US Postal Service 2013 Annual Report Download - page 63

2013 Report on Form 10-K United States Postal Service 61
Part III
ITEM 11 — EXECUTIVE COMPENSATION
COMPENSATION DISCUSSION AND ANALYSIS
ROLE OF THE BOARD OF GOVERNORS AND STATUTORY COMPENSATION AND BENEFITS REQUIREMENTS AND LIMITATIONS
The Board of Governors of the Postal Service establishes executive officer compensation and benefits, subject to the
requirements and limitations of federal law. The Board has delegated to its Compensation and Management Resources
Committee (“Compensation Committee”) authority for initial review of management proposals related to compensation
and benefits for executive officers. The Compensation Committee, which meets several times throughout the year, is
composed solely of presidentially-appointed, Senate-confirmed Governors who are independent of postal management.
The Compensation Committee makes recommendations to the full Board for their review and approval.
Federal law governing the Postal Service, set forth in Title 39 of the United States Code, provides that compensation and
benefits for all officers in the Postal Service shall be comparable to the compensation and benefits paid for comparable
levels of work in the private sector of the economy. The Postal Service is the second largest civilian employer in the
nation, with approximately 618,000 career and non-career employees as of the end of fiscal year 2013. The Postal
Service operates nearly 212,000 motor vehicles and more than 31,000 retail units. In 2013, the Postal Service delivered
160 billion pieces of mail, almost half of the world’s mail, and generated approximately $67 billion in revenue. In 2013, the
Postal Service ranked 140th in Fortune Magazine’s listing of Fortune Global 500 Companies. By way of comparison, two
of our largest competitors ranked 179th and 245th on this list. If the Postal Service were listed on the Fortune 500 annual
ranking of America’s largest corporations, it would be ranked 42nd. The same two of our largest competitors are ranked
53rd and 63rd on that list.
Even as the economy continues to be challenged, comparably sized companies typically provide their top executives with
annual salaries well in excess of $1 million and total compensation and benefits valued at several million dollars. These
compensation packages typically consist of annual and long-term performance incentives, including a combination of cash
payments and stock options and a number of benefits and perquisites.
Although the law governing the Postal Service provides that executives and others should be compensated at a level
comparable to the private sector, the law does not afford the Governors the tools to achieve a standard of compensation
comparable to the private sector. Compensation for executive officers of the Postal Service remains significantly below
that of similarly-situated senior executives in the private sector. Postal law imposes three different caps on compensation
for postal employees. The first cap provides that no officer or employee may be paid compensation “at a rate in excess of
the rate for level I of the Executive Schedule under section 5312 of title 5” of the United States Code. 39 U.S.C. § 1003(a).
As the upper limit on federal salaries has been frozen for four years, this compensation cap has been set at $199,700 for
calendar years 2010 through 2013.
With the approval of the Board the Postal Service may develop a program to award a bonus or other reward in excess of
the compensation cap discussed above, as long as this does not cause the total compensation paid to the officer in a year
to “exceed the total annual compensation payable to the Vice President [of the United States] under [3 U.S.C. § 104] as of
the end of the calendar year in which the bonus or award is paid.” 39 U.S.C. § 3686(a)-(b). As the Vice President’s
compensation has been frozen for four years, this total compensation cap was $230,700 for calendar years 2010 through
2013. The Board may approve a program allowing for bonuses or other rewards if it determines, for the annual appraisal
period involved, that the performance appraisal system for affected employees makes meaningful distinctions based on
relative performance.
In addition, the Board may allow up to 12 officers or employees of the Postal Service in critical senior executive or
equivalent positions to be paid total annual compensation up to “120 percent of the total annual compensation payable to
the Vice President [of the United States] under [3 U.S.C. § 104] as of the end of the calendar year in which such payment
is received.” 39 U.S.C. § 3686(c). Based on the Vice President’s salary for calendar years 2010 through 2013, this
compensation cap was $276,840 for those years.
By law, postal employees, including executive officers, are entitled to participate in either the Civil Service Retirement
System or Federal Employees Retirement System, depending on when their federal employment began. These retirement
systems are described later in this compensation discussion and analysis. In addition, in order to remain competitive with
comparable employment in private industry and other parts of the Federal Government, postal policy also authorizes