entitled under their protective covenant agreements.
The Plan in general provides that if the Company terminates a participant’s employment other than due to “Cause,” “Disability Termination,” or death (a “Qualifying Termination”), the Company will pay: (i) an amount in cash equal to a pro-rata portion of the individual’s annual performance incentive award under the MIP that would have been earned for the year of termination, based on actual performance for the full performance period, with the pro-rata portion calculated based on the number of months during which the individual was employed by the Company during the applicable year; (ii) an amount in cash equal to one times (or, for the CEO, two times) the sum of the participant’s annual base salary plus the participant’s target MIP performance award in effect as of the termination date; (iii) if the participant timely and properly elects continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”), payment of the portion of their monthly COBRA premium for the participant and the participant’s dependents that exceeds the premiums paid by the participant for such coverage immediately prior to termination for up to 18 months following termination, or, in certain circumstances, an equivalent benefit (subject to certain tax-based limitations); and (iv) career counseling services up to $20,000 (or, for the CEO, up to $30,000).
In addition, with respect to RPUs granted under the MIP or LTIP, in each case granted on or after the effective date of the Plan, a participant who experiences a Qualifying Termination will generally be entitled to the same treatment that would apply in the event of “retirement” under the terms of such awards. With respect to stock options granted to a participant on or after the effective date of the Plan, such stock options (to the extent vested as of the date of the Qualifying Termination) will remain exercisable until the earlier of the first anniversary of the termination date and the original expiration date of the stock options.
Change in Control
All outstanding equity awards that are continued or assumed by a successor entity in connection with a change in control require a “double trigger” for
vesting to accelerate; that is, they also require a qualifying termination of employment prior to any acceleration of vesting.
Equity Grant Practices
Grants of awards to executive officers under our equity incentive programs are approved by the Committee. Stock options have an exercise price
equal to the NYSE closing market price on the date of grant.
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| Consideration of Previous “Say on Pay” Voting Results |
Our shareowners vote annually, on an advisory basis, to approve the compensation of our NEOs as set out in the Compensation Discussion and Analysis section and in the compensation tables and accompanying narrative disclosure in the Proxy Statement. See “Proposal 2 – Advisory Vote to Approve Named Executive Officer Compensation.” In the most recent advisory vote to approve NEO compensation, taken at the 2022 Annual Meeting of Shareowners, nearly 92% of votes cast approved our NEO compensation.
The 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. In addition, we regularly engage with our stakeholders, including on executive compensation matters. We use the results of these engagements to inform board discussions on our executive compensation policies and programs.
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48 | | Notice of Annual Meeting of Shareowners and 2023 Proxy Statement |
2022 Summary Compensation Table
The following table sets forth the compensation of our NEOs.
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Name and Principal Position | Year | Salary ($)(1) | Bonus ($) | Stock Awards ($)(2) | Option Awards ($)(3) | Non-Equity Incentive Plan Compensation ($)(4) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(5) | All Other Compensation ($)(6) | Total ($) |
Carol Tomé Chief Executive Officer | 2022 | 1,466,250 | — | 15,046,968 | 1,228,547 | 1,035,932 | — | 187,504 | 18,965,201 |
| 2021 | 1,336,251 | — | 23,670,426 | 1,125,023 | 1,397,139 | — | 92,054 | 27,620,893 |
| 2020 | 729,169 | — | 1,833,812 | 1,125,010 | — | — | 84,919 | 3,772,910 |
Brian Newman Chief Financial Officer | 2022 | 784,377 | — | 5,563,543 | 382,755 | 364,363 | — | 94,203 | 7,189,241 |
| 2021 | 760,764 | — | 10,934,230 | 373,401 | 3,128,793 | — | 56,690 | 15,253,878 |
| 2020 | 741,321 | 600,000 | 991,596 | 362,505 | 2,555,238 | — | 96,784 | 5,347,444 |
Nando Cesarone President U.S. and UPS Airline | 2022 | 768,042 | — | 4,348,893 | 351,117 | 364,278 | — | 107,812 | 5,940,142 |
| 2021 | 683,361 | — | 7,218,244 | 313,487 | 475,914 | — | 98,089 | 8,789,095 |
| 2020 | 606,495 | — | 3,699,097 | 163,548 | 357,008 | — | 60,728 | 4,886,876 |
Kate Gutmann President International, Healthcare and Supply Chain Solutions | 2022 | 781,197 | — | 4,674,444 | 377,426 | 364,278 | — | 20,676 | 6,218,021 |
| 2021 | 745,803 | — | 6,659,398 | 390,681 | 511,579 | 48,547 | 19,690 | 8,375,698 |
| 2020 | 688,896 | — | 3,664,545 | 179,714 | 409,344 | 354,807 | 19,322 | 5,316,628 |
| Bala Subramanian Chief Digital and Technology Officer | 2022 | 330,853 | 250,000(7) | 6,928,392 | — | — | — | 932 | 7,510,177 |
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(1)Represents the salary earned during the portion of the year that the executive was employed.
(2)Represents the aggregate grant date fair value for stock awards computed in accordance with FASB ASC Topic 718. These awards include LTIP RPUs, MIP RPUs, and the awards described above under “Employment Transition Awards, Retention Arrangements and Recognition Awards.” Information about the assumptions used to value these awards can be found in Note 13 “Stock-Based Compensation” in our 2022 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 2022 LTIP RPU awards, assuming maximum performance, is as follows: Tomé — $26,955,496; Newman — $9,956,640; Cesarone — $7,473,062; Gutmann — $8,032,806; and Subramanian - $6,334,038. The grant date fair value for the performance-based component of Bala Subramanian’s equity award made in connection with his employment offer letter, assuming maximum performance, is $2,308,131.
