DEF 14A 1 d270150ddef14a.htm DEF14A DEF14A
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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

Filed by the Registrant x                            Filed by a Party other than the Registrant ¨

Check the appropriate box:

 

¨ Preliminary Proxy Statement

 

¨ Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

 

x Definitive Proxy Statement

 

¨ Definitive Additional Materials.

 

¨ Soliciting Material Pursuant to Section 240.14a-12

 

 

UNITED PARCEL SERVICE, INC.

 

(Name of Registrant as Specified in Its Charter)

 

Payment of Filing Fee (Check the appropriate box):

 

x No fee required.

 

¨ Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

  (1) Title of each class of securities to which transaction applies:

 

  

 

  (2) Aggregate number of securities to which transaction applies:

 

  

 

  (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11:

 

  

 

  (4) Proposed maximum aggregate value of transaction:

 

  

 

  (5) Total fee paid:

 

  

 

 

¨ Fee paid previously with preliminary materials.

 

¨ Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

  (1) Amount previously paid:

 

  

 

  (2) Form, Schedule or Registration Statement No.:

 

  

 

  (3) Filing Party:

 

  

 

  (4) Date Filed:

 

  

 


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LOGO

55 Glenlake Parkway, N.E., Atlanta, Georgia 30328

Notice of Annual Meeting of Shareowners

May 3, 2012

To our Shareowners:

United Parcel Service, Inc.’s annual meeting of shareowners will be held at the Hotel du Pont, 11th and Market Streets, Wilmington, Delaware 19801, on Thursday, May 3, 2012, at 8:00 a.m. The purposes of the meeting are:

1.    To elect 12 directors nominated by the board of directors and named in the proxy statement to serve until our 2013 annual meeting of shareowners;

2.    To ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the year ending December 31, 2012;

3.    To approve the 2012 Omnibus Incentive Compensation Plan;

4.    To approve an amendment to the Discounted Employee Stock Purchase Plan;

5.    To vote on a shareowner proposal described in the proxy statement, if properly presented at the meeting; and

6.    To transact any other business as may properly come before the meeting.

Our board of directors has fixed the close of business on March 5, 2012 as the record date for determining holders of our common stock entitled to notice of, and to vote at, the annual meeting.

 

LOGO

Teri P. McClure

Secretary

Atlanta, Georgia

March 12, 2012

Your vote is important. Please vote as soon as possible by using the Internet or by telephone or, if you received a paper copy of the proxy card by mail, by signing and returning the proxy card. Instructions for your voting options are described on the Notice of Internet Availability of Proxy Materials or proxy card.

Important Notice Regarding the Availability of Proxy Materials for the Shareowner Meeting to be Held on May 3, 2012: The proxy statement and annual report are available at www.proxyvote.com.


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TABLE OF CONTENTS

 

2012 PROXY STATEMENT SUMMARY

    1   

GENERAL INFORMATION ABOUT THE 2012 ANNUAL MEETING

    5   

OUR BOARD OF DIRECTORS

    10   

GOVERNANCE OF OUR COMPANY

    18   

Selecting Nominees for Director

    18   

Director Independence

    18   

Executive Sessions of our Non-Management Directors

    19   

Board Leadership Structure

    19   

Board’s Role in Risk Oversight

    20   

Corporate Governance Guidelines, Committee Charters and Code of Business Conduct

    20   

Committees of the Board of Directors

    21   

Compensation Committee Interlocks and Insider Participation

    22   

Compensation Practices and Risk Management

    22   

Meetings of the Board of Directors and Attendance at the Annual Meeting

    23   

Majority Voting for Directors and Director Resignation Policy

    23   

Related Person Transactions

    24   

Communicating with our Board of Directors

    24   

Other Information Regarding Directors

    24   

AUDIT COMMITTEE MATTERS

    25   

Report of the Audit Committee

    25   

Principal Accounting Firm Fees

    26   

COMPENSATION OF DIRECTORS

    27   

OWNERSHIP OF SECURITIES

    29   

EXECUTIVE COMPENSATION

    32   

2011 Compensation Discussion and Analysis

    32   

Report of the Compensation Committee

    47   

Summary Compensation Table for 2011

    48   

Grants of Plan-Based Awards for 2011

    50   

Outstanding Equity Awards at Fiscal Year-End 2011

    51   

Option Exercises and Stock Vested in 2011

    53   

2011 Pension Benefits

    54   

2011 Non-Qualified Deferred Compensation

    55   

Potential Payments on Termination or Change in Control

    57   

PROPOSAL 1 — ELECTION OF DIRECTORS

    61   

PROPOSAL 2 — RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

    62   

PROPOSAL 3 — APPROVAL OF THE 2012 OMNIBUS INCENTIVE COMPENSATION PLAN

    63   

EQUITY COMPENSATION PLANS

    72   

PROPOSAL 4 — APPROVAL OF AN AMENDMENT TO THE DISCOUNTED EMPLOYEE STOCK PURCHASE PLAN

    73   

PROPOSAL 5 — SHAREOWNER PROPOSAL

    76   

OTHER INFORMATION FOR SHAREOWNERS

    78   

Section 16(a) Beneficial Ownership Reporting Compliance

    78   

Solicitation of Proxies

    78   

Householding

    78   

Shareowner Proposals or Shareowner Nominations for Director at 2013 Annual Meeting

    78   

2011 Annual Report on Form 10-K

    79   

Other Business

    79   

ANNEX A — UNITED PARCEL SERVICE, INC. 2012 OMNIBUS INCENTIVE COMPENSATION PLAN

    A-1   


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2012 PROXY STATEMENT SUMMARY

UNITED PARCEL SERVICE, INC.

55 Glenlake Parkway, N.E., Atlanta, Georgia 30328

 

This summary highlights information contained elsewhere in this proxy statement. This summary does not contain all of the information that you should consider, and you should read the entire proxy statement carefully before voting.

UPS 2012 Annual Meeting Information

 

   

Date and Time:    May 3, 2012, at 8:00 a.m. Eastern Time.

 

   

Place:    Hotel du Pont, 11th and Market Streets, Wilmington, Delaware 19801.

 

   

Record Date:    March 5, 2012.

 

   

Voting:    Holders of class A common stock are entitled to ten votes per share; holders of class B common stock are entitled to one vote per share.

 

   

Admission:    To attend the meeting in person you will need proof of your share ownership as of the record date and a form of government-issued photo identification.

 

Items of Business

 

      Board Vote
Recommendation
   Page Reference
(for more
information)

1.     Elect 12 directors named in this proxy statement

   FOR ALL    61

2.     Ratify the appointment of our independent registered public accounting firm

   FOR    62

3.     Approve the 2012 Omnibus Incentive Compensation Plan

   FOR    63

4.     Approve an amendment to the Discounted Employee Stock Purchase Plan

   FOR    73

5.     Vote on a shareowner proposal

   AGAINST    76

 

 

Notice of Annual Meeting of Shareowners and 2012 Proxy Statement       1


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2012 PROXY STATEMENT SUMMARY (CONTINUED)

Director Nominees

The board of directors of United Parcel Service, Inc. (“we,” “our,” “us,” the “Company,” or “UPS”) is asking you to elect the 12 nominees for director. The table below provides summary information about the 12 director nominees. A nominee will only be elected if the number of votes for the nominee’s election is greater than the number of votes cast against that nominee. For more information about the nominees, including information about the qualifications, attributes and skills of the nominees, see page 10.

 

Name   Age   Director
Since
  Occupation   Board Committees   Inde-
pendent

F. Duane Ackerman

  69   2007   Retired Chairman and Chief Executive Officer, BellSouth Corporation   Nominating and Corporate Governance*; Compensation; Executive   Yes

Michael J. Burns

  60   2005   Former Chairman, Chief Executive Officer and President, Dana Corporation   Audit   Yes

D. Scott Davis

  60   2006   Chairman and Chief Executive Officer, United Parcel Service, Inc.   Executive   No

Stuart E. Eizenstat

  69   2005   Partner, Covington & Burling LLP   Compensation; Nominating and Corporate Governance   Yes

Michael L. Eskew

  62   1998   Former United Parcel Service, Inc. Chairman and Chief Executive Officer   Executive   No

William R. Johnson

  63   2009   Chairman, President and Chief Executive Officer, H.J. Heinz Company   Nominating and Corporate Governance   Yes

Candace Kendle

  64   2011   Retired Chairwoman and Chief Executive Officer, Kendle International Inc.   Audit   Yes

Ann M. Livermore

  53   1997   Director and Former Executive Vice President, Hewlett-Packard Company   Compensation   Yes

Rudy H.P. Markham

  66   2007   Retired Financial Director, Unilever PLC and Unilever NV   Audit   Yes

Clark T. Randt, Jr.

  66   2010   President of Randt & Co. LLC.   Nominating and Corporate Governance   Yes

John W. Thompson

  62   2000   Chief Executive Officer, Virtual Instruments Corporation   Compensation*   Yes

Carol B. Tomé

  55   2003   Chief Financial Officer and Executive Vice President
— Corporate Services, The Home Depot, Inc.
  Audit*   Yes
* Committee Chair

 

 

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2012 PROXY STATEMENT SUMMARY (CONTINUED)

Ratification of the Appointment of the Independent Registered Public Accounting Firm

The board is asking you to ratify the selection of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2012. Set forth below is summary information with respect to the fees for services provided to us during the fiscal years ended December 31, 2011 and 2010. For more information, see page 26.

 

      2011      2010  

Fees Billed:

                 

Audit Fees

   $ 11,926,000       $ 12,396,000   

Audit-Related Fees

     871,000         1,042,000   

Tax Fees

     1,406,000         1,572,000   

Total

   $ 14,203,000       $ 15,010,000   

 

Approval of the 2012 Omnibus Incentive Compensation Plan

The board is asking you to approve the 2012 Omnibus Incentive Compensation Plan (“2012 Plan”) which will replace the 2009 Omnibus Incentive Compensation Plan (“2009 Plan”). Pursuant to the 2012 Plan, options, stock appreciation rights, restricted stock, restricted stock units, restricted performance shares, restricted performance units and other cash awards can be granted to directors and employees. 27 million shares of common stock have been reserved for issuance under the 2012 Plan, which includes unissued shares that were previously authorized for issuance under previous plans. For more information, see page 63.

Approval of an Amendment to the Discounted Employee Stock Purchase Plan

The board is asking you to approve an amendment to the Discounted Employee Stock Purchase Plan (the “DESPP”) to increase to 20 million the number of shares of our class A common stock available under the DESPP. The DESPP was approved by shareowners in 2001 and is designed to encourage our employees’ interest in our success and provide retention incentives. The amendment to increase the number of shares available under the DESPP is being presented to shareowners for their approval so that the DESPP continues to qualify as an “employee stock purchase plan” within the meaning of Section 423 of the Internal Revenue Code of 1986. For more information, see page 73.

Vote on a Shareowner Proposal

The board is asking you to vote against a shareowner proposal. For more information about the proposal, see page 76.

2011 Key Compensation Decisions

Our Named Executive Officers are compensated in a manner consistent with our strategy, competitive practice, sound compensation governance principles and shareowner interests.

Key compensation decisions for the Named Executive Officers for 2011 include the following:

 

   

Our executive compensation programs were modified effective January 2011 so that all elements of incentive compensation will be performance-based.

 

   

Base salaries of the NEOs were increased by an average of 4.8%; the base salary of the CEO was increased by 3.0% which was equivalent to the merit budget for the broader management population in 2011.

 

 

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2012 PROXY STATEMENT SUMMARY (CONTINUED)

 

   

We modified our stock ownership guidelines for the CEO (eight times annualized salary) and the Management Committee (five times annualized salary).

 

   

2011 annual incentive awards for the NEOs under the Management Incentive Program were earned at 95% of target. 2011 MIP ownership incentive awards equal to one month’s salary were earned by the NEOs.

 

   

The 10% potential increase in restricted performance units under the Long-Term Incentive program was not earned for the 2007 grant maturing in 2012, due to below target earnings per share performance.

 

   

2011 Long-Term Incentive Performance award tranches were earned at 95% of target based on revenue growth and operating return on invested capital, and the 2011 earnings measurement tranche for the 2009 LTIP was earned at target based on earnings per share achievement.

 

   

The Compensation Committee approved a redesigned financial services benefit for executives through which the Company will reimburse fees from financial and tax services providers up to $15,000 per year per covered executive.

For more information, see page 32.

 

2011 Compensation Summary

The following table summarizes the compensation of our Chief Executive Officer, Chief Financial Officer and our next three most highly compensated executive officers, to whom we refer collectively as the Named Executive Officers for fiscal year 2011. For more information, see page 48.

 

Name   Salary($)    

Stock

Awards($)

   

Option

Awards($)

   

Non-Equity

Incentive

Plan

Compen-

sation($)

   

Change in
Pension Value($)

   

All

Other

Compen-

sation($)

    Total($)  

D. Scott Davis

    1,022,865        9,455,012        450,807        566,996        1,516,686        40,732        13,053,098   

David P. Abney

    473,097        3,614,104        148,937        209,431        606,037        14,931        5,066,537   

Kurt P. Kuehn

    427,137        1,865,518        136,299        191,660        535,154        29,815        3,185,583   

David A. Barnes

    418,137        1,566,642        132,558        186,386        485,169        14,648        2,803,540   

John J. McDevitt

    429,621        1,633,122        135,248        190,183        168,010        13,796        2,569,980   

2013 Annual Meeting

 

Shareowner proposals submitted for inclusion in the proxy statement for our annual meeting of shareowner expected to be held in May 2013 pursuant to SEC Rule 14a-8 must be received by us by November 12, 2012. For more information, see page 78.

 

 

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PROXY STATEMENT FOR THE 2012 ANNUAL MEETING OF SHAREOWNERS

GENERAL INFORMATION ABOUT THE 2012 ANNUAL MEETING

 

This proxy statement and proxy card are furnished in connection with the solicitation of proxies to be voted at our annual meeting of shareowners, which will be held at the Hotel du Pont, 11th and Market Streets, Wilmington, Delaware 19801, on May 3, 2012, at 8:00 a.m. On March 12, 2012, we began mailing to shareowners of record either a Notice of Internet Availability of Proxy Materials (“Notice”) or this proxy statement and proxy card.

Why am I receiving this proxy statement and proxy card?

You have received these proxy materials because our board of directors is soliciting your proxy to vote your shares at the annual meeting. This proxy statement describes issues on which we would like you to vote at our annual meeting of shareowners. It also gives you information on these issues so that you can make an informed decision.

Our board of directors has made this proxy statement and proxy card available to you on the Internet because you own shares of United Parcel Service, Inc. common stock, in addition to delivering printed versions of this proxy statement and proxy card to certain shareowners by mail.

When you vote by using the Internet, by telephone or (if you received your proxy card by mail) by signing and returning the proxy card, you appoint D. Scott Davis and Teri P. McClure as your representatives at the annual meeting. They will vote your shares at the annual meeting as you have instructed them or, if an issue that is not on the proxy card comes up for vote, in accordance with their best judgment. This way, your shares will be voted whether or not you attend the annual meeting. Even if you plan to attend the annual meeting, we encourage you to vote in advance by using the Internet, by telephone or (if you received your proxy card by mail) by signing and returning your proxy card. If you vote by Internet or telephone, you do not need to return your proxy card.

Why did I receive a Notice of Internet Availability of Proxy Materials in the mail instead of a printed set of proxy materials?

