UPS 2011 Annual Report Download - page 117

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Compensation Program Changes
Effective January 1, 2011, we modified certain components of our management compensation programs for
future award grants, as follows:
• We eliminated our Long-Term Incentive program, and incorporated the value of the award into our
Management Incentive Award program. The combined award is referred to as the “Management
Incentive Award” program.
• The performance period for the Management Incentive Award program changed from an October 1st –
September 30th fiscal year to a calendar year, to be consistent with our business planning cycle.
• Previously, the restricted stock units granted under the Management Incentive Award program were
granted in the fourth quarter of each year, while the restricted performance units granted under the
Long-Term Incentive Program were granted in the second quarter of each year (restricted stock units
and restricted performance units are referred to as “Restricted Units”). Prospectively, Restricted Units
granted under the modified Management Incentive Award will generally be granted in the first quarter
of each year.
• These changes did not impact any existing awards that had been previously granted.
Management Incentive Award
Subsequent to January 1, 2011, non-executive management earning the right to receive Management
Incentive Awards are determined annually by the Salary Committee, which is comprised of executive officers of
the Company. Awards granted to executive officers are determined annually by the Compensation Committee of
the UPS Board of Directors. Our Management Incentive Awards program provides, with certain exceptions, that
one-half to two-thirds of the annual Management Incentive Award will be made in Restricted Units (depending
upon the level of management involved), which generally vest over a five-year period. The other one-third to
one-half of the award is in the form of cash or unrestricted shares of class A common stock, and is fully vested at
the time of grant.
Upon vesting, Restricted Units result in the issuance of the equivalent number of UPS class A common
shares after required tax withholdings. Except in the case of death, disability, or retirement, Restricted Units
granted for our Management Incentive Awards and previous Long-Term Incentive Program generally vest over a
five year period with approximately 20% of the award vesting at each anniversary date of the grant. The entire
grant is expensed on a straight-line basis over the requisite service period. All Restricted Units granted are
subject to earlier cancellation or vesting under certain conditions. Dividends earned on Restricted Units are
reinvested in additional Restricted Units at each dividend payable date.
Long-Term Incentive Performance Award
We also award Restricted Units in conjunction with our Long-Term Incentive Performance Awards program
to certain eligible employees. The Restricted Units ultimately granted under the Long-Term Incentive
Performance Awards program will be based upon the achievement of certain performance measures, including
growth in consolidated revenue and operating return on invested capital, each year during the performance award
cycle, and other measures, including growth in consolidated earnings per share, over the entire three year
performance award cycle. The Restricted Units granted under this program vest at the end of the three year
performance award cycle.
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