(3)Represents the aggregate grant date fair value for 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 13 “Stock-Based Compensation” in our 2022 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.
(4)Represents the cash portion of the MIP performance incentive award and the MIP ownership incentive award. Also, for Brian Newman, represents the cash portion of the performance-based cash award granted under his employment offer letter.
(5)Represents an estimate of the annual increase in the actuarial present value of the NEO’s accrued benefit under our retirement plans for the applicable year, assuming retirement at age 60 (or current age, if later). The actuarial present value of Kate Gutmann’s accrued benefit under our retirement plans decreased by $536,476 between the measurement date used for 2021 and the measurement date used for 2022. See “Executive Compensation — 2022 Pension Benefits” for additional information, including assumptions used in this calculation. The change in pension value can be impacted by a number of factors, including additional credited service, changes in amounts of compensation covered by the benefit formula, plan amendments and assumption changes.
(6)All other compensation consisted of the following:
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| Name | 401(k) Plan Retirement Contributions(a) ($) | Restoration Savings Plan Contributions(b) ($) | 401(k) Plan Match ($) | Life Insurance Premiums ($) | Financial Planning Services ($) | Healthcare Benefits ($) | Other (c) ($) | Total ($) |
| Carol Tomé | 14,500 | 120,713 | 9,150 | 21,584 | 15,000 | 5,549 | 1,008 | 187,504 |
| Brian Newman | 14,500 | 48,633 | 9,150 | 2,027 | 14,344 | 5,549 | — | 94,203 |
| Nando Cesarone | 23,200 | 53,277 | 9,150 | 1,982 | 14,654 | 5,549 | — | 107,812 |
| Kate Gutmann | — | — | 7,625 | 2,018 | 5,484 | 5,549 | — | 20,676 |
| Bala Subramanian | — | — | — | 932 | — | — | — | 932 |
(a)For plan participants hired after July 1, 2016, we generally provide a retirement contribution based on years of service.
(b)For 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.
(c)From time to time, when it is in the best interests of the Company, executive officers may be allowed or encouraged to bring a spouse to Company sponsored events. In such event, the incremental cost to the Company for spousal attendance is treated as compensation to the executive officer. Amounts in this column represent such cost.
(7) See “Employment and Severance Arrangements; Change in Control Payments” in the Compensation Discussion and Analysis for a description of cash transition payments made in connection with Bala Subramanian’s hiring.
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50 | | Notice of Annual Meeting of Shareowners and 2023 Proxy Statement |
2022 Grants of Plan-Based Awards
The following table provides information about plan-based awards granted during 2022 to each of the NEOs.
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| | Grant Date | Committee Approval Date | 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 or Units (#)(3) | All Other Option Awards: Number of Securities Underlying Options (#)(4) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards ($)(5) |
| Name | Threshold ($) | Target ($) | Maximum ($) | | Threshold (#) | Target (#) | Maximum (#) |
| Carol Tomé | — | — | — | 1,000,000 | 1,666,667 | | — | — | — | — | — | — | — |
| 3/23/2022 | — | — | — | — | | — | 53,117 | 116,857 | — | — | — | 12,252,498 |
| 3/23/2022 | — | — | — | — | | — | — | — | — | 25,357 | 214.58 | 1,228,547 |
| 2/9/2022 | — | — | — | — | | — | — | — | 12,416 | — | — | 2,794,469 |
| Brian Newman | — | — | — | 342,633 | 1,666,667 | | — | — | — | — | — | — | — |
| 3/23/2022 | — | — | — | — | | — | 19,620 | 43,164 | — | — | — | 4,525,745 |
| 3/23/2022 | — | — | — | — | | — | — | — | — | 7,900 | 214.58 | 382,755 |
| 2/9/2022 | — | — | — | — | | — | — | — | 4,611 | — | — | 1,037,798 |
| Nando Cesarone | — | — | — | 342,333 | 1,666,667 | | — | — | — | — | — | — | — |
| 3/23/2022 | — | — | — | — | | — | 14,726 | 32,397 | — | — | — | 3,396,846 |
| 3/23/2022 | — | — | — | — | | — | — | — | — | 7,247 | 214.58 | 351,117 |
| 2/9/2022 | — | — | — | — | | — | — | — | 4,230 | — | — | 952,046 |
| Kate Gutmann | — | — | — | 342,333 | 1,666,667 | | — | — | — | — | — | — | — |
| 3/23/2022 | — | — | — | — | | — | 15,829 | 34,824 | — | — | — | 3,651,275 |
| 3/23/2022 | — | — | — | — | | — | — | — | — | 7,790 | 214.58 | 377,426 |
| 2/9/2022 | — | — | — | — | | — | — | — | 4,546 | — | — | 1,023,168 |
| Bala Subramanian | — | — | — | — | — | | — | — | — | — | — | — | — |
| 7/18/2022 | 6/8/2022 | — | — | — | | — | 5,554 | 12,219 | — | — | — | 1,049,151 |
| 9/30/2022 | 6/8/2022 | — | — | — | | — | 16,830 | 37,026 | — | — | — | 2,879,108 |
| 7/18/2022 | 6/8/2022 | — | — | — | | — | — | — | 16,660 | — | — | 3,000,133 |
(1)Reflects, as applicable, the target and maximum values of the cash portion of the 2022 MIP award for each NEO. A participant’s first MIP award is paid entirely in vested class A stock. The potential payments for the MIP award are performance-based and therefore at risk.
