LTIP for the CEO, COO & CFO

[pretzel_man]

P-man . . . . you have a credibility gap.

According to the 14A (proxy) The LTI program was modified in 2008 so that except for region managers & up, the LTI was paid in RPUs (Stock that vests in 5 years) not options, and that for the region managers and above it is 75% RPUs and 25% options. For the non management committee types, the payout is between 25 & 75% of annual base salary. LTI covers 3,100 folks, and has no performance objectives!

LTIP is a THIRD bonus, on top of MIP & LTI, and the target payouts are higher, ranging from50-200% of annual base salary, but covers 600 folks. And the payouts are and have been, substantial since the plans inception; in 2006 85% to plan; 2007 75% to plan and 2008 65% to plan. 65% of 200% is still 130% of base salary. A pretty nice bonus in anyones book. And the RSUs vest in three years, two years faster then MIP

So how much is a district managers salary??

As a company, UPS has never had much of a problem with the retention of District Managers have they?? And in fact, I have never heard of a member of the Management Committee being swept up by another firm . . . Only Eric Kirchner comes to mind as a Region Manager that left for the "brass ring" elsewhere.

The issue is the retention of front line managers & supervisors; by continuing to balance the books on the backs of those supervisors & managers means that the retention issue will only get worse.

I believe that everything you say is true.

It doesn't change the fact however that the LTIP was added because of the analysis on the relative pay of those at grade 20 and up compared to other companies.

As you said, they are the top 600 to 1000 members of UPS in terms of level. For a 400,000 person company that is the top .25%.

What would the upper .25% of employees in other companies make? I don't know that answer, but the compensation committee decided that these people should be compensated to bring them closer to parity.

As far as LTI goes, you are also correct that it changed to RPU's (or RSU's - I keep forgetting which abbreviation LTIP is). That also doesn't change the fact of all the years of previous options that are worthless.

The world has changed. In the old days, management just had to follow the cookie cutter approach. We were growing. If we did tasks, the business would improve.

Today, management has to be much more dynamic. IMO, that's why some PAS sites have done poorly and others have done very well. It takes more skill to run an operation properly in today's environment.

I have no problem with the upper echelon of of UPS management getting compensated for their responsibility level.

P-Man

 

[pretzel_man]

Hoaxster,
The shift in compensation philisophy has been subtle; but the impact is significant.
The reward is real; the risk is limited at best. And funny, share price is not one of the elements LTIP payouts are based on.

LTIP is not determined based on share price. That's correct. I don't have the sheets in front of me, but the award is based on leading indicators to stock price.

As you pointed out, the LTIP award dropped from 85% to 75% to 65%. Who knows what it will be next year.

I want the top .25% of our company trying to improve their own salary be moving those leading indicators. Let them improve the company and gain from it.

We will all gain.

P-Man

 

[Black_6_Leader]

That also doesn't change the fact of all the years of previous options that are worthless.

I have no problem with the upper echelon of of UPS management getting compensated for their responsibility level.

P-Man

P-Man, As I see it, there are several errors in your logic . . . the options are worthless because these so called leaders were unable to impact the share price in a positive direction.

And remember, all the supervisors and managers, who were awarded MIP shares shares when the price was in the $70s, are now receiving vested shares worth $45. They too have taken a haircut. And I would bet, that haircut is by far a larger percentage of their net worth then the underwater options represent to a district manager. That is why they have been leaving in droves.

Let me borrow a few lines from a document, that from the sounds of your comments, you may have seen before:

"I work for the success of the entire Company rather than for my own personal gain or advantage. I give the benefit of my knowledge and experience to each of my Partners. I want to help them as I know they will help me."

"To me, "Service Comes First" I am dedicated to serving others, -- All of our People--All of our Customers --All of our Business Contacts --and All of the People in the Community. I perform this act of Service with sincerity and honest purpose."

"The financial stability and the future profitable success of our Company are assured when my dedication to Service is performed with the thought of "giving" rather then "receiving."

These were copied word for word from a certificate that is still given to first time MIP recipients. There was a time when these were more then hollow words . . .

