SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Filed by the Registrant x
Filed by a Party other than the Registrant o
Check the appropriate box:
o Preliminary Proxy Statement | ||||
o Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | ||||
x Definitive Proxy Statement | ||||
o Definitive Additional Materials | ||||
o Soliciting Material Pursuant to §240.14a-12 |
United Parcel Service, Inc.
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x | No fee required. |
o | Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. |
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(1) | Amount Previously Paid: |
(2) | Form, Schedule or Registration Statement No.: |
(3) | Filing Party: |
(4) | Date Filed: |
1. | To elect a board of directors to serve until our 2006 annual meeting of shareowners; | |
2. | To ratify the appointment of Deloitte & Touche LLP as our auditors for the year ending December 31, 2005; and | |
3. | To transact any other business as may properly come before the meeting. |
Allen E. Hill | ||
Secretary |
Why am I receiving this proxy statement and proxy card? |
Who is entitled to vote? |
To how many votes is each share of common stock entitled? |
How do I vote? |
• | You may vote by using the Internet. The address of the website for Internet voting iswww.proxyvote.com. Internet voting is available 24 hours a day and will be accessible until 11:59 p.m. Eastern Time on May 4, 2005. Easy-to-follow instructions allow you to vote your shares and confirm that your instructions have been properly recorded. If you vote by using the Internet, you do not need to return your proxy card. | |
• | You may vote by telephone. The toll-free telephone number is noted on your proxy card. Telephone voting is available 24 hours a day and will be accessible until 11:59 p.m. Eastern Time on May 4, 2005. Easy-to-follow voice prompts allow you to vote your shares and confirm that your instructions have been properly recorded. If you vote by telephone, you do not need to return your proxy card. | |
• | You may vote by mail. If you choose to vote by mail, simply mark your proxy card, date and sign it, and return it in the postage-paid envelope that we have provided. |
How many votes do you need to hold the annual meeting? |
What if I change my mind after I return my proxy? |
• | submitting a subsequent proxy by using the Internet, by telephone or by mail with a later date; | |
• | sending written notice of revocation to our Corporate Secretary at 55 Glenlake Parkway, N.E., Atlanta, Georgia 30328; or | |
• | voting in person at the annual meeting. |
On what items am I voting? |
• | the election of a board of directors to serve until our 2006 annual meeting of shareowners; and | |
• | the ratification of the appointment of Deloitte & Touche LLP as our auditors for the year ending December 31, 2005. |
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How may I vote for the nominees for director, and how many votes must the nominees receive to be elected? |
• | vote FOR the election of the ten nominees for director; | |
• | WITHHOLD AUTHORITY to vote for one or more of the nominees and vote FOR the remaining nominees; or | |
• | WITHHOLD AUTHORITY to vote for the ten nominees. |
What happens if a nominee is unable to stand for election? |
How may I vote for the ratification of the appointment of our auditors, and how many votes must the proposal receive to pass? |
• | vote FOR the proposal; | |
• | vote AGAINST the proposal; or | |
• | ABSTAIN from voting on the proposal. |
How does the board of directors recommend that I vote? |
What happens if I sign and return my proxy card but do not provide voting instructions? |
Will my shares be voted if I do not vote by using the Internet, by telephone or by signing and returning my proxy card? |
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Can I receive future proxy materials and annual reports electronically? |
