US Postal Service 2014 Annual Report Download - page 74

2014 Report on Form 10-K United States Postal Service 70
History of USPS Officer Pay Freezes:
Year
Description
2014
• Base salaries increased 1%
• No performance lump sums awarded
2013
• Base salaries frozen
• No performance lump sums awarded
2012
• Base salaries frozen
• No performance lump sums awarded
2011
• Salary ranges frozen
• Base salaries frozen
• No performance lump sums awarded
2010
• Salary ranges frozen
• Base salaries frozen
2009
• No performance lump sums awarded
2008
• Base salaries frozen
Note: USPS non-bargaining employee compensation does not include COLA payments.
For the past seven years, the officer compensation system has not worked as designed because the Postal Service has faced
significant financial challenges caused in part by the ongoing decline of First-Class Mail, the economy, and problems with its
business model. The Postal Service has taken significant steps, described elsewhere in this report, to reduce costs and generate
revenue. However, it has sought and continues to need comprehensive legislative change to have much greater flexibility to
reduce costs, generate new revenue and return to financial stability. The ongoing financial challenges facing the Postal Service
continued to influence significantly the decisions on compensation for Fiscal Year 2014.
Within the confines of its legislative authority and the financial constraints confronting the Postal Service, the Board’s
philosophy is that:
• There should be a strong connection between individual executive compensation and the Postal Service’s performance
on a number of dimensions, including service, net income and productivity.
• Compensation and benefits should be designed to attract and retain top organizational contributors to ensure the Postal
Service has the caliber of executives who will enable it to operate at the highest levels of performance and productivity.
• Lump sum incentives should be set to motivate executives to improve performance continuously on a long-term basis
and to perform above the annually-established goals and objectives. If individual performance exceeds the goals and
objectives set for the year, the employee should receive additional compensation. Likewise, if overall performance falls
below the annual goals and objectives, the individual should be paid less.
• A significant amount of the executive’s compensation should be at risk and the “at-risk” 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.
The Compensation Program
In 2007, with the assistance of an independent consulting firm specializing in executive compensation, 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. 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.