 

[pretzel_man]

P-Man, As I see it, there are several errors in your logic . . . the options are worthless because these so called leaders were unable to impact the share price in a positive direction.

And remember, all the supervisors and managers, who were awarded MIP shares shares when the price was in the $70s, are now receiving vested shares worth $45. They too have taken a haircut. And I would bet, that haircut is by far a larger percentage of their net worth then the underwater options represent to a district manager. That is why they have been leaving in droves.

Let me borrow a few lines from a document, that from the sounds of your comments, you may have seen before:

"I work for the success of the entire Company rather than for my own personal gain or advantage. I give the benefit of my knowledge and experience to each of my Partners. I want to help them as I know they will help me."

"To me, "Service Comes First" I am dedicated to serving others, -- All of our People--All of our Customers --All of our Business Contacts --and All of the People in the Community. I perform this act of Service with sincerity and honest purpose."

"The financial stability and the future profitable success of our Company are assured when my dedication to Service is performed with the thought of "giving" rather then "receiving."

These were copied word for word from a certificate that is still given to first time MIP recipients. There was a time when these were more then hollow words . . .

Everyone is impacted by the non growth and drop in share price.

As I recall, Jim Casey said that our people will grow as the company grows. He spoke of the need to grow often. Its still true today.

Everyone is hurt by the non growth, but I would argue that division managers are especially impacted. (and so they should be)

Division managers were awarded options at $54 with expected 11% growth. They are worthless.

In the old days, they could count on those options being worth something in 5 years. At least they now get the RSU's. The net worth of division managers today vs. 20 years ago is hugely different and its because of the lack of growth. The same would be true for grade 20's and up. When so much of your pay is incentive based (and deferred), that has to be the case.

They don't have a right to complain. It goes with the territory.

The same is true for the rest of management. We need the company and stock to grow.

BTW, I do not believe it true that supervisors and managers are leaving in droves. The last numbers I saw showed attrition about the same for the last few years.

P-Man

 

[Catatonic]

BTW, I do not believe it true that supervisors and managers are leaving in droves. The last numbers I saw showed attrition about the same for the last few years.

P-Man

And almost non-existent for the last 6 months.

 

[bones]

Black_6_Leader, excellent posts, thanks for your insight. On another note I wonder how often the management comittee reads the policy book at meetings? I'm sure the board never does. As I believe someone pointed out above greed has been and is still firmly in control of the board and the management comittee. I worked under one of the management comittee members long ago when they were just getting started in their career, while I may consider that person above average I have worked for people whom I consider smarter, more effective, and got better results that are doing a great job for this company for a fraction of the money. Consider what a 25 year manager would have retired with in the 90's or before with what a 25 year manager will retire with in the next 5 to 10 years. It is a fraction before you factor in inflation. P-man pointed out above how much better you have to be as a management person now than before, why do 18's and below deserve so much less for it while there seems to be such a great effort to substantially raise grade 20 and above compensation. I believe the weak economic conditions are just being used as an excuse to do what was being planned to begin with, give them less so we can have more. I may be wrong but when I look at a couple regions volume this year compared with 02, 03, and 04 there doesn't seem to be that much difference (in some years it was higher then than now). We have cut regions and districts since then, why was the volume enough to pay all the bills then plus decent MIP but now it is no where close and we must all continue to give back?

 

[brownmonster]

The same is true for the rest of management. We need the company and stock to grow.

Also true with hourlies. We were touted the virtue of buying the stock. Being awarded a falling stock would be better than having to buy the stock and watching it fall. It's now upper mgmnts time to shine. We're all counting on them to show us why they are in the positions they are in. This ain't AIG. I need to perform almost flawlessly to reach my daily goals and am continually asked to do more. I expect nothing less from those running the company. The BM

 

[airbusfxr]

The airline mechanics retro pay must be going into this slush fund. I have not received a raise or inhancement since NOV 2005.

 

[drewed]

Wow lets bring that into another thread....