(2)Potential number of RPUs that could be earned under the 2022 LTIP if the target or maximum performance goals are attained. Bala Subramanian’s potential number of RPUs that could be earned under the 2022 LTIP have been prorated based on his start date. For Bala, also includes a one-time grant of LTIP RPUs made in connection with his hiring, with the final payout subject to Company performance under the 2021 LTIP Award.
(3)For NEOs other than Bala Subramanian, represents the number of RPUs or shares of class A stock granted in 2022 pursuant to the 2021 MIP. For Bala Subramanian, represents an initial grant of RSUs made in connection with his hiring, which generally vests in equal increments on July 18, 2023 and 2024, provided he remains an employee through the applicable vesting dates.
(4)Represents stock options granted under the Stock Option program in 2022. Bala Subramanian did not receive a Stock Option Award in 2022 based on his July 2022 start date.
(5)Grant date fair value under FASB ASC Topic 718 of the LTIP RPUs, MIP RPUs, stock options and the initial awards to Bala Subramanian, as applicable, granted to each of the NEOs in 2022. 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 2022 LTIP and under the performance-based initial RPU grant for Bala Subramanian, which have performance conditions, are computed based on the probable outcome of the performance conditions. There can be no assurance that any value will ever be realized.
2022 Outstanding Equity Awards at Fiscal Year-End
The following table shows the number of shares covered by exercisable options, unexercisable options, and unvested RSUs and RPUs held by the NEOs on December 31, 2022.
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| | 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) |
| Carol Tomé | 40,504 | 60,757 | 99.28 | 6/1/2020 | 6/1/2030 | | — | — | — | — |
| | 9,523 | 38,096 | 165.66 | 2/10/2021 | 2/10/2031 | | — | — | — | — |
| — | 25,357 | 214.58 | 3/23/2022 | 3/23/2032 | | — | — | — | — |
| | — | — | — | — | — | | 12,813 | 2,227,438 | 115,460 | 20,071,566 |
| Brian Newman | 12,154 | 18,232 | 105.54 | 2/12/2020 | 2/12/2030 | | — | — | — | — |
| | 3,161 | 12,644 | 165.66 | 2/10/2021 | 2/10/2031 | | — | — | — | — |
| — | 7,900 | 214,58 | 3/23/2022 | 3/23/2032 | | — | — | — | — |
| | — | — | — | — | — | | 4,758 | 827,216 | 46,488 | 8,081,474 |
| Nando Cesarone | 735 | — | 106.87 | 3/1/2017 | 3/1/2027 | | — | — | — | — |
| | 756 | 757 | 106.43 | 3/1/2018 | 3/1/2028 | | — | — | — | — |
| | 633 | 633 | 104.45 | 3/22/2018 | 3/22/2028 | | — | — | — | — |
| | 1,692 | 3,383 | 111.80 | 2/14/2019 | 2/14/2029 | | — | — | — | — |
| | 2,742 | 8,226 | 105.54 | 2/12/2020 | 2/12/2030 | | — | — | — | — |
| | 2,653 | 10,616 | 165.66 | 2/10/2021 | 2/10/2031 | | — | — | — | — |
| | — | 7,247 | 214.58 | 3/23/2022 | 3/23/2032 | | — | — | — | — |
| | — | — | — | — | — | | 22,173 | 3,854,628 | 33,214 | 5,773,922 |
| Kate Gutmann | 8,066 | 2,017 | 106.43 | 3/1/2018 | 3/1/2028 | | — | — | — | — |
| | 5,822 | 3,882 | 111.80 | 2/14/2019 | 2/14/2029 | | — | — | — | — |
| | 6,025 | 9,039 | 105.54 | 2/12/2020 | 2/12/2030 | | — | — | — | — |
| | 1,825 | 7,304 | 165.66 | 2/10/2021 | 2/10/2031 | | — | — | — | — |
| | 1,331 | 5,326 | 163.25 | 3/25/2021 | 3/25/2031 | | — | — | — | — |
| — | 7,790 | 214.58 | 3/23/2022 | 3/23/2032 | | — | — | — | — |
| | — | — | — | — | — | | 24,335 | 4,230,472 | 32,385 | 5,629,808 |
| Bala Subramanian | — | — | — | — | — | | 16,925 | 2,942,190 | 22,636 | 3,935,042 |
(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 equity incentive plans, unvested stock options become fully vested on the retirement date for the NEOs if they meet certain service requirements.
(2)Unvested stock awards in this column include: (a) RPUs granted as part of the MIP in 2018 that vest over a five-year period with approximately 20% of the award vesting on January 15 of each year; (b) RPUs granted as part of the 2021 MIP which vest one year after the grant date; (c) the initial grant of RSUs made to Bala Subramanian in connection with his hiring, which vests 50% on each of July 18, 2023 and 2024; (d) the 2020 special grants of RSUs to Nando Cesarone and Kate Gutmann, which generally vest as follows: 25% on May 13, 2021, 25% on May 13, 2022 and 50% on May 13, 2023,; and (e) the 2021 special grant of RSUs to Kate Gutmann which generally vest as follows: 25% on March 25, 2022; 25% on March 25, 2023; and 50% on March 25, 2024. Values are rounded to the closest unit.