Pursuant to rules adopted by the Securities and Exchange Commission, we are permitted to furnish our proxy materials over the Internet to our shareowners by delivering a Notice in the mail. We are sending the Notice to certain record shareowners. If you received a Notice by mail, you will not receive a printed copy of the proxy materials in the mail. Instead, the Notice instructs you on how to access and review the proxy statement and annual report over the Internet at www.proxyvote.com. The Notice also instructs you on how you may submit your proxy over the Internet. If you received a Notice by mail and would like to receive a printed copy of our proxy materials, you should follow the instructions for requesting these materials contained in the Notice.

Shareowners who receive a printed set of proxy materials will not receive the Notice, but may still access our proxy materials and submit their proxies over the Internet at www.proxyvote.com.

Who is entitled to vote?

Holders of our class A common stock and our class B common stock at the close of business on March 5, 2012 are entitled to vote. March 5, 2012 is referred to as the record date.

In accordance with Delaware law, a list of shareowners entitled to vote at the meeting will be available in electronic form at the place of the annual meeting on May 3, 2012 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 &

 

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GENERAL INFORMATION ABOUT THE 2012 ANNUAL MEETING (CONTINUED)

 

Tunnell, 1201 North Market Street, Wilmington, Delaware 19899, between the hours of 9:00 a.m. and 5:00 p.m.

To how many votes is each share of common stock entitled?

Holders of class A common stock are entitled to ten votes per share. Holders of class B common stock are entitled to one vote per share. On the record date, there were 234,712,717 shares of our class A common stock and 723,864,575 shares of our class B common stock outstanding and entitled to vote.

The voting rights of any shareowner or shareowners as a group, other than any of our employee benefit plans, who beneficially own shares representing more than 25% of our voting power are limited so that the shareowner or group may cast only one one-hundredth of a vote with respect to each vote in excess of 25% of the outstanding voting power.

How do I vote?

Shareowners of record may vote by using the Internet, by telephone or (if you received a proxy card by mail) by mail as described below. Shareowners also may attend the meeting and vote in person. If you hold class B shares through a bank or broker, please refer to your proxy card, Notice or other information forwarded by your bank or broker to see which voting options are available to you.

 

   

You may vote by using the Internet.    The address of the website for Internet voting is www.proxyvote.com. Internet voting is available 24 hours a day and will be accessible until 11:59 p.m. Eastern Time on May 2, 2012. Easy-to-follow instructions allow you to vote your shares and confirm that your instructions have been properly recorded.

 

   

You may vote by telephone.    The toll-free telephone number is noted on your proxy card. Telephone voting is available 24 hours a day and will be accessible until 11:59 p.m. Eastern Time on May 2, 2012. Easy-to-follow voice prompts allow you to vote your shares and confirm that your instructions have been properly recorded.

 

   

You may vote by mail.    If you received a proxy card by mail and choose to vote by mail, simply mark your proxy card, date and sign it, and return it in the postage-paid envelope.

The method you use to vote will not limit your right to vote at the annual meeting if you decide to attend in person. Written ballots will be passed out to anyone who wants to vote at the annual meeting. If you hold your shares in “street name,” you must obtain a proxy, executed in your favor, from the holder of record to be able to vote in person at the annual meeting.

What if I change my mind after I return my proxy?

You may revoke your proxy and change your vote at any time before the polls close at the annual meeting. You may do this by:

 

   

submitting a subsequent proxy by using the Internet, by telephone or by mail with a later date;

 

   

sending written notice of revocation to our Corporate Secretary at 55 Glenlake Parkway, N.E., Atlanta, Georgia 30328; or

 

   

voting in person at the annual meeting.

Attendance at the meeting will not by itself revoke a proxy.

How many votes do you need to hold the annual meeting?

The presence, in person or by proxy, of the holders of a majority of the votes entitled to be cast at the annual meeting will constitute a quorum. If a quorum is present, we can hold the annual meeting and conduct business.

 

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GENERAL INFORMATION ABOUT THE 2012 ANNUAL MEETING (CONTINUED)

 

On what items am I voting?

You are being asked to vote on five items:

 

   

to elect 12 directors nominated by the board of directors and named in the proxy statement to serve until our 2013 annual meeting of shareowners;

 

   

to ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the year ending December 31, 2012;

 

   

to approve the 2012 Plan;

 

   

to approve an amendment to the DESPP; and

 

   

to vote on a shareowner proposal.

No cumulative voting rights are authorized, and dissenters’ rights are not applicable to these matters.

How may I vote in the election of directors, and how many votes must the nominees receive to be elected?

With respect to the election of directors, you may:

 

   

vote FOR the 12 nominees for director;

 

   

vote AGAINST the 12 nominees for director;

 

   

vote FOR certain of the nominees for director and AGAINST certain of the nominees for director; or

 

   

ABSTAIN from voting on one or more of the nominees for director.

The UPS Restated Certificate of Incorporation, as amended (the “Certificate of Incorporation”) and the UPS Amended and Restated Bylaws (the “Bylaws”) provide for majority voting in uncontested director elections. At this annual meeting, a nominee will only be elected if the number of votes cast for the nominee’s election is greater than the number of votes cast against that nominee. Abstentions are not considered votes cast for or against the nominee under a majority voting standard.

What happens if a nominee is unable to stand for election?

If a 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.

How may I vote for the proposal to ratify the appointment of our independent registered public accounting firm, and how many votes must this proposal receive to pass?

With respect to this proposal, you may:

 

   

vote FOR the ratification of the accounting firm;

 

   

vote AGAINST the ratification of the accounting firm; or

 

   

ABSTAIN from voting on the proposal.

In order to pass, the proposal must receive the affirmative vote of a majority of the votes that could be cast at the annual meeting by the holders who are present in person or by proxy. If you abstain from voting on the proposal or your broker is unable to vote your shares, it will have the same effect as a vote against the proposal.

 

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GENERAL INFORMATION ABOUT THE 2012 ANNUAL MEETING (CONTINUED)

 

How may I vote for the approval of the 2012 Plan, and how many votes must the proposal receive to pass?

With respect to the proposal to approve the 2012 Plan, you may:

 

   

vote FOR the proposal;

 

   

vote AGAINST the proposal; or

 

   

ABSTAIN from voting on the proposal.

The approval of the 2012 Plan must receive the affirmative vote of a majority of the votes that could be cast at the annual meeting by the holders who are present in person or by proxy to pass. If you abstain from voting on the proposal, it will have the same effect as a vote against the proposal.

In addition, New York Stock Exchange (“NYSE”) rules require that the total votes cast on the proposal to approve the 2012 Plan must represent a majority of the shares entitled to vote on the proposal.

How may I vote for the approval of an amendment to the DESPP, and how many votes must the proposal receive to pass?

With respect to the proposal to approve an amendment to the DESPP, you may:

 

   

vote FOR the proposal;

 

   

vote AGAINST the proposal; or

 

   

ABSTAIN from voting on the proposal.

The approval of an amendment to the DESPP must receive the affirmative vote of a majority of the votes that could be cast at the annual meeting by the holders who are present in person or by proxy to pass. If you abstain from voting on the proposal, it will have the same effect as a vote against the proposal.

How may I vote with respect to the shareowner proposal, and how many votes must the proposal receive to pass?

With respect to the shareowner proposal, you may:

 

   

vote FOR the proposal;

 

   

vote AGAINST the proposal; or

 

   

ABSTAIN from voting on the proposal.

The shareowner proposal must receive the affirmative vote of a majority of the votes that could be cast at the annual meeting by the holders who are present in person or by proxy to pass. If you abstain from voting on the proposal, it will have the same effect as a vote against the proposal.

How does the board of directors recommend that I vote?

The board recommends that you vote as follows:

 

   

FOR all 12 director nominees;

 

   

FOR the ratification of the appointment of our independent registered public accounting firm;

 

   

FOR the approval of the 2012 Plan;

 

   

FOR the approval of an amendment to the DESPP; and

 

   

AGAINST the shareowner proposal.

What happens if I sign and return my proxy card but do not provide voting instructions?

If you return a signed card but do not provide voting instructions, your shares will be voted as follows:

 

   

FOR all 12 director nominees;

 

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GENERAL INFORMATION ABOUT THE 2012 ANNUAL MEETING (CONTINUED)

 

 

   

FOR the ratification of the appointment of our independent registered public accounting firm;

 

   

FOR the approval of the 2012 Plan;

 

   

FOR the approval of an amendment to the DESPP; and

 

   

AGAINST the shareholder proposal.

Will my shares be voted if I do not vote by using the Internet, by telephone or by signing and returning my proxy card?

If you own class A shares and you do not vote by using the Internet, by telephone or (if you received a proxy card by mail) by signing and returning your proxy card, then your class A shares will not be voted and will not count in deciding the matters presented for shareowner consideration at the annual meeting. If your class A shares are held pursuant to The UPS Stock Fund in the UPS Savings Plan and you do not vote by using the Internet, by telephone or by signing and returning your proxy card, the trustee will vote your shares for each proposal in the same proportion as the shares held pursuant to that plan for which voting instructions were received.

If your class B shares are held in street name through a bank or broker, your bank or broker may vote your class B shares under certain limited circumstances if you do not provide voting instructions before the annual meeting, in accordance with NYSE rules that govern the banks and brokers. These circumstances include voting your shares on “routine matters,” such as the ratification of the appointment of our independent registered public accountants described in this proxy statement. With respect to this proposal, therefore, if you do not vote your shares, your bank or broker may vote your shares on your behalf or leave your shares unvoted.

The remaining proposals are not considered routine matters under NYSE rules relating to voting by banks and brokers. When a proposal is not a routine matter and the brokerage firm has not received voting instructions from the beneficial owner of the shares with respect to that proposal, the brokerage firm cannot vote the shares on that proposal. This is called a “broker non-vote.” Broker non-votes that are represented at the annual meeting will be counted for purposes of establishing a quorum, but not for determining the number of shares voted for or against the non-routine matter.

We encourage you to provide instructions to your bank or brokerage firm by voting your proxy. This action ensures your shares will be voted at the meeting in accordance with your wishes.

What do I need to show to attend the annual meeting in person?

You will need proof of your share ownership (such as a recent brokerage statement or letter from your broker showing that you owned shares of United Parcel Service, Inc. common stock as of March 5, 2012) and a form of government-issued photo identification. If you do not have proof of ownership and valid photo identification, you may not be admitted to the annual meeting. All bags, briefcases and packages will be held at registration and will not be allowed in the meeting.

Can I receive future proxy materials and annual reports electronically?

Yes. This proxy statement and the 2011 Annual Report to Shareowners are available on our investor relations website located at www.investors.ups.com. Instead of receiving paper copies in the mail, shareowners can elect to receive an email that provides a link to our future annual reports and proxy materials on the Internet. Opting to receive your proxy materials electronically will save us the cost of producing and mailing documents to your home or business, will reduce the environmental impact of our annual meetings, and will give you an automatic link to the proxy voting site.

If you are a shareowner of record and wish to enroll in the electronic proxy delivery service for future meetings, you may do so by going to www.icsdelivery.com/ups and following the prompts.

 

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OUR BOARD OF DIRECTORS

We currently have 12 members that make up our board of directors. All directors are elected annually to serve until the next annual meeting and until their respective successors are elected.

Dr. Candace Kendle was first appointed to the board in August 2011. She was recommended as a candidate for director by one of our independent directors. The remaining 11 directors have served since our last annual meeting.

All the members of our board have been nominated for reelection at this annual meeting. See “Proposal 1 — Election of Directors” on page 61.

Biographical information about our directors and the experience, qualifications, attributes and skills considered by our Nominating and Corporate Governance Committee and board in determining that the nominee should serve as a director appears below. For additional information about how we identify and evaluate nominees for director, see “Governance of our Company — Selecting Nominees for Director” on page 18.

 

LOGO  

 

F. Duane Ackerman

  

 

Age 69

  

 

Director since 2007

  Retired Chairman and Chief Executive Officer, BellSouth Corporation
 

Duane has been Retired Chairman and Chief Executive Officer of BellSouth Corporation, a communication services company, since 2007. He previously served as Chairman and Chief Executive Officer of BellSouth Corporation from 2005 through 2006 and as Chairman, President and Chief Executive Officer from 1998 until 2005, after first being elected President and Chief Executive Officer in 1997. He is also a director at Allstate Corporation and The Home Depot, Inc.

 

Duane brings to the board, among other skills and qualifications, many years of experience as Chairman and Chief Executive Officer of BellSouth, one of the world’s largest communications companies. In that leadership role, he gained broad experience in managing a large, complex, labor-intensive business, including experience with collective bargaining arrangements. He also gained knowledge in operations and communications technology, and worked in a corporate culture in which employees, who often spend their entire career with the company, are encouraged to develop their skills through jobs with increasing responsibility. Duane also brings the experience of serving as a director of other large, complex public companies.

 

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OUR BOARD OF DIRECTORS (CONTINUED)

 

LOGO   Michael J. Burns    Age 60    Director since 2005
  Former Chairman, Chief Executive Officer and President, Dana Corporation
 

Michael was the Chairman, Chief Executive Officer and President of Dana Corporation until February 2008. He joined Dana Corporation in March 2004 after 34 years with General Motors Corporation. Michael had served as President of General Motors Europe since 1998.

 

Michael brings to the board, among his other skills and qualifications, years of senior leadership experience in managing two large, complex businesses, General Motors Europe and Dana Corporation. As Chairman and Chief Executive Officer of Dana Corporation, he gained experience leading an international organization that operated in the highly competitive vehicle component industry. As President of General Motors Europe he gained experience leading a large regional sector of General Motors that included design, engineering, manufacturing, and sales and distribution for its automotive brands in Europe as well as export to other regions of the world. During his career with General Motors, he served in ever increasing leadership responsibilities that included international assignments in Asia and Europe spanning nine years. Michael also brings deep knowledge of technology and the supply of components and services to major vehicle manufacturers in the global automotive, commercial vehicle and off-highway markets.

LOGO   D. Scott Davis    Age 60    Director since 2006
  UPS Chairman and Chief Executive Officer
 

Scott earned a bachelor’s degree in finance from Portland State University and completed the Advanced Management Program at the Wharton School of Business. He joined UPS in 1986 when the company acquired an Oregon technology company, II Morrow, where he had served as the chief financial officer and then chief executive officer. From 1991 to 1998, Scott held positions of increasing responsibility as treasury manager, financial reports and plans manager and accounting manager. From late 1998 to early 2000, he served as chief executive officer of Overseas Partners, Ltd., a Bermuda reinsurance company. Scott rejoined UPS as its vice president of finance in 2000. He joined the UPS Management Committee and assumed the role of Chief Financial Officer in 2001. In 2006, Scott was also appointed Vice Chairman. Scott became Chairman and Chief Executive Officer on January 1, 2008. He serves as a director of Honeywell International Inc. and was chairman of the board of the Federal Reserve Bank of Atlanta in 2009. He is presently a member of the President’s Export Council. Scott is also a trustee of the Annie E. Casey Foundation, the world’s largest philanthropic foundation dedicated to helping disadvantaged children.

 

Scott brings to the board, among other skills and qualifications, a unique understanding of our strategies and operations gained through his over 20 years of service to our Company, a complex, global business enterprise with a large, labor-intensive workforce. He has experience both as a Chairman and Chief Executive Officer and as a Chief Financial Officer, and significant experience in financial management. His tenure as Chairman of the Board of the Federal Reserve Bank of Atlanta also brings valuable financial experience. In addition, Scott has experience serving as a director of Honeywell, a large, global business. As described under “Board Leadership and Risk Oversight,” our Corporate Governance Guidelines call for our chief executive officer to serve as chairman.