 

[Feeder Hawgg]

Does anyone remember what D. Scott Davis oversaw from 1996 - 2001, Oversees Partners Limited. How did that turn out for you shareowners? The newest philosophy comes from Start Right Stay Right, by Steve Ventura. The opening line is "Congratulations! You have a Job! Too bad it doesn't pay as much today as it did just a couple years ago. When I went into management 21 years ago, there was the Thrift Plan, and OPL was awarded 1:4 ratio, MIP, 1/2 month in December and the company paid all of my insurance. Stock rose at a steady rate splitting every four years to six years. Along came 401K gift match....life was good. Now I pay around $250 a month for my share of insurance which is now option 3. No 401K match. Wrote off the last of my OPL in 2007. No raise!!!!!! And my stock is worth about half as my portfolio stated at the end of 2008. I know the economy is hurting and needs stimulating but stimulate me and I will spend my share.
The problem as stated in an earlier post is the lack of Policy Book knowledge and the need to manage by a book that will cost you $10.99 at Amazon.com. The bottom line is unless we get back to the tried and true principles of the Policy Book the newest book we are using is going to cost us more than the $10.99 retail.

 

[Black_6_Leader]

Jim Casey said it best at the 1956 Plant Managers conference, in a talk enshrined as "A Talk with Joe"

"As to your job, you’ll see clearly that the price of progress is service and that the more valuable you make your service to others the more profitable it will be to you. You will reverse the common tendency of people to put dollars first in every move they make. You’ll see that money comes after results — not before them.

As time goes on, the soundness of that philosophy will prove itself to you. Without thinking much of dollars themselves, they will flow into your bank account and add to the value of your stockholdings in greater number than you had expected."

​

To see today's senior management team put personal rewards before partnership or service, most likely has Jim turning in his grave . . . When you visit Holyrood Cemetery, I bet you no longer have to ask for directions to the Casey grave, just ask for "Pinwheel Jim".

 

[sortaisle]

LTIP is based on company performance.

LTIP is tied to metrics that are leading indicators to company growth and stock growth.

If these top executives can help move those indicators, I'm glad that they get this amount and more.

A district manager has 3/4 of their pay tied to incentives based on business indicators. Region managers, management committee, and C-Level execs have an even greater % of pay tied to these leading business indicators.

If the company does well, they will.

P-Man

And therein lies the major problem with our company. They start making decisions based off of what makes things look better on paper. Not what is best for our customers. UPS is starting to get blinded with the bean counting. It's no wonder we started to lose our most profitable accounts to other companies. The only thing that is keeping us afloat is the other corporations are doing the same thing. It doesn't take a genius to know that if you make the customers happy, you will benefit long term. But they gotta make those markers and paychecks by fudging the numbers. Numbers work almost all the time. The reason why numbers will not work with UPS or any other corporation is the people behind the numbers. Ask any of the drivers who's dispatch has changed dramatically over the last few years. 5 years back, 110 stops was about the average day and came back at 9.5. Now you need 135 to average a 9.5. And don't nobody tell me about the PAS making the routes easier. They add and cut some of the dumbest crap I've ever seen on routes. They add driving miles just to fudge the numbers. I can't tell you how many drivers I've talked to that can vouch for this.

 

[airbusfxr]

The LTIP did not seem to rile up the troops when it was announced. I thought every employee would be UPSet.

 

[randomUPSISer]

The LTIP did not seem to rile up the troops when it was announced. I thought every employee would be UPSet.

What was the LTIP number?

 

[Dis-organized Labor]

The LTIP did not seem to rile up the troops when it was announced. I thought every employee would be UPSet.

I actually did, but what are we supposed to do about it?
Picket the Corporate office?

 

[sosocal]

I don't have an opinion on where top managment compares in compensation to other companies...BUT even if that is true and a simple supply and demand balance needs to be corrected...and even if it is rationally tied to performance...THE TIMING COULD NOT BE ANY WORSE!!!...NOW MORE THAN EVER THIS SPITS IN THE FACE OF PARTNERSHIP. LEAD BY EXAMPLE. WALK THE TALK. As a manager I will stay to be the last person in the building on Christmas eve, day after thanksgiving, last hairy days of peak etc... My center can live without me there and do just fine...IT is SYMBOLIC to the drivers and mgt team that we are ALL IN THIS TOGETHER....MORE THAN EVER WE NEED THAT NOW FROM THE TOP.