(3)Market value based on NYSE closing price of the class B common stock on the last trading day of the year of $173.84.
(4)Represents the potential units to be earned under the 2021 and 2022 LTIP awards, and any DEUs allocated since the grants were made, at target performance level. For the 2022 LTIP award, which has a performance period ending December 31, 2024, the maximum number of RPUs that could be earned is as follows: Tomé — 119,847; Newman — 44,268; Cesarone — 33,227; Gutmann — 35,715; and Subramanian - 37,369. For the 2021 LTIP award, which has a performance period ending December 31, 2023 (and was granted to NEOs other than Bala Subramanian), the maximum number of RPUs that could be earned is as follows: Tomé — 134,165; Newman — 58,005; Cesarone — 39,844; and Gutmann — 35,532. For Bala Subramanian, also includes the target number of RPUs that could be earned under the initial grant of RPUs made in connection with his hiring, with the actual payout based on Company performance under the 2021 LTIP. The maximum number of RPUs that could be earned in connection with this award is 12,430.
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52 | | Notice of Annual Meeting of Shareowners and 2023 Proxy Statement |
2022 Option Exercises and Stock Vested
The following table sets forth the subject number of shares and corresponding value realized during 2022 regarding options that were exercised, and restricted stock units and restricted performance units that vested, for each NEO.
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| | Option Awards | | Stock Awards |
| Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | | Number of Shares Acquired on Vesting (#)(1) | Value Realized on Vesting ($)(2) |
| Carol Tomé | — | — | | 109,934 | 19,110,927 |
| Brian Newman | — | — | | 56,597 | 10,084,523 |
| Nando Cesarone | 7,129 | 878,894 | | 46,193 | 8,272,992 |
| Kate Gutmann | 27,501 | 2,807,919 | | 44,410 | 8,054,814 |
| Bala Subramanian | — | — | | — | — |
(1)Consists of: the 2021 MIP RPUs that vested on February 10, 2022; the 2022 MIP RPUs that vested on December 31, 2022; the 2020 LTIP RPUs at target that vested on December 31, 2022; and the portion of special RSUs awarded in prior years to Nando Cesarone and Kate Gutmann that vested in 2022. Vested RPUs and RSUs are distributed to participants in an equivalent number of shares of class A common stock.
(2)Based on the NYSE closing price of the class B common stock on the applicable vesting date.
2022 Pension Benefits
The following table quantifies the pension benefits expected to be paid to each NEO from the UPS Retirement Plan and the UPS Excess Coordinating Benefit Plan as of December 31, 2022. The terms of each are described below.
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| Name | Plan Name | Number of Years Credited Service (#)(2) | Present Value of Accumulated Benefit ($)(3) | Payments During Last Fiscal Year ($) |
Carol Tomé(1) | UPS Retirement Plan | — | — | — |
| | UPS Excess Coordinating Benefit Plan | — | — | — |
| | Total | — | — | — |
Brian Newman(1) | UPS Retirement Plan | — | — | — |
| | UPS Excess Coordinating Benefit Plan | — | — | — |
| | Total | — | — | — |
Nando Cesarone(1) | UPS Retirement Plan | — | — | — |
| | UPS Excess Coordinating Benefit Plan | — | — | — |
| | Total | — | — | — |
| Kate Gutmann | UPS Retirement Plan | 33.0 | 1,265,887 | — |
| | UPS Excess Coordinating Benefit Plan | — | — | — |
| | Total | — | 1,265,887 | — |
Bala Subramanian(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)Represents years of service as of December 31, 2022 for all plans.
(3)Represents the total discounted value of the monthly lifetime benefit earned at December 31, 2022, assuming the individual 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 individual. The present values are based on discount rates of 5.71% and 6.07% for the UPS Retirement Plan and UPS Excess Coordinating Benefit Plan, respectively, at December 31, 2022. 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 UPS Retirement Plan and white collar for the UPS Excess Coordinating Benefit Plan), with mortality improvements after 2012 using the MP-2021 projection scale adjusted to converge to 0.5% in 2027 on the SOA Retirement Plan’s Experience Committee model.
The UPS Retirement Plan is non-contributory 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. In accordance with the terms of the Excess Coordinating Benefit Plan, following a participant’s retirement, the Company pays an amount equal to the Social Security and Medicare taxes due on the present value of the benefits provided under the plan.
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, years of service with UPS and age at retirement. Participants may choose to receive a reduced benefit payable in the form of an 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 Kate Gutmann 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.
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. NEOs eligible to retire at age 60 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. These plans froze accruals after December 31, 2022.
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54 | | Notice of Annual Meeting of Shareowners and 2023 Proxy Statement |
2022 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 2022.
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| Name | Plan Name | Executive Contributions in Last FY ($)(1) | Registrant Contributions in Last FY ($)(2) | Aggregate Earnings in Last FY ($)(3) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last FYE ($)(4) |
| Carol Tomé | UPS Deferred Compensation Plan | 1,877,493 | — | (711,503) | — | 5,605,549 |
| | UPS Restoration Savings Plan | — | 120,713 | (12,274) | — | 144,160 |
| Outstanding Non-employee Director RSU Awards | — | — | (882,020) | — | 4,528,835 |
| Brian Newman | UPS Restoration Savings Plan | — | 48,633 | (5,977) | — | 54,776 |
| Nando Cesarone | UPS Restoration Savings Plan | — | 53,277 | (12,991) | — | 89,473 |
| Kate Gutmann | UPS Deferred Compensation Plan | — | — | (94,041) | — | 467,849 |
| Bala Subramanian | | — | — | — | — | — |
(1)Amounts are also included in the “Salary” column of the 2022 Summary Compensation Table.