 

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OUR BOARD OF DIRECTORS (CONTINUED)

 

LOGO   Stuart E. Eizenstat    Age 69    Director since 2005
  Partner, Covington & Burling LLP
 

Stuart has been a partner of Covington & Burling LLP in Washington, D.C. since 2001, and heads the law firm’s international practice. He served as Deputy Secretary of the United States Department of the Treasury from July 1999 to January 2001. He was Under Secretary of State for Economic, Business and Agricultural Affairs from 1997 to 1999. Stuart served as Under Secretary of Commerce for International Trade from 1996 to 1997 and was Ambassador to the European Union from 1993 to 1996. From 1977 to 1981 he was Chief Domestic Policy Advisor in the White House to President Carter. He is a trustee of Black Rock Funds, a member of the board of directors of Alcatel-Lucent and Globe Specialty Metals, chairs the International Advisory Council of The Coca-Cola Company, and serves on the International Advisory Board of GML Ltd., Veracity Worldwide and Office of Cherifien de Phosphates. Stuart is chairman of the board of the Defiant Requiem Foundation, a nonprofit organization. He has received seven honorary doctorate degrees and awards from the United States, French, German, Austrian, Belgian and Israeli governments. He was selected as the best international trade lawyer in Washington, D.C. in 2007 by Legal Times. He is the author of “Imperfect Justice: Looted Assets, Slave Labor, and the Unfinished Business of World War II”, and writes for The New York Times, The Washington Post, The Financial Times and The Wall Street Journal on a variety of economic and global issues. He has a new book, “The Future of the Jews: How Global Forces are Impacting the Jewish People, Israel, and its Relationship with the United States.”

 

Stuart brings to the board, among other skills and qualifications, experience in international trade and global economic matters as a result of a decade and a half of service at senior levels of several U.S. administrations, where among other responsibilities, he was charged with advising on international economic policy, promoting U.S. exports, assisting American business efforts abroad, enforcing laws against unfair trade practices, developing trade policy and making financial and budgetary decisions. He has also served as an advisor on international matters to large, multi-national corporations. He brings the experience of leading the international practice of a major law firm. Stuart also brings insight on environmental issues through his continuing work on climate change issues.

 

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OUR BOARD OF DIRECTORS (CONTINUED)

 

LOGO

  Michael L. Eskew    Age 62    Director since 1998
  Former UPS Chairman and Chief Executive Officer
 

Mike joined UPS in 1972, after he received a bachelor of science degree in industrial engineering from Purdue University. He also completed the Advanced Management Program at the Wharton School of Business. In 1994, Mike was named UPS’s Corporate Vice President for Industrial Engineering. Two years later he became Group Vice President for Engineering. He was appointed Executive Vice President in 1999 and Vice Chairman in 2000. In January 2002, he became Chairman and Chief Executive Officer. In January 2008, Mike retired as Chairman and Chief Executive Officer. Mike is a trustee of the Annie E. Casey Foundation. Mike also is a director of 3M Company, International Business Machines Corporation and Eli Lilly and Company.

 

Mike brings to the board, among other skills and qualifications, his significant knowledge and understanding of our business and operations, acquired through his over 35 years of experience with our Company, a complex, global business enterprise with a large, labor-intensive workforce. He has experience as the former Chairman and Chief Executive Officer of our Company, as well as experience in engineering, operations and labor issues. He brings great insight into our corporate culture in which our employees are encouraged to develop to their greatest potential throughout their career with us. Mike also has experience serving as a director of a number of other large public companies with complex global operations.

LOGO

  William R. Johnson    Age 63    Director since 2009
  Chairman, President and Chief Executive Officer of H.J. Heinz Company
 

Bill has been Chairman, President and Chief Executive Officer of the H.J. Heinz Company, a global packaged foods manufacturer, since 2000. He became President and Chief Operating Officer of Heinz in June 1996, and assumed the position of President and Chief Executive Officer in April 1998. He was named Chairman, President and Chief Executive Officer in September 2000. Bill also serves on Emerson Electric Company’s board of directors.

 

Bill brings to the board, among other skills and qualifications, experience as the current Chairman and Chief Executive Officer of H.J. Heinz, a corporation with significant international operations and a large, labor-intensive workforce. He also gained deep experience in operations, marketing, brand development and logistics through his service to H.J. Heinz. Bill’s experience also includes service as a director of other public companies.

 

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OUR BOARD OF DIRECTORS (CONTINUED)

 

LOGO   Candace Kendle    Age 64    Director since 2011
  Co-founder and Former Chairman and Chief Executive of Kendle International, Inc.
 

Dr. Kendle is the co-founder and was chairman and chief executive officer of Kendle International Inc., a global clinical research organization that delivers a wide range of clinical development and clinical trial services to biopharmaceutical companies around the world, until 2011. She is a founding member of the Association of Clinical Research Organizations, which fosters continued advancement of medical product development and introduction, and has served as chairperson of the organization. Dr. Kendle also serves on the board of the H.J. Heinz Company. She earned a doctorate in pharmacy from the University of Cincinnati, then completed post-doctoral training at the Cincinnati Children’s Hospital Medical Center and the University of North Carolina School of Public Health in Chapel Hill. Prior to founding Kendle International, Dr. Kendle held senior faculty positions at the University of North Carolina Schools of Pharmacy and Medicine; the University of Pennsylvania School of Medicine; the Philadelphia College of Pharmacy and Science, and the University of Cincinnati College of Pharmacy.

 

Candace brings to the board, among other skills and qualifications, leadership skills from her experience as the Chairman and Chief Executive Officer of a global organization, as well as insight and experience in executing strategic acquisitions, expansions into new markets, and product development. Candace also brings deep knowledge of the pharmaceutical industry as a result of her doctorate and post-doctorate work, her many years of experience as a professor and her many years of experience in the practical application of her clinical and pharmaceutical knowledge.

LOGO   Ann M. Livermore    Age 53    Director since 1997
  Director and Former Executive Vice President, Hewlett-Packard Company
 

Ann serves as a director of the Hewlett-Packard Company, after retiring as an executive of the company in 2011. In her last operational role at HP, Ann was Executive Vice President of the HP Enterprise Business, an approximately $57 billion business that encompasses storage, servers, networking, software and services (2010 revenue). The products and services from this organization serve business and public sector customers of all sizes in more than 170 countries. For more than two decades, Ann has been involved with building solutions to help HP customers manage and transform their technology environments to optimize business outcomes. 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. She also serves as a member of the board of directors of the Lucile Packard Children’s Hospital. Ann holds a bachelor’s degree in economics from the University of North Carolina at Chapel Hill and a master’s degree in business administration from Stanford University.

 

Ann brings to the board, among other skills and qualifications, extensive experience in senior leadership positions at HP, the world’s largest information technology company, 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. Ann brings the experience of working in a corporate culture in which employees are encouraged to develop and grow throughout their career.

 

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OUR BOARD OF DIRECTORS (CONTINUED)

 

 

LOGO

  Rudy H.P. Markham    Age 66    Director since 2007
  Retired Financial Director, Unilever PLC and Unilever NV
 

Rudy was the Financial Director of Unilever from August 2000 through May 2007. He joined Unilever in 1968 and from 1989-1998 was based in East Asia where he held a series of increasing responsibilities, ultimately serving as Business Group President North East Asia based in Singapore. Rudy joined the Board of Unilever as Strategy and Technology Director, became a member of its Executive Committee in May 1998 and was subsequently appointed as Financial Director. In May 2007 he retired from the Board of Unilever and on October 31, 2007 he retired as CFO. Rudy studied at Christ’s College, Cambridge, where he gained a Masters Degree in Natural Sciences. He is a fellow of the Chartered Institute of Management Accountants and of the Association of Corporate Treasurers. He also is a Non-executive Director of Legal & General Group PLC, AstraZeneca PLC and Standard Chartered PLC, where he serves as Chairman of its Audit Committee. As of February 2011, he is a member of the supervisory board of CSM, N.V. Rudy is also a Non-executive Director of the Financial Reporting Council and Non-executive Chairman of Moorfields Eye Hospital and UCLP Ltd, both of which are UK-registered institutions. In November 2009, Rudy was appointed a member of the Leverhulme Trust Board, a UK charitable foundation, and a non-executive member of the supervisory and operating boards of the British Foreign and Commonwealth Office.

 

Rudy brings to the board, among other skills and qualifications, 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, with a large, global workforce. He served in a number of finance positions, including as Chief Financial Officer, 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.

 

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OUR BOARD OF DIRECTORS (CONTINUED)

 

LOGO

  Clark T. “Sandy” Randt, Jr.    Age 66    Director since 2010
  President of Randt & Co. LLC.
 

Sandy has been the president of Randt & Co. LLC, a company that advises firms with interests in China, since 2009. He is a former U.S. ambassador to the People’s Republic of China, where he served from July 2001 until January 2009. From 1994 through 2002, he was a partner resident in the Hong Kong office of Shearman & Sterling, a major international law firm, where he headed the firm’s China practice. From 1982 through 1984, Sandy served as First Secretary and Commercial Attaché at the U.S. Embassy in Beijing. In 1974, he was the China representative of the National Council for United States-China Trade, and from 1968 to 1972, he served in the U.S. Air Force Security Service. Sandy graduated from Yale University with a B.A. in 1968 and received his law degree from the University of Michigan in 1975. He also attended Harvard Law School where he was awarded the East Asia Legal Studies Traveling Fellowship to China. Sandy is a member of the New York bar association and the Council on Foreign Relations. He is a former governor and first vice president of the American Chamber of Commerce in Hong Kong. Sandy also serves on the board of Valmont Industries, Inc. and the Board of Governors of the Yale-National University of Singapore liberal arts college.

 

Sandy brings to the board, among other skills and qualifications, experience in Asia and in facilitating business throughout Asia. He is recognized as one of America’s foremost authorities on China, and has more than 30 years of direct experience in Asia. He brings to the board experience in diplomacy and international trade gained through his years of service as a U.S. ambassador to the People’s Republic of China and in other positions at the U.S. Embassy in Beijing, as well as his service to the National Council for United States-China Trade. He has also served as an advisor on international matters to large, multi-national corporations, and brings the experience of leading the China practice of a major international law firm.

LOGO

  John W. Thompson    Age 62    Director since 2000
  Chief Executive Officer, Virtual Instruments Corporation
 

John has been Chief Executive Officer of Virtual Instruments Corporation, a storage network and virtual optimization solutions company, since May 2010. In October 2011, he retired as Chairman of the Board of Symantec Corporation, the world leader in information security and availability solutions. Until his retirement as Chief Executive Officer in 2009, John served as Chairman and Chief Executive Officer of Symantec, since April 1999. Prior to joining Symantec, he held a variety of senior leadership positions at International Business Machines Corporation, including General Manager of IBM Americas, and was a member of IBM’s Worldwide Management Council. John is a director of Microsoft Corporation, and previously served as a director of Seagate Technology.

 

John brings to the board, among other skills and qualifications, his experience as Chairman and Chief Executive Officer of Symantec, one of the world’s largest software companies and the world’s largest maker of security software, as well as in senior leadership positions at IBM and Virtual Instruments. Through his experiences at Symantec, IBM and Virtual Instruments, he has gained deep knowledge in the areas of sales, marketing, technology and operations, including managing a large workforce and overseeing international business operations. John’s experience also includes service as a director of other large public companies.

 

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OUR BOARD OF DIRECTORS (CONTINUED)

 

 

LOGO

  Carol B. Tomé    Age 55    Director since 2003
  Chief Financial Officer and Executive Vice President — Corporate Services, The Home Depot, Inc.
 

Carol has been Executive Vice President and Chief Financial Officer of The Home Depot, Inc., the world’s largest home improvement specialty retailer and the fourth largest retailer in the United States, since May 2001. In January 2007 Carol assumed the additional role of Executive Vice President — Corporate Services. Prior to that, she had been Senior Vice President — Finance and Accounting/Treasurer since February 2000. From 1995 until 2000, she served as Vice President and Treasurer. A native of Jackson, Wyoming, Carol holds a B.S. in Communication from the University of Wyoming and an M.B.A. in Finance from the University of Denver. She is an active volunteer, including serving as a member of The Committee of 200 and a member of the Atlanta Botanical Garden board. In January 2008, Carol joined the board of the Federal Reserve Bank of Atlanta and serves as chair of the board. She also serves on the board of the Metro Atlanta Chamber of Commerce.

 

Carol brings to the board, among other skills and qualifications, extensive experience in corporate finance throughout her career at Home Depot, the fourth largest retailer in the United States and the world’s largest home improvement specialty retailer. She brings the experience of currently serving as chief financial officer of a complex, multi-national business with a large, labor-intensive workforce. Carol’s role as chair of the board of the Federal Reserve Bank of Atlanta also brings a valuable financial experience.

 

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GOVERNANCE OF OUR COMPANY

 

The following sections provide an overview of our corporate governance structure and processes. Among other topics, we describe how we select directors, how we consider the independence of our directors and key aspects of our board operations.

Selecting Nominees for Director

Our board has delegated to the Nominating and Corporate Governance Committee the responsibility for reviewing and recommending to the board nominees for director. In accordance with our Corporate Governance Guidelines, the Nominating and Corporate Governance Committee, in evaluating director candidates, considers factors such as personal character, values and disciplines, ethical standards, diversity, other outside commitments, professional background and skills, all in the context of an assessment of the needs of the board at the time. In addition, each director candidate is expected to ensure that other existing and planned future commitments will not materially interfere with his or her responsibilities as a director.

The Nominating and Corporate Governance Committee’s objective is to maintain a board of individuals of the highest personal character, integrity and ethical standards, and that reflects a range of professional backgrounds and skills relevant to our business. For each of the nominees to the board, the biographies shown above highlight the experiences and qualifications that were among the most important to the Nominating and Corporate Governance Committee in concluding that the nominee should serve as a director of the Company. The Nominating and Corporate Governance Committee considers diversity in identifying nominees for director, including personal characteristics such as race and gender, as well as diversity in experience and skills relevant to the board’s performance of its responsibilities in the oversight of a complex global business.

The Nominating and Corporate Governance Committee is responsible for recommending nominees for election to the board at each annual meeting of shareowners and for identifying one or more candidates to fill any vacancies that may occur on the board. Under our Corporate Governance Guidelines, the Nominating and Corporate Governance Committee may use a variety of sources in order to identify new candidates. New candidates may be identified through recommendations from independent directors or members of management, search firms, discussions with other persons who may know of suitable candidates to serve on the board, and shareowner recommendations. Evaluations of prospective candidates typically include a review of the candidate’s background and qualifications by the Nominating and Corporate Governance Committee, interviews with the committee as a whole, one or more members of the committee, or one or more other board members, and discussions of the committee and the full board. The Committee then recommends candidates to the full board, with the full board selecting the candidates to be nominated for election by the shareowners or to be elected by the board to fill a vacancy.

The Nominating and Corporate Governance Committee will consider director candidates proposed by shareowners on the same basis as recommendations from other sources. Any shareowner who wishes to recommend a prospective candidate for the board of directors for consideration by the Nominating and Corporate Governance Committee may do so by submitting the name and qualifications of the prospective candidate in writing to the following address: Corporate Secretary, 55 Glenlake Parkway, N.E., Atlanta, Georgia 30328. Any such submission should also describe the experience, qualifications, attributes and skills that make the prospective candidate a suitable nominee for the board of directors. Our Bylaws set forth the requirements for direct nomination by a shareowner of persons for election to the board of directors. These requirements are described under “Other Business” at the end of this proxy statement.

