Annual Meeting of Shareowners

May 4, 2017, 8:00 a.m. Eastern Time, The Hotel du Pont, Wilmington, Delaware

Proxy Statement Summary

Corporate Governance Highlights

A brief overview of some of our corporate governance policies and practices is below:

  • The board has a Risk Committee comprised entirely of independent board members that is responsible for assisting in overseeing management’s identification and evaluation of enterprise risks. The Risk Committee met three times during 2016;
  • We have a highly engaged lead director with significant oversight responsibilities;
  • During 2016, the Nominating and Corporate Governance Committee improved its process for identifying, screening and recruiting director candidates;
  • All of our directors are independent, other than our CEO;
  • We provide for majority voting in uncontested director elections;
  • All directors are elected annually;
  • Independent directors meet regularly without management;
  • The board conducts an in depth review of company strategy on an annual basis; and
  • The board and each board committee conduct self-evaluations annually.

Election of Directors

The Board of Directors is asking you to elect 12 nominees for director. The table below provides summary information about the director nominees. The Company utilizes a majority voting standard which means that 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.

Name Age Director
Occupation Committee(s) Other Public
Independent Directors
Rodney C. Adkins 58 2013 Former Senior Vice President of Corporate Strategy, International Business Machines – Risk (Chair)
– Compensation
Michael J. Burns 65 2005 Former Chairman, Chief Executive Officer and President, Dana Corporation – Audit 0
William R. Johnson
(lead director)
68 2009 Former Chairman, President and Chief Executive Officer, H.J. Heinz Company – Nominating and Corporate Governance
– Executive
Candace Kendle 70 2011 Co-founder and Former Chairman and Chief Executive Officer, Kendle International Inc. – Audit
– Risk
Ann M. Livermore 58 1997 Former Executive Vice President, Hewlett- Packard Company – Compensation (Chair)
– Risk
– Executive
Rudy H.P. Markham 71 2007 Former Financial Director, Unilever – Audit 3
Franck J. Moison 63 2017 Vice Chairman, Colgate-Palmolive Company – Nominating and Corporate Governance 1
Clark T. Randt, Jr. 71 2010 Former U.S. Ambassador to the People’s Republic of China – Compensation
– Nominating and Corporate Governance
John T. Stankey 54 2014 CEO, AT&T Entertainment Group – Nominating and Corporate Governance
– Risk
Carol B. Tomé 60 2003 Chief Financial Officer and Executive Vice President — Corporate Services, The Home Depot, Inc. – Audit (Chair) 0
Kevin M. Warsh 46 2012 Former Member of the Board of Governors of the Federal Reserve System, Distinguished Visiting Fellow, Hoover Institution, Stanford University – Compensation
– Nominating and Corporate Governance
Non-Independent Director
David P. Abney 61 2014 Chairman and Chief Executive Officer, United Parcel Service, Inc. – Executive (Chair) 1

Our Performance Highlights

Financial Performance

The Company had another successful year during 2016. Following are some financial highlights:

Shareowner Returns

UPS is committed to investing in the business in ways that increase capacity, improve efficiency, promote growth in global markets and capitalize on opportunities to improve the business. The Company is also committed to returning excess cash to shareowners. Under the Company’s balanced approach, dividends are a priority while share repurchases represent a discretionary use of cash only after meeting the needs of the business. The following graphs highlight our returns to shareowners:

2016 Compensation Actions Summary

Key compensation decisions for the Named Executive Officers (“NEOs”) for 2016 include the following:

  • Most of our NEOs’ total direct compensation is performance-based and is considered “at risk” (90% for the CEO and 86% for all other NEOs as a group);
  • In order to ensure that total compensation at UPS remains competitive with peer group companies, the Compensation Committee approved certain executive compensation changes in September 2016;
  • As a result of the annual performance review process, base salaries of the NEOs were increased by an average of 4.1%. Certain NEOs also received an additional 10% base salary increase in October; and
  • The 2014 LTIP awards, which had three-year performance goals ending in 2016, were earned at 72% of target based on revenue growth, operating return on invested capital and relative total shareowner return.

Compensation Practices

Our compensation programs are designed to align executive decision-making with the long-term interests of our shareowners. A significant portion of executive pay is tied to company performance over a multi-year period. We also have a long-standing owner-manager culture. Other compensation and governance practices that support these principles include the following:

  • We do not have employment agreements with executive officers;
  • We do not have separate change in control or severance agreements with executive officers;
  • We do not provide tax gross-ups to executive officers with respect to equity awards;
  • 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 2015 Incentive Compensation Plan (“2015 Plan”) includes clawback provisions that permit us to recover awards granted to executive officers;
  • Our 2015 Plan requires a “double trigger” — both a change in control and a termination of employment — to accelerate the vesting of unvested awards that are continued or assumed by the successor entity;
  • 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 other executive officers;
  • We prohibit executive officers and directors from hedging their ownership in UPS stock. Additionally, in 2014 we adopted a policy prohibiting our executive officers and directors from entering into future pledges of UPS stock;
  • We use three-year performance goals for revenue growth, operating return on invested capital and relative total shareowner return (“TSR”) for our long-term incentive performance awards; and
  • Our annual equity awards vest 20% per year over a five-year period.

Say on Pay and Say on Pay Voting Frequency

We maintain an executive compensation program that supports the long-term interests of our shareowners. The Board of Directors is asking you to approve on an advisory basis the compensation of the Named Executive Officers, as described in the Compensation Discussion and Analysis section and in the compensation tables and accompanying narrative disclosure in the proxy statement. The board is also asking you to approve that future advisory votes to approve executive compensation be held every three years, or on a triennial basis.

Ratification of the Appointment of the Independent Registered Public Accounting Firm

The board is asking you to ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2017. We have provided summary information with respect to the fees billed for services provided to us by Deloitte & Touche LLP during the fiscal years ended December 31, 2016 and 2015.

    2016   2015
Fees Billed:        
Audit Fees   $14,493,000   $13,939,000
Audit-Related Fees   $  1,380,000   $  1,351,000
Tax Fees   $     592,000   $     797,000
Total   $16,465,000   $16,087,000

Shareowner Proposals

The board is asking you to vote AGAINST the shareowner proposals requiring an annual report on lobbying activities, reducing the voting power of our class A stock and calling for the adoption of the Holy Land Principles.