(2)Company credits to the UPS Restoration Savings Plan, which amounts are also disclosed in the “All Other Compensation” column of the 2022 Summary Compensation Table.
(3)No amounts in this column are reported in the 2022 Summary Compensation Table.
(4)Certain amounts in this column represent salary, bonus or stock options contributed by the NEO to the plans in prior years as follows: Tomé — $2,351,438; Newman – $0; Cesarone — $0; Gutmann — $118,149; and Subramanian - $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.
Prior to December 31, 2004, contributions could be deferred from executive officers’ monthly salary and from their half-month bonus. Also 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.
| | |
| 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 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.
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56 | | Notice of Annual Meeting of Shareowners and 2023 Proxy Statement |
Potential Payments on Termination or Change in Control
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 each of Carol Tomé’s, Brian Newman’s and Bala Subramanian’s hiring, we entered into protective covenant agreements with them which protect UPS’s confidential information and include non-competition and non-solicitation covenants in favor of UPS. For Brian and Carol, if either of their employment is terminated without “cause”, then the Company is obligated to pay their base salary for up to 24 months if it elects to enforce the post-termination covenants.
We have also entered into retention arrangements and similar protective covenant agreements with Nando Cesarone and Kate Gutmann that provide for the continued vesting of their 2020 special RSU retention grants in the event they are terminated without cause or resign for “good reason”.
In May 2022, the Committee approved the UPS Key Employee Severance Plan (the “Severance Plan”). The Severance Plan provides for severance compensation and benefits upon certain terminations of employment of key employees, including the NEOs. The severance protections under the Severance Plan replace cash severance benefits (if any) to which a participating employee would have otherwise been entitled under their protective covenant agreements (as described above).
The Severance Plan in general provides that if the Company terminates the employment of a participant other than due to “Cause,” “Disability Termination,” or death (a “Qualifying Termination”), the Company will pay: (i) an amount in cash equal to a pro-rata portion of the individual’s annual performance incentive award under the MIP that would have been earned for the year of termination, based on actual performance for the full performance period, with the pro-rata portion calculated based on the number of months during which the individual was employed by the Company during the applicable year; (ii) an amount in cash equal to one times (or, for the CEO, two times) the sum of the participant’s annual base salary plus the participant’s target MIP performance award in effect as of the termination date; (iii) if the participant timely and properly elects continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”), payment of the portion of their monthly COBRA premium for the participant and the participant’s dependents that exceeds the premiums paid by the participant for such coverage immediately prior to termination for up to 18 months following termination, or, in certain circumstances, an equivalent benefit (subject to certain tax-based limitations); and (iv) career
counseling services up to $20,000 (or, for the CEO up to $30,000).
In addition, with respect to RPUs granted under the MIP or LTIP, in each case granted on or after the effective date of the Severance Plan, a participant who experiences a Qualifying Termination will generally be entitled to the same treatment that would apply in the event of “retirement” under the terms of such awards. With respect to stock options granted to a participant on or after the effective date of the Severance Plan, such stock options (to the extent vested as of the date of the Qualifying Termination) will remain exercisable until the earlier of the first anniversary of the termination date and the original expiration date of the stock options.
For terminations of employment not governed by retention arrangements or the Severance Plan, our equity incentive plans and related documents contain provisions that affect outstanding awards to all plan participants, including the NEOs, in the event of a participant’s death, disability, retirement, or a change in control (as defined below) of the Company.
Upon a participant’s death, disability or retirement:
•Options will immediately vest, and remain exercisable until the tenth anniversary of the date of grant;
•Shares of restricted stock, RSUs or RPUs that are no longer subject to performance conditions will immediately vest. In the case of a participant’s death, shares (or cash, as applicable) attributable to the number of restricted shares, RSUs or RPUs will be transferred to the participant’s estate within 90 days. In the case of a participant’s disability or retirement, shares (or cash, as applicable) attributable to the number of restricted shares, RSUs or RPUs will be transferred to the participant on the same schedule as if they had remained employed; and
•Shares of restricted stock, RSUs and RPUs that are still subject to performance conditions shall be deemed earned on a prorated basis for the number of months worked during the performance period. In the case of a participant’s death, shares (or cash, as applicable) attributable to the prorated number of restricted shares, RSUs or RPUs calculated at target performance level will be transferred to the participant’s estate within 90 days. In the case of a participant’s disability or retirement, shares (or cash, as applicable) attributable to the prorated number of restricted shares, RSUs or RPUs calculated based on actual performance results for the full performance period will be transferred to the participant following the end of the performance period.
Upon a change in control, if the successor company does not continue, assume or substitute other grants for outstanding awards, or upon a change in control followed by a termination of the grantee’s employment by UPS without cause or by the grantee for good reason:
•Options will immediately vest and become exercisable;
•Shares of restricted stock, RSUs or RPUs that are no longer subject to performance conditions will immediately vest; and
•Shares of restricted stock, RSUs and RPUs that are still subject to performance conditions will be deemed earned to the extent that actual achievement of the applicable performance conditions can be determined, or on a prorated basis for the portion of the performance period completed prior to the change in control or qualifying termination, based on target or actual performance.