Director Independence

Our Corporate Governance Guidelines include categorical standards adopted by the board to determine director independence that meet the listing standards set forth by the NYSE. Our Corporate Governance Guidelines are available on the governance section of our investor relations website at www.investors.ups.com.

 

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GOVERNANCE OF OUR COMPANY (CONTINUED)

 

Pursuant to the Corporate Governance Guidelines, the board undertook its annual review of director independence in February 2012. As part of this review, the board considered whether there were any relationships between each director or any member of his or her immediate family and UPS. The board also examined whether there were any relationships between an organization of which a director is a partner, shareholder or executive officer and UPS. The purpose of this review was to determine whether any such relationships were inconsistent with a determination that a director is independent. The board also evaluated the categorical standards that form a part of our Corporate Governance Guidelines.

As a result of this review, the board affirmatively determined that the following directors are independent directors: Duane Ackerman, Michael Burns, Stuart Eizenstat, Bill Johnson, Candace Kendle, Ann Livermore, Rudy Markham, Sandy Randt, John Thompson and Carol Tomé. Accordingly, 10 of our 12 directors are independent, and all directors on the following committees are independent:

 

   

Audit Committee;

 

   

Compensation Committee; and

 

   

Nominating and Corporate Governance Committee.

In determining the independence of Stuart Eizenstat, Bill Johnson, Ann Livermore, John Thompson and Carol Tomé, our board considered ordinary course relationships between UPS and the companies that employed these directors during 2011.

Executive Sessions of our Non-Management Directors

Our non-management directors hold executive sessions without management present as frequently as they deem appropriate. The presiding director for these meetings rotates among the chairpersons of the independent board committees, currently the Audit, Compensation and Nominating and Corporate Governance Committees. The presiding director determines the agenda for the session and, after the session, acts as a liaison between the non-management directors and the Chairman and Chief Executive Officer. The presiding director may invite the Chairman and Chief Executive Officer to join the session for certain discussions, as he or she deems appropriate. If the non-management directors include in the executive sessions any directors who are not independent directors, then at least once a year there will be an executive session including only the independent directors.

Board Leadership Structure

Our Corporate Governance Guidelines provide that our board will include a majority of independent directors, and the Guidelines and our Bylaws provide that our Chief Executive Officer will serve as Chairman of the Board. Accordingly, Scott Davis has served as Chairman of the Board since he was appointed Chief Executive Officer on January 1, 2008. Having our Chief Executive Officer serve as Chairman of the Board is consistent with the historical practice of UPS, as all nine of our previous Chief Executive Officers have also served as Chairman of the Board.

As described above under “Director Independence,” 10 of our 12 directors are independent. In addition, all of the directors on each of the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee are independent directors. Each of these committees is led by a committee chair who sets the agenda for the committee and reports to the full board on the committee’s work. We do not have a lead director, but our Corporate Governance Guidelines provide that our non-management directors will meet in executive session without management present as frequently as they deem appropriate, typically at the time of each regular board meeting. The chairs of the independent board committees rotate as presiding director, and the presiding director acts as a liaison between the non-management directors and the Chairman and Chief Executive Officer in connection with each regular meeting.

Our company has employed this leadership structure of having a combined Chairman and Chief Executive Officer for many years, and we believe

 

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GOVERNANCE OF OUR COMPANY (CONTINUED)

 

that this leadership structure has been effective for the Company. We believe that having a combined Chairman and Chief Executive Officer, a board with a majority of independent directors who meet regularly in executive session, and independent chairs for the board’s Audit, Compensation, and Nominating and Corporate Governance committees provides the best form of leadership for the Company and its shareowners. We have a single leader for our company and he is seen by our employees, customers, business partners, shareowners and other stakeholders as providing strong leadership for the Company, in our industry and in the communities in which we operate.

Board’s Role in Risk Oversight

Our board is responsible for overseeing our risk management. Under its charter, the Audit Committee is responsible for discussing with management policies with respect to financial risk assessment and enterprise risk management, including guidelines to govern the process by which major financial and accounting risk assessment and management is undertaken by the Company. The Audit Committee also oversees our corporate compliance programs, as well as the internal audit function. The Board’s other independent committees oversee risks associated with their respective areas of responsibility. For example, the Compensation Committee considers the risks associated with our compensation policies and practices, with respect to both executive compensation and compensation generally. In addition to the committees’ work in overseeing risk management, our full board regularly engages in discussions of the most significant risks that the Company is facing and how these risks are being managed, and the board receives reports on risk management from senior officers of the Company and from the committee chairs. The board reviews periodic assessments from the Company’s ongoing enterprise risk management process that are designed to identify potential events that may affect the achievement of the Company’s objectives.

The Company’s Senior Vice President of Legal, Compliance and Public Affairs, General Counsel and Corporate Secretary reports directly to our Chairman and Chief Executive Officer, providing him with visibility into the Company’s risk profile. The head of the Company’s compliance and internal audit functions regularly reports to the Audit Committee, and each of the General Counsel and the compliance and internal audit department manager have regularly scheduled private sessions with the Audit Committee. The board of directors believes that the work undertaken by the committees of the board, together with the work of the full board of directors and the Chairman and Chief Executive Officer, enables the board of directors to effectively oversee the Company’s risk management function.

We believe that our leadership structure, as described above, supports the risk oversight function of the board. While we have a combined Chief Executive Officer and Chairman of the Board, strong independent directors chair the various committees involved with risk oversight and there is open communication between management and directors with respect to risk oversight.

Corporate Governance Guidelines, Committee Charters and Code of Business Conduct

Our Corporate Governance Guidelines are available on the governance section of our investor relations website at www.investors.ups.com. The charters for each of the Audit, Compensation and Nominating and Corporate Governance Committees also are available on our investor relations website.

We have a long-standing commitment to conduct our business in accordance with the highest ethical principles. Our Code of Business Conduct is applicable to all the representatives of our enterprise, including our executive officers and all other employees and agents of our company and our subsidiary companies, as well as to our directors. A copy of our code is available on the governance section of the investor relations website.

 

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Committees of the Board of Directors

Our board of directors has four committees: the Audit Committee, the Compensation Committee, the Nominating and Corporate Governance Committee and the Executive Committee. The following table shows the current members of each committee.

 

Director    Audit    Compensation   

Nominating

and

Corporate

Governance

   Executive

F. Duane Ackerman

        X    X*    X

Michael J. Burns

   X               

D. Scott Davis

                  X*

Stuart E. Eizenstat

        X    X     

Michael L. Eskew

                  X

William R. Johnson

             X     

Candace Kendle

   X               

Ann M. Livermore

        X          

Rudy H.P. Markham

   X               

Clark T. Randt, Jr.

             X     

John W. Thompson

        X*          

Carol B. Tomé

   X*               

X= current committee member; * = chair

 

Audit Committee.    The primary responsibilities of our Audit Committee include:

 

   

discharging the board’s responsibility relating to our accounting, reporting and financial practices,

 

   

general responsibility for 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 qualification and independence of our accountants and the performance of our internal audit function and independent accountants,

 

   

having sole authority to appoint and oversee a registered public accounting firm (as defined by applicable law) to serve as our independent accountants, including sole discretion to retain and terminate the independent accountants, and

 

   

discussing with management policies with respect to financial risk assessment and enterprise risk management.

In 2011, the Audit Committee held 10 meetings. Each member of our Audit Committee meets the independence requirements of the NYSE and SEC rules and regulations, and each is financially literate. Our board has determined that Carol Tomé is an audit committee financial expert as defined by the SEC.

Compensation Committee.    The primary responsibilities of our Compensation Committee include:

 

   

discharging the board’s responsibilities with respect to compensation of our executive officers,

 

   

recommending to the board corporate goals and objectives relevant to the compensation for our Chief Executive Officer,

 

   

evaluating the Chief Executive Officer’s performance in light of these goals and

 

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objectives and establishing the total compensation for the Chief Executive Officer based on this evaluation,

 

   

reviewing and approving the compensation of other executive officers based upon all relevant information,

 

   

reviewing and approving awards to executive officers under our equity compensation plans,

 

   

overseeing the evaluation of risk associated with the Company’s total compensation strategy and compensation programs, and

 

   

exercising sole authority with respect to retention, compensation and termination of any outside consultants retained to advise the Compensation Committee.

In 2011, the Compensation Committee held seven meetings. Each member of our Compensation Committee meets the independence requirements of the NYSE and is an outside director under Section 162(m) of the Internal Revenue Code. For additional information about the Compensation Committee’s processes and the role of executive officers and compensation consultants in determining compensation, see “Compensation Discussion and Analysis.”

Nominating and Corporate Governance Committee.    The primary responsibilities of our Nominating and Corporate Governance Committee include:

 

   

receiving and considering recommendations from the Chief Executive Officer and others regarding succession at the Chief Executive Officer and other senior officer levels,

 

   

assisting the board in identifying and screening qualified candidates to serve as directors, including considering shareowner nominees,

 

   

recommending to the board 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, and

 

   

making recommendations to the board concerning corporate governance principles, including the structure, composition and functioning of the board and all board committees, the delegation of authority to management, board oversight of management actions and reporting duties of management.

In 2011, the Nominating and Corporate Governance Committee held four meetings. Each member of our Nominating and Corporate Governance Committee meets the independence requirements of the NYSE.

Executive Committee.    The Executive Committee may exercise all powers of the board of directors in the management of our business and affairs, except for those powers expressly reserved to the board under Delaware law or otherwise limited by the board of directors. In 2011, the Executive Committee held no meetings.

Compensation Committee Interlocks and Insider Participation

Duane Ackerman, Stuart Eizenstat, Ann Livermore and John Thompson were members of the Compensation Committee of our board of directors during 2011. None of these directors are employees or former employees of UPS. None of the members of the Compensation Committee has any direct or indirect material interest in or relationship with us outside of his position as a non-employee director. None of our executive officers serves as a member of a board of directors or compensation committee of any entity that has one or more executive officers who serves on our board of directors or Compensation Committee.

Compensation Practices and Risk Management

We believe our compensation practices provide a balanced mix of cash and equity, annual and longer-term incentives, and performance metrics which mitigate excessive risk-taking that could harm our value.

 

   

Considering multiple performance measures under our annual and long-term incentive

 

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GOVERNANCE OF OUR COMPANY (CONTINUED)

 

 

award programs serves as an internal “check-and-balance” so as not to put emphasis solely on one measure of performance;

 

   

Permitting the Compensation Committee discretion in making final award determinations under the MIP program in order to take into account changing market conditions allows our executives to focus on the long-term health of our company rather than an “all or nothing” approach to achieving short-term goals;

 

   

Using both restricted performance units and stock options for equity awards balances risk incentives;

 

   

Annual and long-term incentive awards to executive officers are limited to a fixed maximum;

 

   

The performance measures considered under our annual and long-term incentive plans include company-wide metrics; we believe that the inclusion of company-wide metrics encourages decision-making that is in the best long-term interests of our shareowners;

 

   

Vesting requirements over a minimum of three years for our equity awards ensures that our executives’ interests align with those of our shareowners over the long term;

 

   

Incentive awards to our executive officers are subject to the clawback policy contained in the 2009 Plan; and

 

   

All executive officers are subject to robust stock ownership guidelines.

Meetings of the Board of Directors and Attendance at the Annual Meeting

Our board of directors held five meetings during 2011. Each of our directors attended at least 75% of the total number of meetings of the board and any committees of which he or she was a member. It is the board’s policy that our directors attend the annual meeting. All but one of the directors who were serving on the board at our 2011 annual meeting attended the meeting.

Majority Voting for Directors and Director Resignation Policy

Our Certificate of Incorporation and Bylaws provide for majority voting in uncontested director elections. Under the majority voting standard, directors are elected by a majority of the votes cast, which means that the number of shares voted for a director must exceed the number of shares voted against that director.

Under our Corporate Governance Guidelines, the Nominating and Corporate Governance Committee has established procedures for any director who is not elected to tender his or her offer to resign. Upon receiving the director’s offer to resign, the Nominating and Corporate Governance Committee will recommend to the board whether to accept or reject the offer to resign, or whether other action should be taken. In determining whether or not to recommend that the board accept any resignation offer, the Nominating and Corporate Governance Committee may consider all factors believed relevant by the Committee’s members. If a majority of the members of the Nominating and Corporate Governance Committee were required to tender their offers of resignation as provided above, the independent directors on the board who were not required to tender their offers of resignation will act as a committee to consider the offers and recommend to the board whether or not to accept them.

The board will act on the Nominating and Corporate Governance Committee’s recommendation within 90 days following certification of the election results. In deciding whether or not to accept the offer to resign as well as, if applicable, the effective date of the board’s acceptance of the offer to resign and any other conditions, the board will consider the factors considered by the Nominating and Corporate Governance Committee and any additional information and factors that the board believes to be relevant. Any director who offers to resign is expected to recuse himself or herself from the board vote unless the number of independent

 

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GOVERNANCE OF OUR COMPANY (CONTINUED)

 

directors who were successful incumbents is fewer than three. Thereafter, the board will promptly publicly disclose its decision regarding any offer to resign (including the reason(s) for rejecting the resignation offer, if applicable). If the board determines to accept a director’s offer to resign pursuant to this process, the Nominating and Corporate Governance Committee will recommend to the board and the board will thereafter determine whether and when to fill such vacancy or reduce the size of the board.

Related Person Transactions

In accordance with our Audit Committee charter, our Audit Committee is responsible for overseeing our written Code of Business Conduct, which includes policies relating to conflicts of interest. The Code requires that all of our employees and directors avoid conflicts of interest, defined as situations where the person’s private interests conflict, or even appear to conflict, with the interests of UPS as a whole.

At least annually, each director and executive officer completes a detailed questionnaire that inquires about any business relationship that may give rise to a conflict of interest and all transactions in which UPS is involved and in which the executive officer, a director or a related person has a direct or indirect material interest. We also conduct a review, at least annually, of our financial systems to identify potential conflicts of interest and related person transactions.

The Nominating and Corporate Governance Committee, which includes only independent directors, conducts an annual review of the information from the questionnaire and financial systems review, evaluates related person transactions (if any) involving the directors and their related persons and makes recommendations to the board of directors regarding the independence of each board member.

If a transaction arises during the year that may require disclosure as a related person transaction, information about the transaction would be provided to the Audit Committee and the Nominating and Corporate Governance Committee, as applicable, for review, approval or ratification of the transaction.

We have not entered into any related person transactions that meet the requirements for disclosure in this proxy statement.

We have purchase, finance and other transactions and relationships in the normal course of business with companies with which our directors are associated, but which are not material. The Nominating and Corporate Governance Committee has reviewed these transactions and relationships and believes they were entered into on terms that are both reasonable and competitive. Additional transactions and relationships of this nature may be expected to take place in the ordinary course of business in the future.

Communicating with our Board of Directors

Any shareowners or interested parties who wish to communicate directly with our board of directors, with our non-management directors as a group or with the presiding director of our non-management directors may do so by writing to the Corporate Secretary, 55 Glenlake Parkway, N.E., Atlanta, Georgia 30328. Please specify to whom your letter should be directed. Once the communication is received and reviewed by the Corporate Secretary, it will be promptly forwarded to the addressee. Advertisements, solicitations for business, requests for employment, requests for contributions or other inappropriate material will not be forwarded to our directors.

