US Postal Service 2011 Annual Report Download - page 52

2011 Report on Form 10-K United States Postal Service - 50 -
amount should increase as the executive’s level
of responsibility increases.
 Innovation, effectiveness as an agent for
change, the ability to balance day-to-day
priorities and long-term strategies, and
organizational value as defined by the
achievement of key corporate goals and
objectives should be rewarded.
 Executive compensation should be fair and
equitable internally, recognizing the width and
breadth of the responsibilities of the Postal
Service’s executives.
 Executive success is defined by a number of
factors, including financial returns, the quality of
service the Postal Service provides, the results
achieved by the executive’s actions to enhance
the organization’s efficiency and overcome
challenges and whether an executive met
established individual goals. For these reasons,
lump sum incentives may be appropriate even in
years in which the Postal Service sustains
financial losses. This is especially true where the
Postal Service maintained service levels while
significantly reducing costs.
THE COMPENSATION PROGRAM
In 2007, after enactment of the Postal Act of 2006, the
Compensation Committee of the Board of Governors
retained the services of Watson Wyatt (now Towers
Watson), an independent consulting firm specializing in
executive compensation matters, to assist the Board in
implementing the compensation provisions of the Postal
Act of 2006 and to review and update the overall
program for officer compensation and benefits.
The Compensation Committee recommended and the
Board approved a salary band for the Postmaster
General to be set at the legislative salary cap. In doing
so, the Board’s objectives were to design a
compensation program that optimized the legislative
flexibility granted by the Postal Act of 2006, reduced
internal pay compression, improved external
marketplace competitiveness and honored legislative
constraints and existing pay ranges, consistent with the
recommendations from Towers Watson. For the other
executive officers, the Board set pay bands based on
salary relationships of comparable executive officers in
the comparator external market. In general, the Board
has maintained these types of pay band relationships
since 2007.
When the Governors appointed the current Postmaster
General, they set his salary at the legislative salary cap.
Given the Postal Service’s significant financial
challenges when he assumed office, the current
Postmaster General asked the Governors not to award
him any additional compensation, beyond salary and the
general types of benefits provided to postal executives.
The Governors agreed.
Over the years, the Governors have authorized the
Postmaster General to establish actual salaries for the
other executive officers, within the confines of the salary
ranges established by the Governors. For calendar year
2011, after reviewing recommendations from the
Postmaster General and the Compensation Committee
and in light of the Postal Service’s dire financial
condition, the Governors froze salary ranges and
salaries.
In 2011, the Postal Service continued to employ a
national performance assessment program (“NPA”) to
set annual performance goals and metrics that vary
among executive officers and are weighted to reflect
appropriately the degree to which an executive is able to
influence the overall performance of the Postal Service.
Annual NPA metrics and targets generally take into
consideration the Postal Service’s performance during
the prior year and particular challenges the Postal
Service expects to face during the upcoming year. The
NPA places emphasis on objective, measurable
performance indicators. The Governors also set
individual metrics and targets for the Postmaster
General and Deputy Postmaster General and authorize
the Postmaster General to establish individual metrics
and targets for other officers.
Generally, the Board establishes annual Pay-for-
Performance (PFP) incentive opportunities to provide
incentives and to reward the Postmaster General and
the Deputy Postmaster General for reaching various
levels of performance. The Postmaster General
establishes annual PFP incentive opportunities to
provide incentives and to reward the other executive
officers for reaching various levels of performance.
Incentive payouts are not made for a particular goal if
the Postal Service or the individual fails to meet
minimum acceptable performance standards. While, in
some years, annual PFP incentives are paid out in cash
or deferred for future payment where required due to the
compensation caps, it was determined that, in light of the
Postal Service’s financial condition, no performance
awards would be paid for fiscal year 2011. This will be
the fourth consecutive year that compensation for
executive officers has been impacted by either a freeze
in salary and/or a non- payment of performance lump
sums.
The Postal Service has continued to use the NPA
process to measure performance during fiscal year 2011
even though there will be no associated compensation.
NPA performance goals and rewards fall into several
categories. These include areas that an officer may
directly influence, such as service, efficiency, employee
satisfaction, and productivity, as well as those that are