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John J. Beystehner Age 53 Director since 2005 UPS Chief Operating Officer and President, UPS Airlines John joined UPS in 1971 as a part-time clerk while attending Boston College. After graduating in 1973 with a bachelor’s degree in finance, he joined UPS full-time and then earned a law degree in 1977 from Suffolk University Law School. Between 1973 and 1982, John was involved in all phases of UPS’s package operations. He has held various positions in marketing, sales and air operations. John joined UPS’s Management Committee in 1999 when he was named Senior Vice President for worldwide sales and marketing, and assumed his current position in 2004. | ||
Michael L. Eskew Age 55 Director since 1998 UPS Chairman and Chief Executive Officer Mike joined UPS in 1972, after he received a bachelor of science degree in industrial engineering from Purdue University. He also completed the Advanced Management Program at the Wharton School of Business. In 1994, Mike was named UPS’s Corporate Vice President for Industrial Engineering. Two years later he became Group Vice President for Engineering. He was appointed Executive Vice President in 1999 and Vice Chairman in 2000. In January 2002, he succeeded Jim Kelly as Chairman and Chief Executive Officer. Mike serves on the President’s Export Council, he is Chairman of the U.S.-China Business Council, and he is a trustee of the Annie E. Casey Foundation, the world’s largest philanthropic foundation dedicated to helping disadvantaged children. Mike also is a director of 3M Company and IBM. | ||
James P. Kelly Age 61 Director since 1991 Former UPS Chairman and Chief Executive Officer Jim joined UPS in 1964 as a package car driver in the Metro Jersey District. He was promoted into management as a package distribution center manager in 1966. In 1988, he was elected Senior Vice President and appointed UPS’s Labor Relations Manager. In 1992, Jim became Chief Operating Officer and in 1994, he became Executive Vice President. Jim succeeded Oz Nelson as Chairman and Chief Executive Officer in January 1997. In January 2002, Jim retired as Chairman and Chief Executive Officer. Jim also is a director of BellSouth Corporation, Dana Corporation and Hewitt Associates, Inc., and he is a trustee of the Annie E. Casey Foundation, the world’s largest philanthropic foundation dedicated to helping disadvantaged children. | ||
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Ann M. Livermore Age 46 Director since 1997 Executive Vice President, Hewlett-Packard Company Ann is Executive Vice President of Hewlett-Packard Company and general manager of its Technology Solutions Group. Before that, she was the general manager of the HP services business. Ann joined HP in 1982, was named marketing services manager for the Application Support Division in 1985, and was promoted to marketing manager of that division in 1989. Ann became the marketing manager of the Professional Services Division in 1991 and was named sales and marketing manager of the former Worldwide Customer Support Organization. Ann was elected a Vice President of HP in 1995 and was promoted to general manager of Worldwide Customer Support Operations in 1996. In 1997, she took on responsibility for HP’s software businesses as general manager of the newly formed Software and Services Group. In 1998, she was named general manager of the new Enterprise Computing Solutions Organization and, in 2001, general manager of the Services Business. Born in Greensboro, N.C., Ann holds a bachelor’s degree in economics from the University of North Carolina at Chapel Hill and an M.B.A. from Stanford University. Ann is also on the board of visitors of the Kenan-Flagler Business School at the University of North Carolina at Chapel Hill and the Board of Advisors of the Stanford Business School. | ||
Gary E. MacDougal Age 68 Director since 1973 Former Chairman of the Board and Chief Executive Officer, Mark Controls Corporation From 1963 to 1969, Gary was with McKinsey & Co., an international management consulting firm, where he became a partner. From 1969 to 1987, Gary was Chairman and Chief Executive Officer of Mark Controls Corporation, a control systems products manufacturer. In 1988, he became honorary Chairman. Also in 1988, Gary was assistant campaign manager in the Bush presidential campaign and in 1989 was appointed by President Bush as a delegate and alternate representative in the U.S. delegation to the United Nations. He is a Director of the Bulgarian American