Other Information Regarding Directors

Michael Burns is the former Chairman, Chief Executive Officer and President of Dana Corporation. Dana Corporation filed a voluntary petition under Chapter 11 of the federal bankruptcy laws on March 3, 2006. On January 31, 2008, Dana Corporation emerged from Chapter 11, prior to his departure from Dana Corporation.

 

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AUDIT COMMITTEE MATTERS

Report of the Audit Committee

The Audit Committee of our board of directors is responsible for, among other things, reviewing with Deloitte & Touche LLP, our independent registered public accounting firm, the scope and results of their audit engagement. In connection with the 2011 audit, the Audit Committee has:

 

   

Reviewed and discussed with management UPS’s audited financial statements, including management’s report on internal controls over financial reporting, included in our Annual Report on Form 10-K for the year ended December 31, 2011;

 

   

Discussed with Deloitte & Touche the matters required by Statement of Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1, AU § 380), as adopted by the Public Company Accounting Oversight Board in Rule 3200T; and

 

   

Received from and discussed with Deloitte & Touche the communications from Deloitte & Touche required by the Public Company Accounting Oversight Board regarding their independence.

Based on the review and the discussions described in the preceding bullet points, the Audit Committee recommended to the board of directors that the audited financial statements and management’s report on internal controls over financial reporting be included in our Annual Report on Form 10-K for the year ended December 31, 2011 for filing with the Securities and Exchange Commission.

The Audit Committee has adopted a charter and a process for pre-approving services to be provided by Deloitte & Touche.

The members of the Audit Committee have been determined to be independent in accordance with the requirements of Section 303.01(B)(2)(a) and (3) of the New York Stock Exchange listing standards and the requirements of Section 10A(m)(3) of the Exchange Act.

The Audit Committee

Carol B. Tomé, Chair

Michael J. Burns

Candace Kendle

Rudy H.P. Markham

 

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AUDIT COMMITTEE MATTERS (CONTINUED)

 

Principal Accounting Firm Fees

Aggregate fees billed to us for the fiscal years ended December 31, 2011 and 2010 by our independent registered public accountants, Deloitte & Touche LLP, the member firms of Deloitte Touche Tohmatsu, and their respective affiliates were:

 

      2011      2010  

Audit Fees(1)

   $ 11,926,000       $ 12,396,000   

Audit-Related Fees(2)

     871,000         1,042,000   

Total Audit and Audit-Related Fees

     12,797,000         13,438,000   

Tax Fees(3)

     1,406,000         1,572,000   

All Other Fees

     0         0   

Total Fees

   $ 14,203,000       $ 15,010,000   

 

(1) Includes fees for the audit of our annual financial statements, Sarbanes-Oxley Section 404 attestation procedures, statutory audits of foreign subsidiary financial statements and services associated with securities filings.
(2) Includes fees for employee benefit plan audits, SSAE No. 16 independent service auditors’ reports and accounting consultations.
(3) Includes fees for tax compliance work and tax planning and advice services.

The Audit Committee has considered whether the provision of audit-related and other non-audit services by Deloitte & Touche is compatible with maintaining Deloitte & Touche’s independence.

Our Audit Committee has established a policy requiring the pre-approval of all audit and non-audit services provided to us by Deloitte & Touche. The policy provides for pre-approval of audit, audit-related and tax services specifically described by the Audit Committee. The Audit Committee has delegated to its chair authority to pre-approve 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 to management the Audit Committee’s responsibility to pre-approve permitted services of our independent registered public accounting firm.

 

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COMPENSATION OF DIRECTORS

 

We provide both cash and equity awards to our non-employee directors. Our employee directors do not receive any compensation for service as a director. Directors are reimbursed for their expenses related to board membership.

In 2011, our non-employee directors received an annual cash retainer of $90,000. The chairs of the Compensation and Nominating and Corporate Governance Committees received an additional annual cash retainer of $15,000, and the chair of the Audit Committee received an additional annual cash retainer of $20,000. Cash retainers are paid on a quarterly basis. Under the UPS Deferred Compensation Plan, non-employee directors may defer retainer fees quarterly, but we do not make any company contributions under this plan. There are no preferential or above-market earnings in the UPS Deferred Compensation Plan.

In addition, in 2011 non-employee directors received an annual restricted stock unit grant in the amount of $150,000 that will be settled in shares of class A common stock (rounded down to the nearest whole share). RSUs are required to be held until the director separates from the UPS board of directors. The annual equity grant is prorated based on the portion of the year that a director serves on the board. There is no additional equity award for new non-employee directors who join the board.

 

2011 Director Compensation

The following table sets forth the compensation paid to our non-employee directors in 2011.

 

Name    Fees
Earned or
Paid in
Cash($)(1)
     Stock
Awards($)(2)
     All Other
Compensation($)(3)
     Total($)  

F. Duane Ackerman

     105,000         149,991         0         254,991   

Michael J. Burns

     90,000         149,991         0         239,991   

Stuart E. Eizenstat

     90,000         149,991         0         239,991   

Michael L. Eskew

     90,000         149,991         13,630         253,621   

William R. Johnson

     90,000         149,991         0         239,991   

Candace Kendle(4)

     45,000         112,483         0         157,483   

Ann M. Livermore

     90,000         149,991         0         239,991   

Rudy H.P. Markham

     90,000         149,991         0         239,991   

Clark T. Randt, Jr.

     90,000         149,991         0         239,991   

John W. Thompson

     105,000         149,991         0         254,991   

Carol B. Tomé

     110,000         149,991         0         259,991   

 

(1) The following directors deferred 2011 cash compensation into the UPS Deferred Compensation Plan (further described in the Compensation of Executive Officers section under the Non-Qualified Deferred Compensation Table): D. Ackerman — $105,000; and C. Tomé — $110,000.
(2) The values for stock awards in this column represent the grant date fair value of the restricted stock units granted in 2011, computed in accordance with FASB ASC Topic 718. Information about the assumptions used to value these awards can be found in Note 11 “Stock-Based Compensation” in our 2011 Annual Report on Form 10-K.

Restricted stock units 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. Dividends earned on each award are reinvested in additional units at each dividend payable date.

(3) This column represents financial planning services paid in 2011.
(4) Dr. Kendle was appointed to the board on August 11, 2011.

 

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COMPENSATION OF DIRECTORS (CONTINUED)

 

The aggregate number of stock awards and option awards made under our director compensation programs and outstanding as of December 31, 2011 for each of our non-employee directors are set forth below.

 

     Stock Awards      Stock
Options
 
Name    Restricted
Stock (#)
     Restricted
Stock
Units(#)
     Phantom
Stock
Units (#)
     Number of
Shares
Underlying
Options
(#)
 

F. Duane Ackerman

     376         6,645         0         0   

Michael J. Burns

     0         6,645         0         0   

Stuart E. Eizenstat

     0         6,645         0         0   

Michael L. Eskew

     0         6,645         0         0   

William R. Johnson

     0         7,478         0         0   

Candace Kendle

     0         1,765         0         0   

Ann M. Livermore

     0         6,645         2,043         4,198   

Rudy H.P. Markham

     394         6,645         0         0   

Clark T. Randt, Jr.

     0         3,585         0         0   

John W. Thompson

     0         6,645         2,043         4,198   

Carol B. Tomé

     0         6,645         966         2,864   

 

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OWNERSHIP OF SECURITIES

Securities Ownership of Certain Beneficial Owners and Management

The following table sets forth information as to any person known to us to be the beneficial owner of more than five percent of our class A or class B common stock.

 

Name and address  

Number of Shares

Beneficially Owned

 

Percent

of Class

BlackRock Inc.(1)

40 East 52nd Street

New York, NY 10022

  40,084,175   5.54%

 

(1) According to a Schedule 13G/A filed with the SEC on February 8, 2012, BlackRock Inc. has sole voting and dispositive power with respect to 40,084,175 shares of our class B common stock. According to the Schedule 13G/A, BlackRock beneficially owned 5.54% of our class B common stock as of December 30, 2011.

The following table sets forth the beneficial ownership of our common stock as of January 27, 2012 by our current directors and nominees, our Chief Executive Officer, Chief Financial Officer and three other executive officers who had the highest total compensation for 2011, calculated in accordance with SEC rules and regulations (the “Named Executive Officers”), and all of our directors and executive officers as a group.

 

     Number of Shares
Directly Owned(1)(2)
     Options
Exercisable

within 60
Days(3)
     Additional Shares in
which the Beneficial

Owner Has or
Participates in the
Voting or

Investment
Power(4)
    Total  Shares
Beneficially
Owned(5)
 
Directors and Executive Officers    Class A
Shares
     Class B
Shares
         

David P. Abney

     113,924         3,065         57,961         0        174,950   

F. Duane Ackerman

     2,062         0         0         0        2,062   

David A. Barnes

     110,566         0         33,553         0        144,119   

Michael J. Burns

     4,848         0         0         0        4,848   

D. Scott Davis

     172,743         0         87,743         5,696,742 (6)      5,957,228   

Stuart E. Eizenstat

     4,848         200         0         0        5,048   

Michael L. Eskew

     220,668         90,048         204,235         5,696,742 (6)      6,211,693   

William R. Johnson

     0         160         0         0        160   

Candace Kendle

     0         0         0         0        0   

Kurt P. Kuehn

     62,367         0         42,947         0        105,314   

Ann M. Livermore

     26,901         0         4,198         0        31,099   

Rudy H.P. Markham

     1,607         0         0         0        1,607   

John J. McDevitt

     78,581         10,000         36,296         0        124,877   

Clark T. Randt, Jr.

     0         0         0         0        0   

John W. Thompson

     7,573         18,546         4,198         0        30,317   

Carol B. Tomé

     5,137         2,936         2,864         0        10,937   

Shares held by all directors and executive officers as a group (22 persons)

     1,073,859         154,997         652,042         5,696,742 (7)      7,577,640 (7) 

 

(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 — 29,900; Barnes — 2,930; Eskew — 40,820; Kuehn — 3,016; McDevitt — 18,163; and all directors and executive officers as a group — 101,006. Each named individual disclaims all beneficial ownership of the shares held by immediate family members.

 

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OWNERSHIP OF SECURITIES (CONTINUED)

 

(2) Includes shares pledged as of January 27, 2012 as follows: Abney — 36,620; Barnes — 32,657; Davis — 6,600; Kuehn — 52,366; McDevitt — 39,026; and all directors and executive officers as a group — 263,916.
(3) Represents class A shares that may be acquired through stock options exercisable through March 27, 2012.
(4) None of the individuals listed, nor members of their families, has any direct ownership rights in the shares listed. See footnotes 6 and 7.
(5) All directors and executive officers individually and as a group held less than one percent of outstanding shares, based on an aggregate of 958,428,930 shares of class A and class B common stock outstanding as of January 27, 2012. Assumes that all options exercisable through April 1, 2012 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.
(6) Includes 5,520,484 class A shares and 176,258 class B shares owned by the Annie E. Casey Foundation, Inc., of which Scott Davis, Mike Eskew and one other executive officer not listed above and other persons constitute the corporate Board of Trustees.
(7) Includes shares owned by the Annie E. Casey Foundation, Inc. Eliminates duplications in the reported number of shares arising from the fact that several directors and executive officers share in the voting power with respect to these shares.

Additional Ownership

In addition to the beneficial ownership of our common stock shown above, our directors and executive officers also hold equity instruments that are not reported in the beneficial ownership table but represent additional financial interests that are subject to the same market risk as ownership of our common stock. The number of shares of stock to which these stock units are equivalent as of January 27, 2012 is as follows.

 

      Restricted
Stock Units
     Phantom
Stock Units
     Restricted
Performance
Units
     Stock Option
Deferral
Shares
     Other
Deferred
Compensation
Plan Shares
     Total  

David P. Abney

     47,916         0         24,655         15,952         0         88,523   

F. Duane Ackerman

     6,645         0         0         0         3,279         9,924   

David A. Barnes

     19,200         0         21,438         9,133         0         49,771   

Michael J. Burns

     6,645         0         0         0         3,954         10,599   

D. Scott Davis

     121,711         0         66,202         5,514         0         193,427   

Stuart E. Eizenstat

     6,645         0         0         0         0         6,645   

Michael L. Eskew

     7,242         0         26,989         45,750         0         79,981   

William R. Johnson

     7,478         0         0         0         0         7,478   

Candace Kendle

     1,765         0         0         0         0         1,765   

Kurt P. Kuehn

     23,530         0         21,592         12,905         0         58,027   

Ann M. Livermore

     6,645         2,043         0         0         0         8,688   

Rudy H.P. Markham

     6,645         0         0         0         0         6,645   

John J. McDevitt

     20,167         0         22,512         22,329         0         65,008   

Clark T. Randt, Jr.

     3,585         0         0         0         0         3,585   

John W. Thompson

     6,645         2,043         0         0         247         8,935   

Carol B. Tomé

     6,645         966         0         0         0         7,611   

 

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OWNERSHIP OF SECURITIES (CONTINUED)

 

Restricted stock units (“RSUs”) are bookkeeping units, the value of each of which corresponds to one share of UPS class A common stock. We grant RSUs to our non-employee directors.

Phantom stock units are bookkeeping units, the value of each of which corresponds to one share of UPS class A common stock. Dividends paid on UPS common stock are added to the director’s phantom stock unit balance. Upon termination of the individual’s service as a director, amounts represented by phantom stock units will be distributed in cash over a time period elected by the recipient.

Restricted performance units (“RPUs”) are bookkeeping units, the value of each of which corresponds to one share of UPS class A common stock. We grant RPUs to the Named Executive Officers under two programs, the Management Incentive Program and the Long-Term Incentive Performance Award Program.

Stock option deferral shares are shares held for the individual in a rabbi trust within the UPS Deferred Compensation Plan. Each individual elected to defer the receipt of these shares rather than acquiring them directly upon the exercise of a stock option.

Other deferred compensation plan shares are amounts within the UPS Deferred Compensation Plan allocated to UPS common stock. These represent the non-employee directors’ retainer fees that have been deferred and invested in UPS stock.

 

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EXECUTIVE COMPENSATION

The following sections provide information about our Named Executive Officers and our executive compensation program. It starts with the Compensation Discussion and Analysis, which explains how and why the Compensation Committee made its 2011 compensation decisions for the Named Executive Officers, followed by the report of our Compensation Committee, sometimes referred to in the following sections as the Committee. We then provide the detailed executive compensation tables in the format required by the SEC.

2011 Compensation Discussion and Analysis

The Compensation Discussion and Analysis describes UPS’s executive compensation programs for 2011 and certain aspects of the programs for 2012. The focus of this section of the proxy is to explain how and why the Committee made its 2011 compensation decisions for the following Named Executive Officers, or NEOs:

 

D. Scott Davis

  Chairman and Chief Executive Officer

David P. Abney

  Senior Vice President and Chief Operating Officer

Kurt P. Kuehn

  Senior Vice President and Chief Financial Officer

David A. Barnes

  Senior Vice President and Chief Information Officer

John J. McDevitt

  Senior Vice President, Human Resources and Labor Relations

Executive Summary

Business Environment

 

UPS had record earnings per share in 2011, despite the challenges faced by global markets, and continued to strengthen our standing as the leading enabler of commerce around the world. Throughout the year, we sought to expand our service offerings and maintain the high quality service and value our customers have come to expect from UPS, while continuing our efforts to effectively manage our costs. In our U.S. Domestic segment, we had strong revenue growth and significant margin expansion. In our International segment, we had record revenue on volume growth that outpaced the market. In our Supply Chain & Freight segment we upgraded our capabilities and had strong operating profit, with contributions from all business units.