 

[pretzel_man]

I don't have an opinion on where top managment compares in compensation to other companies...BUT even if that is true and a simple supply and demand balance needs to be corrected...and even if it is rationally tied to performance...THE TIMING COULD NOT BE ANY WORSE!!!...NOW MORE THAN EVER THIS SPITS IN THE FACE OF PARTNERSHIP. LEAD BY EXAMPLE. WALK THE TALK. As a manager I will stay to be the last person in the building on Christmas eve, day after thanksgiving, last hairy days of peak etc... My center can live without me there and do just fine...IT is SYMBOLIC to the drivers and mgt team that we are ALL IN THIS TOGETHER....MORE THAN EVER WE NEED THAT NOW FROM THE TOP.

LTIP is not a new program. It is in its third year, I think.

Corporate compensation regularly does evaluations on UPS pay, benefits, etc. They are currently in the middle of one for much of UPS.

Think for a moment, how LTIP began. Compensation studied jobs at UPS compared to other companies of similar size and responsibilities.

Grade 20's and above are in the upper 1/4 of 1% of all UPSers. What do you think someone at IBM, Microsoft, or other trucking companies for that matter make at that level?

Every UPSer wants to make equal to or better than counterparts in other companies. Corporate compensation recommended this change to the salary committee.

Remember, this is an incentive plan. The better UPS produces, the better the incentive. These people are in a position to impact the bottom line. If they get compensated for doing so, that seems okay to me.

P-Man

 

[pretzel_man]

The LTIP did not seem to rile up the troops when it was announced. I thought every employee would be UPSet.

You continually avoid this question....

You believe you deserve to be paid equal to or better than people in other companies doing a similar job.

Why do you think Grade 20's should not receive the same parity?

P-Man

 

[sosocal]

LTIP is not a new program. It is in its third year, I think.

Corporate compensation regularly does evaluations on UPS pay, benefits, etc. They are currently in the middle of one for much of UPS.

Think for a moment, how LTIP began. Compensation studied jobs at UPS compared to other companies of similar size and responsibilities.

Grade 20's and above are in the upper 1/4 of 1% of all UPSers. What do you think someone at IBM, Microsoft, or other trucking companies for that matter make at that level?

Every UPSer wants to make equal to or better than counterparts in other companies. Corporate compensation recommended this change to the salary committee.

Remember, this is an incentive plan. The better UPS produces, the better the incentive. These people are in a position to impact the bottom line. If they get compensated for doing so, that seems okay to me.

P-Man

all good points....and no argument to methodology or worthiness etc, etc etc.....MY point is that is it is very bad timing - it would have been a good example or symbolic gesture if they temperarilly dropped this compensation enhancement at the time they took the axe to the rest of management -- You know do more with less... without a raise...Personally take one for the partnership? Honestly I have no problem doing it and no bitterness about being in the situation that necessitates the new mantra... Its all about my perception of leadership by example --ironically-- being let down by the very organization that fashioned that perception... I persoanlly find the timing disappointing.

 

[pretzel_man]

all good points....and no argument to methodology or worthiness etc, etc etc.....MY point is that is it is very bad timing - it would have been a good example or symbolic gesture if they temperarilly dropped this compensation enhancement at the time they took the axe to the rest of management -- You know do more with less... without a raise...Personally take one for the partnership? Honestly I have no problem doing it and no bitterness about being in the situation that necessitates the new mantra... Its all about my perception of leadership by example --ironically-- being let down by the very organization that fashioned that perception... I persoanlly find the timing disappointing.

I don't know.....

Loss of 401k match and raises also impacted these people.

The concept is that these incentives are there to benefit the individuals by benefitting the company. The LTIP is tied to metrics that also drive comany performance.

P-Man