Enterprise Fund and a trustee of the Annie E. Casey Foundation, the world’s largest philanthropic foundation dedicated to helping disadvantaged children. From 1993 to 1997, he was Chairman of the Governor’s Task Force on Human Service Reform for the State of Illinois. Gary received his bachelor’s degree from the University of California at Los Angeles in engineering in 1958. After receiving his degree, he spent three years as a U.S. Navy officer. Following service, Gary attended Harvard Business School where he received his M.B.A. degree. He serves as an advisory director of Saratoga Partners, a New York-based venture capital fund. | ||
Victor A. Pelson Age 67 Director since 1990 Senior Advisor, UBS Securities LLC Vic is a Senior Advisor to UBS Securities LLC investment bankers. He has held this position with UBS and predecessor companies since 1996. He was associated with AT&T from 1959 to March 1996, and at the time of his retirement from AT&T was Chairman of Global Operations and a member of the Board of Directors and the Management Executive Committee. He also is a director of Eaton Corporation and Dun & Bradstreet. | ||
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Lea N. Soupata Age 54 Director since 1998 UPS Senior Vice President and Human Resources Group Manager A native of New York City, Lea joined UPS in 1969 and now manages the human resources function for approximately 384,000 employees worldwide. Following several assignments with UPS in Human Resources, Sales and Operations, in 1990 Lea became the District Manager of the Central New York District. She was transferred in 1994 to our corporate office as Vice President of Human Resources prior to being named to her current position. Lea serves as chair of The UPS Foundation, our charitable arm, and has been active in a number of community service programs including the United Way. She is a trustee of the Annie E. Casey Foundation, the world’s largest philanthropic foundation dedicated to helping disadvantaged children. She also serves as a board member of Junior Achievement of Georgia, the HR Policy Association and she is a fellow in the National Academy of Human Resources. | ||
John W. Thompson Age 55 Director since 2000 Chairman and Chief Executive Officer, Symantec Corporation John has been Chairman and Chief Executive Officer of Symantec Corporation, the world leader in information security solutions, since April 1999. Prior to joining Symantec, he held a variety of senior leadership positions at IBM, including General Manager of IBM Americas, and was a member of IBM’s Worldwide Management Council. John is a member of the Board of Directors of NiSource Inc. and Seagate Technology. He currently serves on the President’s National Infrastructure Advisory Council and the Bay Area advisory committee for Teach for America. | ||
Carol B. Tomé Age 48 Director since 2003 Executive Vice President and Chief Financial Officer, The Home Depot, Inc. Carol has been Executive Vice President and Chief Financial Officer of The Home Depot, Inc., the world’s largest home improvement specialty retailer and the second largest retailer in the United States, since May 2001. Prior to that, she had been Senior Vice President — Finance and Accounting/Treasurer since February 2000. From 1995 until 2000, she served as Vice President and Treasurer. A native of Jackson, Wyoming, Carol holds a B.S. in Communication from the University of Wyoming and an M.B.A. in Finance from the University of Denver. She is an active volunteer, including serving as a member of the Advisory Board for the Metropolitan Atlanta Arts Fund, The Committee of 200 and a member of the National Board of Directors for Girls Incorporated. | ||
Ben Verwaayen Age 53 Director since 2005 Chief Executive, BT Group plc Ben was appointed to the Board of BT Group plc in the United Kingdom in January 2002 and became Chief Executive in February 2002. He chairs the company’s Operating Committee. Ben was formerly Vice Chairman of the management board of Lucent Technologies in the USA from October 1999. He joined Lucent in September 1997 as Executive Vice President international and became Chief Operating Officer the following month. Prior to joining Lucent, Ben worked for KPN in the Netherlands for nine years as President and Managing Director of its telecoms subsidiary, PTT Telecom. From 1975 to 1988, he worked for ITT in Europe. Ben is a Dutch national. | ||