We continued to make strategic investments in healthcare capabilities, global infrastructure, service alliances, technology and new products and services. For example, in 2011, we acquired an Italian healthcare distribution company and expanded our Cologne Air Hub.

Superior execution and employee commitment across all business units enhanced our ability to provide solutions that create value for our customers. Revenue, operating profit and earnings per share improved during 2011 as we managed our operations well, attracted and retained business and maintained focus on the long-term health of the Company, specifically:

 

   

We achieved a 7.2% increase in our 2011 consolidated revenue.

 

   

Our 2011 consolidated diluted earnings per share increased by 15.3%.

 

   

We continued to generate strong free cash flow in 2011.

 

   

Our 2011 total shareowner return was 3.88%, which compared favorably to the Dow Jones Transportation Average (which was flat) and the Standard & Poor’s 500 Index (which was 2.12%).

 

   

We expanded our Asia Air network, Chengdu, Guam, Tokyo to Taipei and Guangzhou, and added Hong Kong to Europe direct flights.

 

   

We formed a new alliance in Colombia, and increased our air network capacity in South America.

 

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EXECUTIVE COMPENSATION (CONTINUED)

 

 

   

We expanded our healthcare logistics business.

 

   

We added new services, including UPS My Choice, UPS Returns Exchange and UPS Returns Pack and Collect.

We believe UPS has the global network, infrastructure, management team and portfolio of technological capabilities to provide an unparalleled array of customer solutions.

Summary of 2011 Compensation Actions

Key compensation decisions for the Named Executive Officers for 2011 include the following:

 

   

Our executive compensation programs were modified effective January 2011 so that all elements of equity compensation will be performance-based.

 

   

Base salaries of the NEOs were increased by an average of 4.8%; the base salary of the CEO was increased by 3.0% which was equivalent to the merit budget for the broader management population in 2011.

 

   

We modified our stock ownership guidelines for the CEO (eight times annualized salary), the Management Committee (five times annualized salary) and the board of directors (five times annualized retainer).

 

   

2011 annual incentive awards for the NEOs under the Management Incentive Program were earned at 95% of target. 2011 MIP ownership incentive awards equal to one month’s salary were earned by the NEOs.

 

   

The 10% potential increase in restricted performance units under the Long-Term Incentive program was not earned for the 2007 grant maturing in 2012, due to below target earnings per share performance.

 

   

2011 Long-Term Incentive Performance award tranches were earned at 95% of target based on revenue growth and operating return on invested capital and the 2011

  earnings measurement tranche for the 2009 LTIP was earned at target based on earnings per share achievement.

 

   

The Compensation Committee approved a redesigned financial services benefit for executives through which the Company will reimburse fees from financial and tax services providers up to $15,000 per year per covered executive.

Compensation and Governance Practices

We believe that our compensation programs encourage executive decision-making that is aligned with the long-term interests of our shareowners by tying a significant portion of pay to company performance over a multi-year period and by promoting our long-standing owner-manager culture. Other compensation and governance practices that support these principles, each of which is described in more detail in this Compensation Discussion and Analysis, include the following:

 

   

We do not have employment agreements with any of our executive officers.

 

   

We do not have a separate change in control or severance agreement with any of our executive officers.

 

   

Our compensation practices provide a balanced mix of cash and equity, annual and longer-term incentives, and performance metrics which mitigate excessive risk-taking.

 

   

Our 2009 Plan and the proposed 2012 Plan include a clawback provision that permits us to recover awards granted to executive officers if the financial results used to determine the amount of the award are materially restated and the executive officer engaged in fraud or intentional misconduct.

 

   

Our 2009 Plan and the proposed 2012 Plan generally require a “double trigger” — both a change in control and a termination of employment — to accelerate the vesting of unvested awards.

 

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We have robust stock ownership guidelines that include a target ownership of eight times annual salary for the Chief Executive Officer and five times annual salary for the other executive officers.

 

   

Executive officers and directors 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.

 

   

Since equity award programs can have a dilutive impact on shareowner value, we regularly evaluate our overhang ratio and our annual grant rate, and we believe that our low overhang (7.21%) and grant rate (0.89%) percentages demonstrate our objective to effectively and responsibly manage equity usage.

Compensation Decisions — Process and Inputs

Executive Compensation Strategy

The UPS executive compensation programs are designed to:

 

   

Drive organizational performance by tying a significant portion of pay to company performance;

 

   

Retain and motivate talent by fairly compensating executive officers; and

 

   

Encourage long-term stock ownership and careers with UPS, linking executives to long-term value creation.

Our compensation programs are designed to emphasize strong annual performance and foster long-term operational performance and success. We believe that a majority of total compensation (base salary, annual incentives and long-term incentives) that can be earned by the Named Executive Officers should be “at risk”, meaning that the compensation is only earned by meeting annual or long-term performance goals. The 2011 compensation elements with “at risk” components are approximately 75% of the 2011 target compensation opportunity for all of the Named Executive Officers, and approximately 78% for our Chief Executive Officer.

Below are charts that demonstrate, for the CEO and for the NEOs as a group, the portion of target compensation that is at risk.


2011 Target Compensation for CEO

 

LOGO


2011 Target Compensation for all NEOs

 

LOGO

 

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Roles and Responsibilities

The UPS executive compensation program is administered by the Compensation Committee of the board of directors. Each of the four non-employee directors on the Compensation Committee meets the independence requirements of the NYSE. The Compensation Committee has sole authority to engage and terminate outside advisors and consultants to assist the Compensation Committee in carrying out its responsibilities. In 2011, the Committee retained Frederic W. Cook & Co. (“Cook”). Cook reports directly to the Chair of the Compensation Committee. Cook provides no additional services to UPS.

 

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The following table summarizes the roles of each of the key participants in the executive compensation decision-making process.

 

Participant    Roles

Compensation Committee

  

• Reviews and recommends to the board the corporate goals and objectives relevant to the compensation for the Chief Executive Officer

    

• Evaluates the performance of the Chief Executive Officer in light of the goals and objectives and determines and approves the total compensation of the Chief Executive Officer based on this evaluation

    

• Reviews the Chief Executive Officer’s performance assessment of other executive officers, and reviews and approves compensation for the executive officers, including the Named Executive Officers

    

• Reviews and approves awards to executive officers under certain incentive compensation and equity-based plans, and reviews and approves the design of other benefit plans for executive officers

    

• Oversees the evaluation of risk associated with the Company’s total compensation strategy and compensation programs

    

• Reviews and discusses with management the Compensation Discussion and Analysis

    

• Prepares the Compensation Committee’s report on executive compensation

Independent Members of the Board of Directors

  

• Reviews the Committee’s assessment of the Chief Executive Officer’s performance

Independent Compensation Consultant

  

• Serves as a resource for market data on pay practices and trends

    

• Provides independent advice to the Compensation Committee

    

• Provides competitive analysis and advice related to outside director compensation

    

• Reviews the Compensation Discussion and Analysis

Executive Officers

  

• The Chief Executive Officer makes compensation recommendations to the Compensation Committee for the other executive officers with respect to base salary

    

• The Chief Executive Officer and the Chief Financial Officer make recommendations on performance goals under our incentive compensation plans and provide recommendations as to whether performance goals were achieved at the end of the performance period

    

• Executive officers are not present when the Compensation Committee meets in executive session, or when decisions about their own compensation are made

 

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Market Data

While the Compensation Committee considers market data in making compensation decisions, it does not target compensation at a particular percentile or within any targeted range based solely on competitive data. The data is one of a variety of factors considered by the Compensation Committee when considering base salary, annual and long-term equity awards and total compensation levels, and is generally considered as a market check.

Each year, we review general compensation survey data from sources such as Towers Watson to provide the Compensation Committee with information about our compensation levels relative to comparable sized companies. In addition, we look at pay practices and levels for a peer group of companies that typically have global operations, a diversified business and annual sales and market capitalizations comparable to UPS. The 2011 peer group consisted of the following 19 companies:

 

Boeing Co.   Dell Inc.   Lowes Companies Inc.  

Target Corp.

Caterpillar Inc.   FedEx Corporation   McDonald’s Corp.  

United Technologies Corp.

Coca-Cola Co.   Johnson & Johnson   PepsiCo Inc.  

Walgreen Co.

Coca-Cola Enterprises Inc.

  Kroger Co.  

Procter & Gamble

 

Xerox Corp.

Costco Wholesale Corp.   Lockheed Martin  

Sysco Corp.

   

 

Internal Equity

In addition to market data, the Compensation Committee considers the differentials between executive officer compensation and other UPS positions, and the additional responsibilities of the Chief Executive Officer compared to the other executive officers. Internal comparisons are made between executive officers and their direct reports in an effort to ensure that compensation paid to executive officers is reasonable compared to that of others with whom they work.

Annual Performance Reviews

Each year the Chief Executive Officer provides the Compensation Committee with a subjective assessment of the Named Executive Officers. The Compensation Committee undertakes a comprehensive review each year of the Chief Executive Officer’s performance and the full board meets in executive session to review the Chief Executive Officer’s performance. Factors considered include the Chief Executive Officer’s strategic vision and leadership, execution of our business strategy and achievement of our business goals, his demonstrated ability to make long-term decisions that create competitive advantage and his overall effectiveness as a leader and role model.

Elements of UPS Compensation

The components of the compensation program for our Named Executive Officers are:

 

   

Base salary;

 

   

Annual incentive awards delivered in both cash and equity;

 

   

Long-term equity incentive awards; and

 

   

Benefits and perquisites.

Base Salary

The Compensation Committee considers a number of factors in determining the annual base salaries of the Named Executive Officers. While company performance is the most important factor, scope of responsibility, leadership, market data and internal equity comparisons are all considered by the Compensation Committee when determining annual salary adjustments.

In 2011, as part of an initiative to simplify compensation, the half-month bonus program was discontinued as a separate payment and incorporated into monthly salaries. The half-month bonus was a cash bonus historically awarded in the fourth quarter to eligible salaried employees in the U.S., including the Named Executive Officers.

 

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In addition, base salaries of the NEOs were increased by an average of 4.8%. The base salary of the CEO was increased by 3.0% which was equivalent to the merit budget for the broader management population in 2011. Base salary increases were to reward performance and, for certain Named Executive Officers, to bring their compensation more in line with market rates.

Annual Incentives

MIP Award — Overview

The MIP award is designed to align pay with annual company performance. In 2011, the following changes were made to the program to strengthen the link between incentive compensation and company performance and to ensure that such awards satisfy the performance-based requirements for tax deductible compensation.

 

   

The performance period changed from October 1 though September 30 to January 1 to December 31 to be consistent with our fiscal year and business plan.

 

   

Time-vested restricted performance units, or RPUs, under the Long-Term Incentive program have been eliminated beginning in 2012 and the value is included in the MIP opportunity, which is 100% performance-based.

 

   

Based on the formula approved by the Compensation Committee for 2011, executive officer MIP awards are targeted at a pool of 0.5% of net income in total; the CEO’s maximum is 20% of the pool and each other NEO’s maximum is 7.25% of the pool. The same performance measure and maximum allocation were approved by the Compensation Committee for 2012.

The maximum incentive pool approach for the executive officers is intended to align pay with actual company performance in a manner that also provides compensation that is exempt from the $1 million annual deduction limit of Section 162(m) of the Internal Revenue Code. The awards are granted under the 2009 Plan. Company net income performance will fund the pool to a maximum level, but the actual awards are determined based on the Compensation Committee’s discretion. The Committee may approve awards that are less than the maximum but may not exceed the funded maximum amount for each NEO.

The primary factors considered by the Committee in exercising its discretion include:

 

   

Overall company performance, including the 2011 MIP Evaluation Metrics listed on the next page.

 

   

Business environment and economic trends.

 

   

Target opportunity for each executive.

 

   

MIP factor (percent of target) applied to the non-executive MIP participants to determine MIP awards.

Although the Compensation Committee will consider the awards earned by employees under the broad MIP plan, it is just one input to their determination.

The target opportunity for MIP was increased in 2011 to include the value of time-based RPUs historically provided in the Long-Term Incentive program. This change increases the amount of performance-based compensation fully at risk based on company performance. The change continues to support our emphasis on stock ownership and long-term performance because the award is provided two-thirds in RPUs and one-third in cash. As set forth in the terms and conditions approved by the Compensation Committee, MIP RPUs vest 20% per year over a five year period.

We determine the number of RPUs granted by calculating the dollar value of the portion of the MIP award allocated to RPUs and dividing by the applicable closing price of our class B common stock on the NYSE. In light of the five year vesting schedule, we do not maintain additional holding period requirements for our employees after vesting. When dividends are paid on UPS common stock, an equivalent value is credited to the participant’s bookkeeping account in additional RPUs.

 

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2011 MIP Performance Incentive Award Results

For 2011, the Company’s net income as shown on the company’s 2011 audited statements of consolidated net income was $3.804 billion which results in a maximum incentive pool for executive officers of $19.020 million. The maximum for the CEO is therefore $3.804 million and $1.379 million for the other Named Executive Officers. In exercising their discretion to more closely align executive officer MIP performance incentive awards with company performance, the Committee considered a number of factors including, but not limited to, company performance relative to target objectives for the executive officers detailed in the accompanying table (the 2011 MIP Evaluation Metrics), the level at which the MIP award was earned by non-executive employees (95%), the general macro-economic environment and the Company’s overall performance.

The 2011 MIP Performance Incentive Evaluation Metrics and actual results considered by the Committee are shown in the following table.

 

2011 Evaluation Metrics    Target     Actual  

Consolidated Revenue Growth

     8.0     7.2

Adjusted Consolidated Earnings Per Share Growth

     19.0     18.8

Consolidated Package Average Daily Volume Growth

     3.8     1.4

A specific weight was not assigned to any of the aspects of performance listed above. The Committee uses its judgment to determine final awards based on the Company’s success in implementing the business plan and the challenges of the economic and competitive market in which UPS operated during the year.

 

Summarized in the table below are the NEOs’ maximum funded MIP performance incentive award based on the net income formula, target MIP performance incentive award, and the actual MIP performance incentive award based on the Committee’s discretion.

 

2011 MIP Award    Maximum($)      Target($)      Actual($)  

D.Scott Davis

     3,803,999         1,700,127         1,615,121   

David P. Abney

     1,378,950         619,554         588,576   

Kurt P. Kuehn

     1,378,950         566,982         538,633   

David A. Barnes

     1,378,950         551,382         523,813   

John J. McDevitt

     1,378,950         562,614         534,483   

 

MIP Ownership Incentive Award

To reward management employees for maintaining significant ownership of UPS equity securities, all MIP participants are eligible for an additional incentive award up to the equivalent of one month’s salary. The MIP ownership incentive award is paid in the same proportion of cash and RPUs as the MIP award.

The amount of the award is equal to the participant’s equity ownership multiplied by an ownership incentive award percentage, which is

1.25% for the Chief Executive Officer and 1.50% for the other Named Executive Officers. The maximum award that can be earned is one month’s salary.

