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WSJ: UPS Gives Top Brass a Raise Despite Missed Targets


Wall Street JournalMarch 13, 2017

Top executives at  United Parcel Service Inc. took home higher compensation in 2016 even as the parcel carrier missed many of its performance targets.

The reason? A second pay raise and special stock awards given to senior leaders, including Chief Executive David Abney,  toward the end of last year. Mr. Abney’s total compensation was 21% higher than the previous year. 

The September equity awards were valued at $2.6 million for the top five executives, according to a Securities and Exchange Commission filing on Tuesday, and helped offset some performance-based pay that wasn’t fully paid out due to weak results. Compensation based on the prior three years financial results was paid out at 72% of the target.

The Atlanta-based carrier’s board also boosted salaries 10% for top executives during the September review, just six months after the typical annual salary review in March, which increased salaries about 4%.

UPS says the higher salary and one-time grants were designed to keep the company’s pay competitive with peers, and to also tie more of the compensation to future performance. The stock options vest over five years and the restricted stock awards are tied to long-term performance targets.

“The only way the pay is delivered is if the company performs to the target expectations,” UPS spokesman Steve Gaut said. He said the board asked consultants to review compensation in early 2016 and the board made changes in the fall when the recommendations were available.

Mr. Abney, a four-decade UPS veteran who took over as CEO in 2014, made $13.7 million in total compensation for 2016, according to the filing. His salary of nearly $1.1 million was 6.3% higher than 2015. The estimated value of stock and option awards rose 22% to $10.2 million, including long-term awards valued at $860,000 that were granted in September.

Steven Hall,  founder Steven Hall & Partners, a compensation consultant that wasn’t involved in UPS’s decision making, said companies may give such awards to keep executives from considering other offers, especially if stock options aren’t as valuable as originally expected.

“Sometimes you’ll look and find there’s been some lean times because the stock hasn’t moved up much,” Mr. Hall said. “So we’ll offer one-time retention awards and put a lot on the table so they don’t listen to a phone call” from a competitor.

The company said its three-year performance missed targets for revenue growth, operating return on invested capital and total shareholder returns. Those goals were set the year Mr. Abney took over as CEO. The company also missed some of its 2016 financial targets.

UPS’s net income fell 29% last year as rising costs to handle the surge in e-commerce packages more than offset revenue gains. The company’s total shareholder return rose 23% during the fiscal year, which ended Dec. 31. In January, executives lowered their profit targets for 2017, and tempered their longer-term sales and earnings goals.