Honestly, probably nothing in the long term. This only affects people who sell their MIP every year. I do not have a problem with the change (half now, half whenever)- except for the scorecard. Now it is people (Soupata, Davis & Eskew) who determine the MIP number, not the amount of profits. The MIP will be highly scrutinized from now on out. For new management it means nothing - that is just the way it is.
Is there any thing in writing stating that 5 years from now UPS can't change the rules and not pay that money because the stock is not doing well (if there is something in writing, I would bet there is an out clause for UPS). Atlanta has been lying to mgmt for years now, I would not trust that money to be there in 5 years.
From my understanding the vote to change the MIP in 98 was actually an attempt to do away with it completely!!! Supposedly there was enough feedback from this that the committee decided the repercussions would not be worth the money saved.
UPS will take care of UPS and no one else. Don't ever forget that.
We are all just tools that the company uses to make money and we are all expendable.
I agree about the bottom line. I do not think that anyone will disagree that the MIP change was good for the bottom line - at least over the next 5 years. However, it is offensive that we were told that this is a great thing - tax advantages, blah, blah, blah. It would have been easier if they would have just told us to suck it up and move on. I hate the double talk. This was about shaving $300M off the bottom line this year. How it personally benefits management is beyond me.
Keep an eye on the pension - it is next......
I hope I am wrong.
Its very clear to me how this helps management. While others may not agree, I am stating my personal beliefs.
First, yes I believe MIP will be less than its has been. Not $300M less however. UPS gave out $750M in MIP this year. Even if MIP were to drop by 20%, the overall liability would reduce by $150M.
I recognize that 1/2 of this is deferred payment, but am ignoring that since its not relevent in the long term.
In my opinion, the key to why this is good is in the company focus on what's important. What's important is not keeping profits steady. Its growth.
The six elements are the same elements that Wall St. thinks is important. If those six elements grow so will stock.
From my perspective, if management is focused, the short term reduction in MIP will be much more offset in stock growth. Said differently, if I got more MIP every year, and the stock did not grow, we're much, much worse off.
If the presentation you were given tried to explain that the tax advantages would offset any possible loss they missed the mark.
I gave the presentation to many people and explained that its a short term loss trying to enhance long term gain.
Again, I'm personally in favor of the change because I think its good for UPS and management in the long term and the long term is what matters to me...
"In my opinion, the key to why this is good is in the company focus on what's important. What's important is not keeping profits steady. Its growth."
Yes pretzel man thats what the wizard of OZ would like you to believe. They could have changed the goals at any time without overhauling the rest of the MIP. Therefore they clearly had other objectives then the company line they fed you. The changes to the MIP plan did nothing to impress investors at earnings time. In fact one analyst said he was not crazy about companies that raised their earnings by screwing their management. However buying a frieght company clearly helped the stock. We did not have to change the MIP process to grow the business in this case. I love your attitude. I think its great you're willing to throw yourself on the grenade for the common good. Only in this case the only thing the grenade was getting ready to blow up was the latrine.
I, too, admire your attitude. I have seen many things over the past 15 years and have become somewhat jaded.
If the MIP is a 2 / 4 this year it will result in a $300M savings this year. 1/2 cash, half deferred. 20% of the other half will be realized next year when the RSU's vest.
I am assuming you read the MIP update posted on upsers.com a few weeks ago. Volume development was one of the "below target" numbers. Yet, during the investors meeting we spoke about how volume had really picked up. What changed in those 2-3 weeks? Smells funny......
I did not know about the volume growth committee. When was it formed? I agree that it is needed (probably before now). I also agree that 2008 is key and the issue with the pilots needs to be settled. It seems however that we were caught flat-footed. It seems like we looked up in December and said 'We're in trouble!'.
In one of your earlier posts you talked about the management committee. I have met most of them - on more than one occassion. I agree they are good people - but they fell asleep at the wheel. The earnings forecast was a debacle and it seems that everything that has happened since then has been a knee jerk reaction. I hope I am wrong.
Do you think the management committee is directly responsible for the volume shortfall? I don't and I see the change as a way to motivate those who are. Change is uncomfortable for all so it's not surprising that there is discontent. If you can step back from the immediately personal ramifications and look at this, it's an alignment of the reward system with company goals. It's not as comfortable a position for those that enjoyed the profit sharing plan of the past but I believe that to be exactly what was desired from the company leadership. If you think they were asleep at the switch before, it's not very fair to condemn them for reacting. What would you have said had nothing changed after the shortfall? The more I synthesize this, the more comfortable with it I become. This is meant to keep all of us awake at the wheel.
I do not think they are entirely at fault, but they should shoulder most of the blame. They are the "leaders" of the company - it is their job to look at everything from the 30,000 ft view and well compensated for it. The volume did not just drop off overnight. I completely blame them for the earnings debacle. That was a disaster - bad weather? Come on.
Also, I understand and agree with the change from a company point of view - from a personal standpoint I don't like it. Previously (however flawed it may have become) we could see real numbers to determine what the MIP would be. Now we are relying on three people (Eskew, Soupata, and Davis) to determine what the MIP will be. I know they are good people with plently to lose, but the number is now determined by people, not profit numbers. Every MIP multiplier will be scrutinized from this point forward.
I am glad you are comfortable with the change - it may work and it may backfire.
pretzel, read the latest article on dhl on brown cafe homepage...they arent doing anything. They are covering for themselves putting millions into domestic mkt. Im inches away from stealing some of their volume from one of my businesses I service. They underestimated the domestic market that we dominate. And remember, when one company dominates the market like we do growth is very hard to do...and it seems like we are still squeezing some more volume out of an already dried up market.
The growth committee is relatively new. Kurt K on the Mgmt Committee recommended starting it. Its headed by Wayne Herring who is a region manager. They are making headway and reporting regularly to the management committee and board.
Yes, someone fell asleep with the 4th Qtr projections. That really hurt our credibility with the investors. We're doing a lot of work getting that back.
DHL I think overestimated what low prices would buy vs. poor quality. They wanted to buy the market but did not deliver.
On the other hand, FedEx has improved service and is building capacity.... Yes we dominate the market, but FedEx is taking market share (at least until recently).
Their debt is scary. If interest rates go up, how will they pay their bills? We're AAA rated, and I think they're BBB. Higher interest will kill them and if the buildings are not filled, they're in trouble.....
Look for UPS to leverage our "all services on board" advantage and market this to businesses. FedEX cannot deliver all services at the same time... We can....