US Postal Service 2012 Annual Report Download - page 66

2012 Report on Form 10-K United States Postal Service- 65 -
Once the goals and indicators are established, executive officers are advised as to what the Postal Service expects of
them in terms of performance during the year, how their performance will impact the entire Postal Service, and in years
when performance incentives are authorized, the potential level of performance-based incentives they can expect
depending on the Postal Service’s and their individual performance. Under this program, an individual executive officer
can receive a rating of Non-Contributor, Contributor, High Contributor or Exceptional Contributor, with a numerical rating
within each category, depending on how the Postal Service performs on the national indicators and the individual’s
performance, as determined by the Postmaster General. As shown in the chart below, a rating of Non-Contributor would
result from an overall numerical rating of 1 to 3. A rating of Contributor would result from a numerical score of 4 to 9. A
rating of High Contributor would result from a score of 10 to 12 and a rating of Exceptional Contributor would result from a
score of 13 to 15.
Overall Performance Rating
Adjective Rating Number rating
Exceptional Contributor (EC) 13, 14, 15
High Contributor (HC) 10, 11, 12
Contributor (C) 4 to 9
Non Contributor (NC) 1, 2, 3
In years when a salary freeze is not in effect and when performance incentives are authorized, the individual executive
officer’s performance rating would make the officer eligible for an increase to base salary as well as a performance-based
lump sum payment. Due to statutory cap limitations, increases to the maximum of the salary range for executive officers
generally follow the percentage increase to the Executive Schedule for any given year. Any salary increases for executive
officers are limited by these maximums and are solely performance based as determined by the Postmaster General.
Lump sum incentive payments are based on the executive officer’s performance rating given by the Postmaster General
and multiplied by a range of 1.33% to 2.50% based on the degree to which the individual has achieved previously set
individual goals and metrics. The Postmaster General’s discretion on PFP incentives for executive officers in a given year
is limited by the Postal Service’s overall performance on NPA goals and metrics. Generally, officer performance scores
must average to the Postal Service’s overall NPA performance score for the fiscal year.
Salary increases, if any, are determined after the end of the fiscal year, and any new salaries become effective for the
following calendar year. In making compensation decisions for fiscal year 2012, the Governors noted that management
achieved very significant accomplishments in addressing the many challenges the Postal Service faced in the fiscal year.
Despite a significant continuing decline in First-Class Mail volumes over the past several years, management continued to
take aggressive actions within its control to reduce costs, provide excellent service, and secure revenue. Despite
declining First-Class Mail volume, package volume increased during fiscal year 2012. Management improved total factor
productivity by reducing the workforce, overtime, and supplier expenses, as well as through a number of other process
improvement efforts. In addition to maintaining high levels of service, management also maintained employee satisfaction,
introduced a number of new products and services, increased customer satisfaction, increased customer access, and
offered mailers pricing incentives to help stem the volume decline. Management continued to streamline operations,
closing a number of facilities and beginning implementation of consolidations and other steps to optimize network and
retail operations. The Governors also noted that the Postal Service received an unqualified opinion from its external
auditors as to the effectiveness of internal controls. Finally, management also took significant actions to pursue legislative
reform in areas key to the Postal Service’s ability to provide universal service in the future.
Despite the many significant accomplishments of postal management during fiscal year 2012, the Governors based their
decisions on compensation on the fact that the Postal Service continues to face significant financial challenges. While
these financial challenges result in part from the decline in First-Class mail and the economy, the Governors noted that
comprehensive legislative change is needed to enable the Postal Service to return to financial stability. The absence of
legislative change has had, and will continue to have, a significant negative impact on Postal Service finances. Given the
Postal Service’s financial challenges, the Governors have not approved salary increases for calendar year 2013. For the
same reason, the Postmaster General asked the Governors not to award him a performance incentive for fiscal year
2012. The Governors agreed. Likewise, the Postmaster General, with the approval of the Governors, did not award
performance incentives for fiscal year 2012 for the other named executive officers.
Components of the executive officer compensation and benefits program are further outlined as follows.