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| Other Outstanding Awards; No Tax Gross-Ups |
Any other awards which may be outstanding would vest and be paid generally as described above (except, where applicable, timing of payment generally will be tied to such change in control, rather
than termination or resignation). We do not provide for the payment of tax gross-ups on outstanding awards.
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58 | | Notice of Annual Meeting of Shareowners and 2023 Proxy Statement |
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 30, 2022. The closing price per share of our class B common stock on the NYSE on the last trading day of 2022 was $173.84. The actual amounts to be paid under any of the scenarios can only be determined at the time of such NEO’s separation from the Company.
| | | | | | | | | | | |
| Name | Separation Pay(1) ($) | Accelerated/Continued Vesting of Equity Awards(2) ($) | Total ($) |
| Carol Tomé | | | |
| Termination (voluntary or involuntary for cause) | — | — | — |
| Termination (involuntary without cause) | 9,000,000 | — | 9,000,000 |
| Change in Control (with qualifying termination) | 9,000,000 | 17,293,446 | 26,293,446 |
| Retirement | — | 17,293,446 | 17,293,446 |
| Death | — | 17,293,446 | 17,293,446 |
| Disability | — | 17,293,446 | 17,293,446 |
| Brian Newman | | | |
| Termination (voluntary or involuntary for cause) | — | — | — |
| Termination (involuntary without cause) | 1,818,592 | — | 1,818,592 |
| Change in Control (with qualifying termination) | 1,818,592 | 6,397,536 | 8,216,128 |
| Retirement | — | — | — |
| Death | — | 6,397,536 | 6,397,536 |
| Disability | — | 6,397,536 | 6,397,536 |
| Nando Cesarone | | | |
| Termination (voluntary or involuntary for cause) | — | — | — |
| Termination (involuntary without cause) | 1,817,000 | 3,095,764 | 4,912,764 |
| Change in Control (with qualifying termination) | 1,817,000 | 7,782,250 | 9,599,250 |
| Retirement | — | — | — |
| Death | — | 7,782,250 | 7,782,250 |
| Disability | — | 7,782,250 | 7,782,250 |
| Kate Gutmann | | | |
| Termination (voluntary or involuntary for cause) | — | — | — |
| Termination (involuntary without cause) | 1,817,000 | 3,242,333 | 5,059,333 |
| Change in Control (with qualifying termination) | 1,817,000 | 7,980,706 | 9,797,706 |
| Retirement | — | — | — |
| Death | — | 8,153,289 | 8,153,289 |
| Disability | — | 8,153,289 | 8,153,289 |
| Bala Subramanian | | | |
| Termination (voluntary or involuntary for cause) | — | — | — |
| Termination (involuntary without cause) | 1,667,500 | 4,581,270 | 6,248,770 |
| Change in Control (with qualifying termination) | 1,667,500 | 4,581,270 | 6,248,770 |
| Retirement | — | — | — |
| Death | — | 4,581,270 | 4,581,270 |
| Disability | — | 4,581,270 | 4,581,270 |
(1)Represents the benefits under the UPS Key Employee Severance Plan. For Carol Tomé, represents two times her annual base salary and two times her target MIP award (200% of base salary). For the other NEOs, represents one times their annual base salary and a sum equalling their target MIP awards (130% of base salary).
(2)Represents the value of accelerated or continued vesting of stock options and RPUs in accordance with the terms of our equity incentive plans and the applicable award certificates. Also includes the 2021 and 2022 LTIP awards calculated at target. The performance measurement period for the 2021 LTIP award ends December 31, 2023, and performance measurement period for the 2022 LTIP award ends December 31, 2024. With respect to Nando Cesarone and Kate Gutmann, includes the continued vesting of the one-time RSU awards to each as described in “Employment Transition Awards, Retention Arrangements and Recognition Awards” above.
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 30, 2022 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 as defined in our equity incentive compensation plans is generally 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 under applicable SEC rules and requirements) shall be considered as though such person were a member of the Incumbent Board.
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60 | | Notice of Annual Meeting of Shareowners and 2023 Proxy Statement |
Equity Compensation Plans
The following table sets forth information as of December 31, 2022 concerning shares of our common stock authorized for issuance under our equity compensation plans.
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| 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) | 8,771,515 | 19.98 | 24,341,714(2) |
| Equity compensation plans not approved by security holders | — | N/A | — |
| Total | 8,771,515 | 19.98 | 24,341,714 |
(1)Includes all equity incentive compensation plans and the Discounted Employee Stock Purchase Plan, each of which has been approved by our shareowners. Effective with the approval of the 2021 Omnibus Incentive Compensation Plan (the “2021 Plan”) in May 2021, no additional securities may be issued under prior equity incentive compensation plans. 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 2021 Plan. Awards that are subject to performance conditions are reported at the maximum performance level, which may overstate the dilution associated with such awards.
(2)In addition to grants of options, warrants or rights, this number includes up to 13,889,472 shares of common stock or other stock-based awards that may be issued under the 2021 Plan, and up to 10,452,242 shares of common stock that may be issued under the Discounted Employee Stock Purchase Plan. This number does not include shares under prior equity incentive compensation plans 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.
For purposes of this disclosure, the 2022 annual total compensation of the median compensated employee was $52,144; our CEO’s 2022 annual total compensation was $18,977,605, and the ratio of these amounts was 364-to-one.