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Nominating | ||||||||||||||||
and | ||||||||||||||||
Corporate | ||||||||||||||||
Director | Audit | Compensation | Governance | Executive | ||||||||||||
John Beystehner | X | |||||||||||||||
Mike Eskew | X | * | ||||||||||||||
Ann Livermore(1) | X | |||||||||||||||
Gary MacDougal | X | X | * | |||||||||||||
Vic Pelson | X | * | X | |||||||||||||
Lea Soupata | X | |||||||||||||||
John Thompson | X | X | ||||||||||||||
Carol Tomé | X | * | ||||||||||||||
Ben Verwaayen | X |
(1) | Ann Livermore was a member of the Audit Committee during 2004 and until March 17, 2005. |
• | discharging the board’s responsibility relating to our accounting, reporting and financial practices, | |
• | general responsibility for overseeing our accounting and financial reporting processes, | |
• | overseeing the integrity of our financial statements, our systems of disclosure controls and internal controls and our compliance with legal and regulatory requirements, | |
• | overseeing the qualification and independence of our auditors and the performance of our internal audit function and independent auditors, and |
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• | having sole authority to appoint and oversee a registered public accounting firm (as defined by applicable law) to serve as our independent auditors, including sole discretion to retain and terminate the independent auditors. |
• | discharging the board’s responsibilities with respect to compensation of our executive officers, | |
• | establishing corporate goals and objectives relevant to the compensation for our Chairman and Chief Executive Officer, | |
• | evaluating the Chief Executive Officer’s performance in light of these goals and objectives and establishing the compensation for the Chief Executive Officer based on this evaluation, | |
• | reviewing and approving the compensation of other executive officers based upon the recommendation of the Chief Executive Officer, and | |
• | making awards to executive officers under our equity compensation plans. |
• | receiving and considering recommendations, from the CEO and others, regarding succession at the CEO and other senior officer levels, | |
• | assisting the board in identifying and screening qualified candidates to serve as directors, including considering shareowner nominees, | |
• | recommending to the board candidates for election or reelection to the board or to fill vacancies on the board, | |
• | aiding in attracting qualified candidates to serve on the board, and | |
• | making recommendations to the board concerning corporate governance principles, including the structure, composition and functioning of the board and all board committees, the delegation of authority to management, board oversight of management actions and reporting duties of management. |
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Additional Shares in | ||||||||||||||||||||||||
which the Beneficial | ||||||||||||||||||||||||
Number of Shares | Owner Has or | |||||||||||||||||||||||
Directly Owned(1) | Options | Participates in the | ||||||||||||||||||||||
Exercisable | Voting or | Total Shares | Percent of | |||||||||||||||||||||
Directors and Executive | Class A | Class B | within 60 | Investment | Beneficially | Outstanding | ||||||||||||||||||
Officers | Shares | Shares | Days(2) | Power(3) | Owned(4) | Shares(5) | ||||||||||||||||||
John J. Beystehner | 162,427 | 930 | 34,785 | 315,962 | (6) | 514,104 | * | |||||||||||||||||
Calvin Darden(7) | 167,653 | 0 | 37,758 | 0 | 205,411 | * | ||||||||||||||||||
D. Scott Davis | 103,606 | 0 | 20,043 | 3,098,840 | (6)(8) | 3,222,489 | * | |||||||||||||||||
Michael L. Eskew | 252,762 | 0 | 54,691 | 10,866,521 | (6)(9) | 11,173,974 | 1.0 | % | ||||||||||||||||
James P. Kelly | 48,733 | 341,865 | 0 | 10,550,559 | (9) | 10,941,157 | * | |||||||||||||||||
Ann M. Livermore | 19,378 | 0 | 3,017 | 0 | 22,395 | * | ||||||||||||||||||
Gary E. MacDougal | 29,661 | 486 | 3,017 | 10,550,559 | (9) | 10,583,723 | * | |||||||||||||||||