Ownership levels for the 2011 awards were determined by totaling the number of UPS shares in the participant’s family group accounts and the participant’s unvested restricted units and deferred compensation shares, and then multiplying the sum by the closing price of a class B share on the NYSE on December 30, 2011 (the last trading day of the year). All of the Named Executive Officers earned the maximum MIP ownership incentive award of one month’s salary.

 

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Long-Term Incentives

 

Our long-term incentive programs provide participants with grants of equity-based incentives that are intended to reward performance over a multi-year period. For 2011, our equity programs included the Long-Term Incentive (“LTI”) program and the Long-Term Incentive Performance (“LTIP”) award program. All awards under the programs were granted under the 2009 Plan.

 

Program   Payment Form and
Program Type
  Target Amount   Performance
Measures and/or
Value Proposition
  Program Objectives
Stock options under LTI   Stock options vest 20% per year over five years and have a ten-year term   25% of target LTI

 

(175% of base
salary for the Chief
Executive Officer
and 125% for the
other executive
officers)

  Value recognized
only if UPS stock
price appreciates
  Provides a
significant link to
company stock
price performance

 

Enhances stock
ownership and
shareowner
alignment

Restricted performance units under LTI  

RPUs are paid in UPS stock upon vesting

 

Vest 20% per year over five years

  75% of target LTI

 

(175% of base
salary for the Chief
Executive Officer
and 125% for the
other executive
officers)

  Value increases or
decreases with
stock price
  Retention

 

Enhances stock
ownership and
shareowner
alignment

Restricted performance units under LTIP  

RPUs are settled in UPS stock if earned based on company performance

 

If earned, award vests after the end of the third fiscal year

  As a percent of
base salary:

675% — Chief
Executive Officer
575% — Chief
Operating Officer
300% — Chief
Financial Officer
250% — other
executive officers

  Revenue growth

Operating return on
invested capital

 

Three-year EPS
targets

 

Value increases or
decreases with
stock price

  Supports the
Company’s annual
and long-term
operating plan and
business strategy

 

Enhances stock
ownership and
shareowner
alignment

 

Long-Term Incentive Program — Overview

Our 2011 LTI program had two parts: stock option awards and restricted performance units. In 2011 and in prior years, grants were made annually, typically in May of each year. Region manager-level and above participants, including the Named Executive Officers, received 75% of their award in RPUs and 25% in stock options in an effort to more closely align their compensation with shareowner return. All other participants received 100% of their award in RPUs.

The LTI program has been eliminated for the Named Executive Officers beginning in 2012. We intend to continue making annual stock options awards to the Named Executive Officers in 2012 and future years.

2011 LTI Target Amounts

Target amounts vary to reflect the responsibility level of executive positions and competitive market practice. The 2011 total target award value at grant for the LTI awards was set at 175% of annualized base salary for the Chief Executive Officer and 125% of annualized base salary for the other executive officers. For other management employees, target award values range from 25% to 75% of annualized base salary.

 

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2011 LTI Grants

2011 LTI awards for the Named Executive Officers were granted 75% in restricted performance units and 25% in stock options. The number of stock options granted is determined by dividing 25% of the target award value by the Black-Scholes value of a UPS stock option on the date of grant. The number of restricted performance units granted is determined by dividing 75% of the target award value by the NYSE closing price of UPS stock on the date of grant. The number of stock options and restricted performance units granted to the Named Executive Officers on May 4, 2011 is shown in the Grants of Plan-Based Awards for 2011 table.

Stock Options

The Compensation Committee believes that stock options provide a significant link to company performance and maximize shareowner value, as the option holder receives value only if our stock price increases. Stock options also have retention value, as the option holder will not receive value from the options unless he or she remains our employee during the vesting period of the award (except in the case of retirement, death or disability during the vesting period).

Stock options granted during and after 2008 vest 20% per year over five years and expire ten years from the date of grant. In light of the five year duration of the vesting schedule, we do not maintain additional holding period requirements for our employees after vesting. Grants do not include dividend equivalents or any reload grant features.

Restricted Performance Units

RPUs are bookkeeping units, the value of which corresponds to one share of class A common stock. The decision by the Compensation Committee to use restricted performance units is based on two goals for the award:

 

   

Maintain the long-term nature of the award and its impact on retention; and

 

   

Align management with shareowner interests by utilizing an award linked to share price performance.

Restricted performance units granted under the LTI program after 2007 vest 20% per year over five years. Upon vesting of restricted performance units, the individual receives shares of UPS class A common stock. In light of the five year duration of the vesting schedule, we do not maintain additional holding period requirements for our employees after vesting. When dividends are paid on UPS common stock, an equivalent value is automatically credited to the participant’s bookkeeping account in additional restricted performance units.

The restricted performance units granted under the LTI program prior to 2008 provided that the number of restricted performance units ultimately earned would increase by 10% if we attain a performance measure, such as adjusted diluted earnings per share, for the five-year performance period. Beginning in 2008, the restricted performance units no longer include this provision.

Long-Term Incentive Performance Award Program — Overview

The LTIP award program is designed to further strengthen the performance component of our executive compensation package and enhance retention of key talent. Approximately 500 members of our senior management team, including the Named Executive Officers, participate in this program.

The program has a three-year award cycle. A target award of RPUs is granted to executive officers and certain other eligible managers at the beginning of the three-year period. Ninety percent of the total target award is divided into three substantially equal performance tranches, one for each calendar year in the three-year award cycle. The remaining 10% is based upon achievement of a diluted earnings per share target for the third year. Performance measures, such as revenue growth, operating return on invested capital (“ROIC”), and diluted earnings per share, are set by the Compensation Committee at the beginning of each calendar year in the three-year award cycle.

The actual number of RPUs that the management employee will receive is determined once the payment percentage for a particular tranche has been approved by the Compensation Committee, based on achievement of performance goals for the applicable calendar year.

 

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LTIP Target Award Values

The Compensation Committee approved 2011 target award values for the three-year 2011 LTIP awards at 675% of base salary for the Chief Executive Officer, 575% of base salary for the Chief Operating Officer, 300% of base salary for the Chief Financial Officer and 250% of base salary for the other executive officers. For other management employees, targets range from 50% to 200% of base salary. Target award values are based on internal pay equity considerations and market data regarding total compensation of comparable positions at similarly sized companies. Differences in the target award values are based on increasing levels of responsibility amongst the management team. The maximum LTIP award that can be earned is 150% of target.

The threshold, target and maximum number of RPUs that can be earned by the Named Executive Officers under the 2011 LTIP is shown in the Grants of Plan-Based Awards for 2011 table.

Total 2011 Long-Term Equity Incentive Award Target Values

Shown in the table is the total long-term incentive opportunity granted to the Named Executive Officers in 2011, based upon a percentage of annualized base salary.

 

Named Executive Officer  

LTI

Options

and RPUs

(% salary)

   

LTIP

RPUs

(% salary)

   

Total

(% salary)

 

D. Scott Davis

    175        675        850   

David P. Abney

    125        575        700   

Kurt P. Kuehn

    125        300        425   

David A. Barnes

    125        250        375   

John J. McDevitt

    125        250        375   

Long-Term Incentive Awards Paid in 2012

LTI Restricted Performance Units Results

For the restricted performance units issued in 2007 under the LTI program, an adjusted earnings per share goal of $7.11 per diluted share for 2011 was established. Because the adjusted diluted earnings per share goal was not met in 2011, the 10% increase in restricted performance units will not be earned for the 2007 awards that will vest in May 2012.

 

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LTIP Performance Targets and Results

Performance targets and actual results for the completed performance periods for the 2009 LTIP, 2010 LTIP and 2011 LTIP are described below. Where the three-year LTIP cycles overlap, the performance goals for individual years are the same. The underlying units are earned based on actual performance as compared to pre-established performance criteria for each period over the three-year cycle of the award. The tranches based on 2011 performance, and the related Committee decisions, are shaded in the chart below.

 

     Percent of
Total
LTIP Award
    Performance Goals   Actual Results   Percent of
LTIP
Tranche
Earned
 

2009 LTIP Award

                       

2009 Performance Tranche

    30  

revenue growth — flat

operating ROIC — 18.7%

 

revenue growth — (12.2)%

operating ROIC, as adjusted — 15.0%

    55

2010 Performance Tranche

    30  

revenue growth — 8.0%

operating ROIC — 18.5%

 

revenue growth — 9.4%

operating ROIC, as adjusted — 21.6%

    120

2011 Performance Tranche

    30  

revenue growth — 8.0%

operating ROIC — 24.0%

 

revenue growth — 7.2%

operating ROIC, as adjusted —24.3%

    95

2011 Earnings Measurement Tranche

    10   2011 earnings per share — $3.94  

2011 earnings per share, as

adjusted — $4.23

    100

2010 LTIP Award

                       

2010 Performance Tranche

    30  

revenue growth — 8.0%

operating ROIC — 18.5%

 

revenue growth — 9.4%

operating ROIC, as adjusted — 21.6%

    120

2011 Performance Tranche

    30  

revenue growth — 8.0%

operating ROIC — 24.0%

 

revenue growth — 7.2%

operating ROIC, as adjusted —24.3%

    95

2011 LTIP Award

                       

2011 Performance Tranche

    30  

revenue growth — 8.0%

operating ROIC — 24.0%

 

revenue growth — 7.2%

operating ROIC, as adjusted —24.3%

    95

 

As shown in the table above, based on actual performance, 95% of the 2011 performance tranche was earned for each of the outstanding LTIP awards. In addition, the 2011 earnings measurement tranche for the 2009 LTIP award was earned at target. The RPUs for 2011 are now earned based on performance, meaning the amount of the award for the 2011 performance period has been determined, but will not vest until January 31 following the third year of the cycle, provided the participant remains employed as of the vesting date. For example, units earned under the 2009 LTIP award vested January 31, 2012 and units earned under the 2011 LTIP award will not vest until January 31, 2014. Special vesting rules apply to terminations by reason of death, disability or retirement. A participant’s earned RSU and RPU account will be adjusted quarterly for dividends paid on class A common stock. Awards that vest will be distributed in the form of class A common stock.

Benefits and Perquisites

Consistent with our culture, the benefits and perquisites offered to the Named Executive Officers are the same or similar to programs offered to the entire UPS management team, with the exception of a financial planning service and executive health services. Additional information on these benefits can be found in the program descriptions below.

The UPS Savings Plan

The UPS Savings Plan is a 401(k) plan offered to all U.S.-based employees who are not subject to a collective bargaining agreement and who are not eligible to participate in another savings plan sponsored by UPS or one of its subsidiaries. We provided a matching contribution to those UPS employees who made elective deferrals to the UPS Savings Plan. The Company matches 50% of up to 5% of eligible pay contributed to the UPS Savings Plan for the Named Executive Officers. The match is paid in shares of class A common stock.

 

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Qualified and Non-Qualified Pension Plans

Named Executive Officers participate in our qualified retirement program, the UPS Retirement Plan, on the same terms as all other participants. Benefits payable under the plan are subject to the maximum compensation limits and the annual benefit limits for a tax-qualified defined benefit plan as established by the Internal Revenue Service. Amounts exceeding these limits are paid pursuant to the UPS Excess Coordinating Benefit Plan, which is a non-qualified restoration plan designed to replace the amount of benefits limited under the tax-qualified plan. Without the Excess Coordinating Benefit Plan, the Named Executive Officers would receive a lower benefit as a percent of final average earnings than the benefit received by other participants in the UPS Retirement Plan.

Discounted Employee Stock Purchase Plan

To foster our manager-owner philosophy, we have maintained a Discounted Employee Stock Purchase Plan since 2001. The plan provides all U.S.-based employees, including the Named Executive Officers, and some internationally based employees, with the opportunity to purchase up to $10,000 in our class A common stock annually at a discount to the market price of our stock. The plan has been designed to comply with Section 423 of the Internal Revenue Code. The purchase price at which our class A common stock may be acquired under the plan is equal to 95% of the fair market value of the shares on the last day of each calendar quarter. Share purchases are made on a quarterly basis.

Financial Planning Service

In 2010, our current and former executive officers were eligible for financial planning services provided by the Ayco Company. In 2011, the Compensation Committee approved a redesigned

financial services benefit for current executives through which the Company will reimburse fees from financial and tax services providers up to $15,000 per year per covered executive, beginning in 2012.

Executive Health Services

UPS’s business continuity is best facilitated by avoiding any prolonged or unexpected absences by members of its senior management team. To that end, all Named Executive Officers were provided certain executive health services, including comprehensive physical examinations.

Other Compensation and Governance Policies

Stock Ownership Guidelines

The board has adopted stock ownership guidelines that apply to management and to members of our board of directors. The guidelines further our core philosophy that managers should also be owners of our company. The guidelines are based on our expectation that each executive officer and director will maintain a targeted level of investment in our stock. Compensation programs are designed to foster long-term stock ownership by all of our managers; therefore each executive officer has accumulated a meaningful number of shares of our common stock. As a result, the interests of shareowners and our executive officers are closely aligned, and our executive officers have a strong incentive to provide effective management.

 

 

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EXECUTIVE COMPENSATION (CONTINUED)

 

 

Target ownership for the Chief Executive Officer is eight times annual salary, and for the other executive officers is five times annual salary. The target for our non-employee directors is five times their annual retainer. Shares of class A common stock, deferred units and vested and unvested RSUs and RPUs are considered as owned for purposes of calculating ownership. Managers and directors are expected to reach target ownership within five years of adoption of the guideline or the date that the manager or director became subject to the guideline. The chart below shows the dollar value of the stock ownership guidelines and the value of shares and units owned by each of the NEOs on December 30, 2011.

 

LOGO

 

In addition, all of our non-employee directors who have been subject to the stock ownership guidelines for at least five years exceed their target ownership. Sandy Randt, who joined the board in 2010, and Candace Kendle, who joined the board in 2011, have an additional three and four years, respectively, to achieve target ownership. RSUs are required to be held by the non-employee director until he or she separates from the UPS board of directors.

Clawback Policy

The 2009 Plan provides that if an award is to an executive officer, and the Compensation Committee later determines that financial results used to determine the amount of the award are materially restated and that the executive officer engaged in fraud or intentional misconduct, we will seek repayment or recovery of the award. This clawback applies to all awards granted under the 2009 Plan. The proposed 2012 Plan includes the same clawback provision.

Equity Grant Practices

Grants for all equity programs under the 2009 Plan are approved by the Compensation Committee. Stock options have an exercise price equal to the closing market price on the NYSE on the date of grant.

 

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EXECUTIVE COMPENSATION (CONTINUED)

 

Employment or Change in Control Agreements

We do not have employment agreements with any of our executive officers. In addition, we do not have a separate change in control or severance agreement with any of our executive officers.

The 2009 Plan generally requires a “double trigger” — both a change in control and a termination of employment — to accelerate the vesting of unvested awards. The proposed 2012 Plan also requires a double trigger. The UPS Incentive Compensation Plan adopted in 1999 (the “1999 Plan”) included a provision for an automatic acceleration of unvested awards in the event of a change in control. This provision applies equally to all outstanding equity awards under the 1999 Plan. At the time of the adoption of the 1999 Plan, the accelerated vesting of all outstanding equity awards following a change in control was a customary and reasonable component of an equity incentive program. All of the equity awards granted to the Named Executive Officers prior to May 7, 2009 are subject to the single trigger, while equity awards granted after that date are subject to the double trigger.