Our CEO’s 2022 annual total compensation was different from the amount included in the 2022 Summary Compensation Table “Total” column. Amounts related to healthcare benefits, which are available generally to all salaried employees of the Company, are included in the annual total compensation amounts above. The CEO’s and median employee’s Company-paid healthcare benefit amounts were $12,404 and $5,937 respectively. For the CEO, this amount is not included in the 2022 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 2022 pay ratio reported above, we used a median employee whose compensation most closely aligned with the prior year median compensated employee, who is no longer employed by the company. We believe there has been no change in our employee population or employee compensation arrangements that would significantly impact our pay ratio disclosure. For these purposes, we identified the
median compensated employee from our employee population as of October 1, 2020, using total taxable wages (Form W-2 Box 1 or equivalent) paid to our employees in fiscal year 2020. We determined our total workforce as of October 1, 2020 to consist of 547,857 employees. As permitted by SEC rules, under the 5% “De Minimis Exemption,” we excluded 26,368 non-U.S. employees, or 4.8% of our total workforce. As a result of these exclusions, our median compensated employee was identified from an employee population of 521,489 employees.
The excluded countries and their employee populations were as follows: Argentina (242 employees), Australia (486 employees), Austria (185 employees), Bahrain (28 employees), Belarus (23 employees), Belgium (1,008 employees), Brazil (692 employees), Chile (113 employees), Colombia (1,064 employees), Costa Rica (343 employees), Czech Republic (453 employees), Denmark (531 employees), Dominican Republic (116 employees), Ecuador (65 employees), Egypt (29 employees), El Salvador (30 employees), Finland (187 employees), Greece (143 employees), Guam (2 employees), Guatemala (73 employees), Honduras (39 employees), Hong Kong (1,013 employees), Hungary (417 employees), Indonesia (159 employees), Ireland (1,133 employees), Italy (1,279 employees), Jamaica (4 employees), Japan (644 employees), Kazakhstan (36 employees), Kuwait (54 employees), Luxembourg (11 employees), Macau (2 employees), Malaysia (302 employees), Mexico (2,489 employees), Morocco (60 employees), New Zealand (27 employees), Nicaragua (25 employees), Nigeria (288 employees), Norway (105 employees), Pakistan (59 employees), Panama (32 employees), Peru (77 employees), Philippines (1,470 employees), Portugal (195 employees), Puerto Rico (442 employees), Romania (142 employees), Russia (571 employees), Singapore (1,219 employees), Slovakia (18 employees), Slovenia (51 employees), South Africa (277 employees), South Korea (558 employees), Spain (1,314 employees), Sweden (938 employees), Switzerland (703 employees), Taiwan (970 employees), Thailand (473 employees), Turkey (1,992 employees), Ukraine (89 employees), United Arab Emirates (532 employees), U.S. Virgin Islands (10 employees), and Vietnam (336 employees).
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62 | | Notice of Annual Meeting of Shareowners and 2023 Proxy Statement |
Pay Versus Performance
As required by Item 402(v) of Regulation S-K, we are providing the following table and related disclosures.
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Year(1) | Summary Comp Table Total for First CEO ($) | Summary Comp Table Total for Second CEO ($) | Comp Actually Paid to First CEO ($) | Comp Actually Paid to Second CEO ($) | Average Summary Comp Table Total for Non-CEO Named Executive Officers ($) | Average Comp Actually Paid to Non-CEO Named Executive Officers ($) | Value of Initial Fixed $100 Investment Based on: | Net Income (millions) ($) | Adjusted Operating Profit(3) (millions) ($) |
Total Shareholder Return ($) | Peer Group(2) Total Shareholder Return ($) |
| 2022 | N/A | 18,965,201 | N/A | 13,072,062 | 6,714,395 | 5,141,166 | 162.33 | 131.11 | 11,548 | 13,853 | |
| 2021 | N/A | 27,620,893 | N/A | 43,250,361 | 10,489,120 | 19,573,719 | 193.56 | 152.83 | 12,890 | 13,144 | |
| 2020 | 5,842,130 | 3,772,910 | 37,662,113 | 13,337,679 | 5,454,192 | 11,181,872 | 147.28 | 118.18 | 1,343 | 8,718 | |
(1)In 2022, Carol Tomé was the CEO and the Non-CEO NEOs were Brian Newman, Nando Cesarone, Kate Gutmann and Bala Subramanian; in 2021, Carol Tomé was the CEO and the Non-CEO NEOs were Brian Newman, Scott Price, Nando Cesarone and Kate Gutmann; and in 2020 the CEOs were David Abney (First CEO) and Carol Tomé (Second CEO), and the Non-CEO NEOs were Brian Newman, Nando Cesarone, Kate Gutmann, Juan Perez and George Willis.
(2)Our peer group is represented by the Dow Jones Transportation Average.
(3)Determined by reference to our publicly reported adjusted operating profit for each of 2022, 2021 and 2020.