Victor A. Pelson | 8,882 | 10,267 | 1,411 | 0 | 20,560 | * | ||||||||||||||||||
Lea N. Soupata | 244,261 | 0 | 41,805 | 13,649,399 | (6)(8)(9) | 13,935,465 | 1.2 | % | ||||||||||||||||
John W. Thompson | 500 | 1,125 | 1,411 | 0 | 3,036 | * | ||||||||||||||||||
Carol B. Tomé | 0 | 0 | 0 | 0 | 0 | * | ||||||||||||||||||
Ben Verwaayen(10) | 0 | 0 | 0 | 0 | 0 | * | ||||||||||||||||||
Shares held by all directors and executive officers as a group (21 persons) | 1,885,193 | 431,924 | 341,434 | 13,649,399 | (11) | 16,307,950 |
* | Less than 1%. |
(1) | Includes shares for which the named person has sole voting and investment power or has shared voting and investment power with his or her spouse. Includes shares held by immediate family members as follows: Beystehner — 39,361; Darden — 1,022; Davis — 200; Eskew — 41,640; Kelly — 46,394; and MacDougal — 15,347; all directors and officers as a group — 264,811. Each named individual disclaims all beneficial ownership of the shares held by immediate family members. | |
(2) | Represents class A shares that may be acquired through stock options exercisable through April 1, 2005. | |
(3) | Except as described in footnote 9, all shares listed in this column are class A shares. None of the individuals listed, nor members of their families, has any direct ownership rights in the shares listed. See footnotes 6, 8 and 9. | |
(4) | Calculated based on the number of shares owned by the named individual as of February 1, 2005, plus the number of shares that may be acquired by the named individual through stock options exercisable through April 1, 2005. | |
(5) | Based on an aggregate of 1,122,131,543 shares of class A and class B common stock issued and outstanding as of February 1, 2005. Assumes that all options exercisable through April 1, 2005 owned by the named individual are exercised. The total number of shares outstanding used in calculating this percentage also assumes that none of the options owned by other named individuals are exercised. | |
(6) | Includes 315,962 class A shares held by The UPS Foundation, a UPS-sponsored charitable foundation of which John Beystehner, Scott Davis, Mike Eskew, Lea Soupata and two executive officers not listed above are trustees. | |
(7) | Calvin Darden is retiring on March 31, 2005. | |
(8) | Includes 2,782,878 class A shares held by various trusts of which Scott Davis, Lea Soupata, one other UPS person and other persons are co-fiduciaries. | |
(9) | Includes 9,979,651 class A shares and 570,908 class B shares owned by the Annie E. Casey Foundation, Inc., of which Mike Eskew, Jim Kelly, Gary MacDougal, Lea Soupata, two other UPS persons and other persons constitute the corporate Board of Trustees. |
(10) | Ben Verwaayen was appointed to the board on March 17, 2005. Excludes 336 shares of common stock beneficially owned by him on that date. |
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(11) | Includes shares held by the foundations and trusts of which the listed directors and executive officers are trustees. Eliminates duplications in the reported number of shares arising from the fact that several directors and executive officers share in the voting power with respect to these shares. |
Other | ||||||||||||||||||||
Deferred | ||||||||||||||||||||
Restricted | Stock Option | Compensation | ||||||||||||||||||
Phantom | Performance | Deferral | Plan | |||||||||||||||||
Stock Units | Units | Shares | Balances | Total | ||||||||||||||||
John J. Beystehner | — | 10,988 | 39,496 | — | 50,484 | |||||||||||||||
Calvin Darden | — | 10,604 | 50,903 | 128 | 61,635 | |||||||||||||||
D. Scott Davis | — | 10,590 | 4,593 | — | 15,183 | |||||||||||||||
Michael L. Eskew | — | 28,867 | 54,434 | — | 83,301 | |||||||||||||||
James P. Kelly | 357 | 552 | 28,868 | — | 29,777 | |||||||||||||||
Ann M. Livermore | 1,701 | 1,187 | — | — | 2,888 | |||||||||||||||
Gary E. MacDougal | 1,701 | 1,187 | 7,619 | — | 10,507 | |||||||||||||||
Victor A. Pelson | 1,701 | 1,187 | 2,973 | 6,291 | 12,152 | |||||||||||||||
Lea N. Soupata | — | 11,032 | — | — | 11,032 | |||||||||||||||
John W. Thompson | 1,701 | 1,187 | — | 206 | 3,094 | |||||||||||||||
Carol B. Tomé | 804 | 1,187 | — | — | 1,991 | |||||||||||||||