Consideration of “Say on Pay” and “Say on Frequency” Voting Results

The Compensation Committee considered the results of the shareowner “say on pay vote” at our 2011 annual meeting of shareowners in making compensation decisions for 2011. Because over 93% of votes cast for or against the proposal approved our compensation program as described in our 2011 proxy statement, the Compensation Committee believes that shareowners support our pay for performance policies. Therefore, the Compensation Committee continued to apply the same principles in determining the amounts and types of executive compensation for 2011.

The Compensation Committee and the Board considered the results of the shareowner “say on frequency” vote at our 2011 annual meeting of shareowners in adopting a frequency policy for future say on pay votes. Because a substantial majority (over 70%) of votes cast for a say on pay vote every one, two or three years expressed a preference for having a say on pay vote every three years, and noting the strong support the say on pay vote received, the Board adopted a triennial frequency policy. Therefore, our next say on pay vote will be held at our 2014 annual meeting of shareowners. We welcome the input of our shareowners on our compensation policies and compensation program at any time, and not just in the year where we will conduct a say on pay vote.

Tax Implications of Executive Compensation

Section 162(m) of the Internal Revenue Code makes compensation paid to certain named executive officers in amounts in excess of $1 million not tax deductible unless the compensation is paid under a predetermined objective performance plan meeting certain requirements, or satisfies one of various other exemptions. For 2011 and 2012, the MIP is administered by the Compensation Committee and the payments under MIP are intended to qualify as performance-based compensation and thus satisfy the performance-based requirements for tax deductible compensation. The Compensation Committee approved an award pool based on net income with a maximum portion set for each Named Executive Officer subject to Section 162(m). The Committee then has the discretion to determine the award based on company and business results. The Compensation Committee believes that the interests of our shareowners are best served by not restricting the Compensation Committee’s discretion and flexibility in crafting compensation plans and arrangements. While the Compensation Committee intends to structure awards to comply with Section 162(m), the Compensation Committee may approve elements of compensation for certain executive officers that are not fully deductible, and reserves the right to do so in the future in appropriate circumstances.

 

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EXECUTIVE COMPENSATION (CONTINUED)

 

Report of the Compensation Committee

The Compensation Committee is responsible for, among other things, reviewing and approving compensation for the executive officers, establishing the performance goals on which the compensation plans are based and setting the overall compensation principles that guide the committee’s decision-making. The Compensation Committee has reviewed the Compensation Discussion and Analysis (“CD&A”) and discussed it with management. Based on the review and the discussions with management, the Compensation Committee recommended to the board of directors that the CD&A be included in the 2012 proxy statement and incorporated by reference in the Annual Report on Form 10-K for the year ended December 31, 2011 filed with the Securities and Exchange Commission.

The Compensation Committee

John W. Thompson, Chair

F. Duane Ackerman

Stuart E. Eizenstat

Ann M. Livermore

 

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EXECUTIVE COMPENSATION (CONTINUED)

 

Summary Compensation Table for 2011

The following table shows the compensation for each of the Named Executive Officers for 2011, 2010 and 2009.

 

Name and Principal Position   Year    

Salary

($)(1)

        

Stock

Awards

($)(2)

        

Option

Awards

($)(3)

        

Non-Equity
Incentive

Plan

Compensation

($)(4)

        

Change in
Pension
Value

($)(5)

        

All Other

Compensation

($)(6)

        

Total

($)

 

D. Scott Davis

    2011        1,022,865            9,455,012            450,807            566,996            1,516,686            40,732            13,053,098   
Chairman and Chief Executive Officer     2010        1,000,000            7,798,973            437,514            232,000            1,227,435            30,097            10,726,019   
      2009        1,000,000            3,890,437            437,511            130,523            752,239            31,345            6,242,055   

David P. Abney

    2011        473,097            3,614,104            148,937            209,431            606,037            14,931            5,066,537   
Senior Vice President and Chief Operating Officer     2010        462,500            3,037,551            144,533            107,300            2,120,391            8,104            5,880,379   
    2009        462,500            1,523,098            144,534            62,900            106,154            8,269            2,307,455   

Kurt P. Kuehn

    2011        427,137            1,865,518            136,299            191,660            535,154            29,815            3,185,583   
Senior Vice President and Chief Financial Officer     2010        400,000            1,631,710            125,015            92,800            494,949            22,374            2,766,848   
    2009        400,000            963,909            125,006            54,400            289,639            22,612            1,855,566   

David A. Barnes(7)

    2011        418,137            1,566,642            132,558            186,386            485,169            14,648            2,803,540   
Senior Vice President and Chief Information Officer     2010        400,000            1,407,412            125,015            92,800            1,588,489            7,994            3,621,710   

John J. McDevitt

    2011        429,621            1,633,122            135,248            190,183            168,010            13,796            2,569,980   
Senior Vice President, Human Resources and Labor Relations     2010        420,000            1,477,730            131,259            97,440            175,609            7,146            2,309,184   
    2009        420,000            943,485            131,259            57,120            104,461            8,054            1,664,379   

 

(1) This column represents the salary earned from January 1 through December 31 of the applicable year, including the historical half-month bonus program. Salary increases generally are effective in April of the relevant fiscal year and therefore account for any variations reflected in this column.
(2) 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 RSUs or RPUs, LTI RPUs and MIP RSUs. Awards with performance conditions are computed 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 11 “Stock-Based Compensation” in our 2011 Annual Report on Form 10-K. The amounts reported for these awards may not represent the amounts that the individuals will actually realize, as the amounts, if any, ultimately received 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” above.

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 2011 LTIP RPU awards, assuming maximum performance, are as follows: Davis — $11,816,346; Abney — $4,617,919; Kuehn — $2,124,919; Barnes — $1,703,445; and McDevitt — $1,788,528.

 

(3) The values for stock option awards in this column 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 11 “Stock-Based Compensation” in our 2011 Annual Report on Form 10-K. The amounts reported for these awards may not represent the amounts that the individuals will actually realize, as the amounts, if any, ultimately received 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” above.
(4) This column shows the cash portion of the MIP award and the MIP Ownership Incentive award. For a description of the MIP, see “Compensation Discussion and Analysis” above. The MIP Ownership Incentive award was paid at 100% of target (one month’s salary) for each Named Executive Officer who met or exceeded his target ownership level in the same proportion that the MIP award is paid.

 

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EXECUTIVE COMPENSATION (CONTINUED)

 

(5) This column represents an estimate of the annual increase in the actuarial present value of the Named Executive Officer’s accrued benefit under our retirement plans for the applicable year, assuming the greater of actual age or a retirement age of 60. In addition, David Abney and David Barnes first became eligible to participate in the UPS Excess Coordinating Benefit Plan in 2010. In the year that an individual first becomes eligible for the UPS Excess Coordinating Benefit Plan, the Change in Pension Value includes the full present value of the individual’s accrued benefit in the plan. See “2011 Pension Benefits” below for additional information, including the present value assumptions used in this calculation. The change in pension value can be impacted by a number of factors: additional credited service, changes in amounts of compensation covered by the benefit formula, plan amendments, impact of changes in assumptions used to estimate present values, and others. Amounts for 2011 were impacted by the decline in discount rates of 35 basis points for the Retirement Plan and 26 basis points for the UPS Excess Coordinating Benefit Plan. There are no above market or preferential earnings for the UPS Deferred Compensation Plan.

 

(6) The following table breaks down the amounts shown in this column for 2011 (all amounts in $):

 

Name   

401(k)

Match

     Life
Insurance
     RPRO     

Financial

Planning

     Healthcare
Benefits
     Total  

D. Scott Davis

     6,125         7,705         5,394         14,885         6,623         40,732   

David P. Abney

     6,125         2,183         0         0         6,623         14,931   

Kurt P. Kuehn

     6,125         1,946         0         15,021         6,723         29,815   

David A. Barnes

     6,125         1,900         0         0         6,623         14,648   

John J. McDevitt

     6,125         1,048         0         0         6,623         13,796   

 

     For a description of the Restoration Plan Rollover Option, or RPRO, see “2011 Pension Benefits” below.

 

(7) In accordance with SEC rules, because David Barnes first became a Named Executive Officer in 2010, only his 2010 and 2011 compensation is included in the table.

 

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EXECUTIVE COMPENSATION (CONTINUED)

 

Grants of Plan-Based Awards for 2011

The following table provides information about awards granted in 2011 to each of the Named Executive Officers.

 

                     

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

 
          Estimated Possible Payouts
Under Non-Equity Incentive
Plan Awards(1)
    Estimated Future Payouts
Under Equity Incentive Plan
Awards(2)
         
    Grant     Threshold     Target     Maximum     Threshold     Target     Maximum     or Units     Options     Awards     Awards  
Name   Date     ($)     ($)     ($)     (#)     (#)     (#)     (#)(3)     (#)(4)     ($/Sh)     ($)(5)  

D. Scott Davis

                   566,709        1,268,000                                                           
    03/01/2011                                33,598        93,327        135,325                                8,102,622   
    05/04/2011                                                        18,214                        1,352,390   
      05/04/2011                                                                28,322        74.25        450,807   

David P. Abney

                   206,518        459,650                                                           
    03/01/2011                                13,237        36,769        53,316                                3,167,267   
    05/04/2011                                                        6,018                        446,837   
      05/04/2011                                                                9,357        74.25        148,937   

Kurt P. Kuehn

                   188,994        459,650                                                           
    03/01/2011                                5,973        16,592        24,059                                1,456,623   
    05/04/2011                                                        5,507                        408,895   
      05/04/2011                                                                8,563        74.25        136,299   

David A. Barnes

                   183,794        459,650                                                           
    03/01/2011                                4,978        13,827        20,050                                1,168,959   
    05/04/2011                                                        5,356                        397,683   
      05/04/2011                                                                8,328        74.25        132,558   

John J. McDevitt

                   187,538        459,650                                                           
    03/01/2011                                5,227        14,518        21,052                                1,227,346   
    05/04/2011                                                        5,465                        405,776   
      05/04/2011                                                                8,497        74.25        135,248   

 

(1) Reflects the target and maximum values of the cash portion of the 2011 MIP performance incentive award for each Named Executive Officer. Does not include the MIP ownership incentive award, which is equal to one-third of one month’s salary: Davis — $28,622; Abney — $13,238; Kuehn — $12,115; Barnes — $11,782; and McDevitt — $12,022. 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” above.
(2) These columns show the potential number of units that would be awarded under the 2011 LTIP at the end of the applicable three-year performance period if the threshold, target or maximum performance goals are satisfied.
(3) Represents the number of RPUs granted under the LTI on May 4, 2011.
(4) This column shows the number of stock options granted under the LTI on May 4, 2011.
(5) This column shows the grant date fair value of the LTIP RPUs, MIP RSUs, LTI RPUs and LTI stock options under FASB ASC Topic 718 granted to each of the Named Executive Officers in 2011. The grant date fair values are calculated using the NYSE closing price of UPS stock on the date of grant for RSUs and RPUs and the Black-Scholes option pricing model for stock options. The grant date fair value of the units granted under the 2009 LTIP, 2010 LTIP and 2011 LTIP, which have performance conditions, are computed based on the probable outcome of the performance condition for the 2011 performance period and the related earnings measurement tranche. There can be no assurance that the grant date fair value of stock and option awards will ever be realized.

 

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EXECUTIVE COMPENSATION (CONTINUED)

 

Outstanding Equity Awards at Fiscal Year-End 2011

The following table shows the number of shares covered by exercisable and unexercisable options and unvested RSUs and RPUs held by the Named Executive Officers on December 31, 2011.

 

          Stock Awards  
    Option Awards     Number of
Shares or
Units of
Stock That
Have
Not Vested
    Market
Value of
Shares or
Units of
Stock That
Have
Not Vested
   

Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights That

Have Not
Vested

   

Equity
Incentive

Plan

Awards:
Market or
Payout
Value of
Unearned
Shares,

Units or

Other
Rights That
Have Not
Vested

 
   

Number of
Securities
Underlying
Unexercised
Options

(#)

   

Number of
Securities
Underlying
Unexercised
Options

(#)
Unexercisable

   

Option

Exercise

Price

   

Option

Grant

    Option
Expiration
         
Name   Exercisable     (1)     ($)     Date     Date     (#)(2)     ($)(3)     (#)(4)     ($)(3)  

D. Scott Davis

    13,305                62.40        05/02/2003        05/02/2013                                   
    12,260                70.70        05/03/2004        05/02/2014                                   
    12,660                72.07        05/09/2005        05/08/2015                                   
    11,844                80.88        05/01/2006        04/29/2016                                   
            16,086        70.90        05/09/2007        05/08/2017                                   
    15,653        10,436        71.58        05/07/2008        05/07/2018                                   
    16,122        24,183        55.83        05/06/2009        05/06/2019                                   
    5,899        23,600        67.18        05/05/2010        05/05/2020                                   
            28,322        74.25        05/04/2011        05/04/2021                                   
                                              187,912        13,753,309        227,283        16,634,843   

David P. Abney

    8,296                60.22        04/25/2002        04/25/2012                                   
    9,321                62.40        05/02/2003        05/02/2013                                   
    9,034                70.70        05/03/2004        05/02/2014                                   
    9,812                72.07        05/09/2005        05/08/2015                                   
    9,052                80.88        05/01/2006        04/29/2016                                   
            11,260        70.90        05/09/2007        05/08/2017                                   
    5,171        3,448        71.58        05/07/2008        05/07/2018                                   
    5,326        7,989        55.83        05/06/2009        05/06/2019                                   
    1,949        7,796        67.18        05/05/2010        05/05/2020                                   
            9,357        74.25        05/04/2011        05/04/2021                                   
                                              72,570        5,311,390        89,086        6,520,204   

Kurt P. Kuehn

    4,819                60.22        04/25/2002        04/25/2012                                   
    2,420                62.40        05/02/2003        05/02/2013                                   
    7,905                70.70        05/03/2004        05/02/2014                                   
    8,862                72.07        05/09/2005        05/08/2015                                   
    8,178                80.88        05/01/2006        04/29/2016                                   
            9,652        70.90        05/09/2007        05/08/2017                                   
    4,472        2,982        71.58        05/07/2008        05/07/2018                                   
    4,606        6,910        55.83        05/06/2009        05/06/2019                                   
    1,685        6,744        67.18        05/05/2010        05/05/2020                                   
            8,563        74.25        05/04/2011        05/04/2021                                   
                                              45,121        3,302,411        40,703        2,979,053   

 

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EXECUTIVE COMPENSATION (CONTINUED)

 

            Stock Awards  
    Option Awards     Number of
Shares or
Units of
Stock That
Have
Not Vested
    Market
Value of
Shares or
Units of
Stock That
Have
Not Vested
   

Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights That

Have Not
Vested

   

Equity
Incentive

Plan

Awards:
Market or
Payout
Value of
Unearned
Shares,

Units or

Other
Rights That
Have Not
Vested

 
   

Number of
Securities
Underlying
Unexercised
Options

(#)

   

Number of
Securities
Underlying
Unexercised
Options

(#)
Unexercisable

   

Option

Exercise

Price

   

Option

Grant

    Option
Expiration
         
Name   Exercisable     (1)     ($)     Date     Date     (#)(2)     ($)(3)     (#)(4)     ($)(3)  

David A. Barnes

    4,781                60.22        04/25/2002        04/25/2012                                   
    2,577                62.40        05/02/2003        05/02/2013                                   
    2,404                70.70        05/03/2004        05/02/2014                                   
    7,153                72.07        05/09/2005        05/08/2015                                   
    8,178                80.88        05/01/2006        04/29/2016                                   
            9,652        70.90        05/09/2007        05/08/2017