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CEO SCT Total to CAP Reconciliation | |
Year | Summary Compensation Table Total for CEO ($) | Deductions from SCT Total(1) ($) | Additions to SCT Total(2) ($) | Compensation Actually Paid ($) | |
2022 | 18,965,201 | 16,275,515 | 10,382,376 | 13,072,062 | |
2021 | 27,620,893 | 24,795,449 | 40,424,917 | 43,250,361 | |
2020(3) | 3,772,910 | 2,958,822 | 12,523,591 | 13,337,679 | |
| 5,842,130 | 3,192,625 | 35,012,608 | 37,662,113 | |
(1)Represents the grant-date fair value of stock awards granted during the year (2022: $15,046,968, 2021: $23,670,426, 2020: Carol Tomé $1,833,812 and David Abney $1,411,585), the grant-date fair value of option awards granted during the year (2022: $1,228,547, 2021: $1,125,023, 2020: Carol Tomé $1,125,010 and David Abney $1,153,237) and the aggregate change in the actuarial present value of accumulated benefits under pension plans (2022: $—, 2021: $—, 2020: Carol Tomé $— and David Abney $627,803).
(2)Represents the service cost for defined benefit pension plans (2022: $—, 2021: $—, 2020: Carol Tomé $— and David Abney $234,743) and the value of equity awards calculated using the required methodology for determining CAP, as further detailed in the table below.
(3)In 2020 the CEOs were Carol Tomé (first row) and David Abney (second row).
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CEO Equity Component of CAP | | |
Year | Year End Fair Value of Equity Awards Granted in the Year
($) | Year over Year Change in Fair Value of Outstanding Unvested Equity Awards Granted in Prior Years
($) | Fair Value as of Vesting Date of Equity Awards Granted and Vested in the Year
($) | Year over Year Change in Fair Value of Equity Awards Granted in Prior Years that Vested in the Year
($) | Total Equity Award Adjustments
($) | |
2022 | 12,805,107 | (5,289,424) | — | 2,866,693 | 10,382,376 | |
2021 | 33,072,440 | 6,256,043 | — | 1,096,434 | 40,424,917 | |
2020(1) | 12,523,591 | — | — | — | 12,523,591 | |
| 9,170,268 | 14,290,966 | — | 11,316,631 | 34,777,865 | |
(1)In 2020 the CEOs were Carol Tomé (first row) and David Abney (second row).
•Stock awards issued under the Management Incentive Plan are valued at the New York Stock Exchange (“NYSE”) closing price of UPS Class B stock at each applicable date.
•Outstanding stock awards issued under the Long-Term Incentive Plan are valued using a Monte Carlo model at each reporting date with performance outcomes assumed to be at target. Long-Term Incentive Plan awards that vest during the period are valued using actual performance outcomes and the NYSE closing price of UPS Class B stock on the vesting date.
•Option awards are valued using a Black-Scholes option pricing model that reflects the award’s exercise price relative to the NYSE closing price of UPS Class B common stock at each valuation date.
•Stock award valuations include reinvested dividends where applicable.
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Average Other NEOs SCT Total to CAP Reconciliation | |
Year | Summary Compensation Table Total for Other NEOs ($) | Deductions from SCT Total(1) ($) | Additions to SCT Total(2) ($) | Compensation Actually Paid ($) | |
2022 | 6,714,395 | 5,656,643 | 4,083,413 | 5,141,166 | |
2021 | 10,489,120 | 8,564,070 | 17,648,669 | 19,573,719 | |
2020 | 5,454,192 | 3,897,928 | 9,625,608 | 11,181,872 | |
(1)Represents the average grant date fair value of stock awards granted during the year (2022: $5,378,818, 2021: $8,200,584, 2020: $3,369,684), the average grant date fair value of option awards granted during the year (2022: $277,825, 2021: $351,349, 2020: $210,297) and the average aggregate change in the actuarial present value of accumulated benefits under pension plans (2022: $—, 2021: $12,137, 2020: $317,948).
(2)Represents the average service cost for defined benefit pension plans (2022: $44,219, 2021: $40,127, 2020: $65,084) and the value of equity awards calculated using the required methodology for determining CAP, as further detailed in the table below.
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Average Other NEOs Equity Component of CAP | | |
Year | Year End Fair Value of Equity Awards Granted in the Year
($) | Year over Year Change in Fair Value of Outstanding Unvested Equity Awards Granted in Prior Years
($) | Fair Value as of Vesting Date of Equity Awards Granted and Vested in the Year
($) | Year over Year Change in Fair Value of Equity Awards Granted in Prior Years that Vested in the Year
($) | Total Equity Award Adjustments
($) | |
2022 | 4,841,329 | (1,551,105) | — | 748,969 | 4,039,194 | |
2021 | 12,120,687 | 2,762,650 | — | 2,725,205 | 17,608,542 | |
2020 | 6,340,480 | 1,480,751 | 120,414 | 1,618,878 | 9,560,524 | |
•Stock awards issued under the Management Incentive Plan are valued at the NYSE closing price of UPS Class B stock at each applicable date.
•Outstanding stock awards issued under the Long-Term Incentive Plan are valued using a Monte Carlo model at each reporting date with performance outcomes assumed to be at target. Long-Term Incentive Plan awards that vest during the period are valued using actual performance outcomes and the NYSE closing price of UPS Class B stock on the vesting date.
•Option awards are valued using a Black-Scholes option pricing model that reflects the award’s exercise price relative to the NYSE closing price of UPS Class B common stock at each valuation date.
•Stock award valuations include reinvested dividends where applicable.
The following table lists the financial performance measures that we believe represent the most important financial performance measures we use to link compensation actually paid to our NEOs for fiscal 2022 to our performance.
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Tabular List | |
| Adjusted operating profit | |
Revenue growth | |
Adjusted return on invested capital | |
Adjusted earnings per share growth | |
Adjusted free cash flow | |
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64 | | Notice of Annual Meeting of Shareowners and 2023 Proxy Statement |