Ben Verwaayen | — | — | — | — | — |
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• | Chairman and CEO: 9.0 to 11.0 times annualized base salary; | |
• | Management Committee: 5.5 to 6.5 times annualized base salary; and | |
• | Non-employee Directors: 6.0 times annualized retainer. |
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Long Term | |||||||||||||||||||||
Compensation | |||||||||||||||||||||
Awards | |||||||||||||||||||||
Securities | |||||||||||||||||||||
Underlying | |||||||||||||||||||||
Stock Options | |||||||||||||||||||||
and | |||||||||||||||||||||
Annual Compensation | Restricted | ||||||||||||||||||||
Performance | All Other | ||||||||||||||||||||
Name and Principal Position | Year | Salary | Bonus(1) | Units(#) | Compensation(2) | ||||||||||||||||
Michael L. Eskew | 2004 | $ | 927,500 | $ | 435,000 | 47,649 | $ | 29,419 | |||||||||||||
Chairman and | 2003 | $ | 863,000 | $ | 351,400 | 50,382 | $ | 16,529 | |||||||||||||
Chief Executive Officer | 2002 | $ | 792,000 | $ | 330,753 | 67,879 | $ | 16,062 | |||||||||||||
John J. Beystehner | 2004 | $ | 512,500 | $ | 237,800 | 18,606 | $ | 15,870 | |||||||||||||
Senior Vice President, Chief Operating | 2003 | $ | 447,200 | $ | 182,728 | 18,715 | $ | 6,000 | |||||||||||||
Officer and President, UPS Airlines | 2002 | $ | 403,250 | $ | 170,300 | 24,622 | $ | 6,000 | |||||||||||||
Calvin Darden(3) | 2004 | $ | 472,000 | $ | 220,400 | 17,244 | $ | 29,251 | |||||||||||||
Senior Vice President | 2003 | $ | 453,650 | $ | 183,230 | 18,765 | $ | 19,200 | |||||||||||||
of U.S. Operations | 2002 | $ | 435,600 | $ | 184,448 | 26,667 | $ | 18,774 | |||||||||||||
D. Scott Davis | 2004 | $ | 471,800 | $ | 220,400 | 17,244 | $ | 20,108 | |||||||||||||
Senior Vice President, Chief Financial | 2003 | $ | 445,200 | $ | 182,728 | 18,715 | $ | 10,002 | |||||||||||||
Officer, and Treasurer | 2002 | $ | 388,750 | $ | 165,060 | 23,864 | $ | 9,731 | |||||||||||||
Lea N. Soupata | 2004 | $ | 490,750 | $ | 229,100 | 17,925 | $ | 15,812 | |||||||||||||
Senior Vice President and | 2003 | $ | 472,400 | $ | 190,760 | 19,536 | $ | 6,000 | |||||||||||||
Human Resources Group Manager | 2002 | $ | 456,350 | $ | 192,308 | 27,804 | $ | 6,000 |
(1) | Reflects the value of awards accrued under the United Parcel Service, Inc. Incentive Compensation Plan based upon the prices of our class B common stock on the dates the awards were granted. |
(2) | Amounts for 2004 include $6,150 for the value of class A common stock contributed by us to the accounts of the named individuals pursuant to the UPS Qualified Stock Ownership Plan. Also includes life insurance premiums paid by us on behalf of the named individuals in the following amounts: Eskew — $4,334, Beystehner — $1,220, Darden — $1,112, Davis — $1,112 and Soupata — $1,162. Also includes financial planning services provided to the named individuals in the following amounts: Eskew — $8,000, Beystehner — $8,500, Darden — $8,000, Davis — $8,500 and Soupata — $8,500. Also includes imputed income under split-dollar life insurance policies as follows: Darden — $13,989, Davis — $4,346 and Eskew — $10,935. No premiums were paid by UPS on its executive officers’ split-dollar life insurance policies after the enactment of the Sarbanes-Oxley Act on July 30, 2002. |
(3) | Calvin Darden is retiring on March 31, 2005. |
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Individual Grants | Potential Realizable Value | |||||||||||||||||||||||
At Assumed Annual | ||||||||||||||||||||||||
Number of | Percent of | Rates of Stock Price | ||||||||||||||||||||||
Securities | Total Options | Appreciation for Option | ||||||||||||||||||||||
Underlying | Granted to | Exercise | Term | |||||||||||||||||||||
Options | Employees In | Price Per | Expiration | |||||||||||||||||||||
Name | Granted (1) | 2004 | Share | Date | 5% (2) | 10% (2) | ||||||||||||||||||
Michael L. Eskew | 33,877 | 1.27 | % | $ | 70.70 | 2014 | $ | 1,506,268 | $ | 3,817,179 | ||||||||||||||
John J. Beystehner | 13,228 | 0.50 | % | $ | 70.70 | 2014 | $ | 588,155 | $ | 1,490,499 | ||||||||||||||
Calvin Darden | 12,260 | 0.46 | % | $ | 70.70 | 2014 | $ | 545,115 | $ | 1,381,427 | ||||||||||||||
D. Scott Davis | 12,260 | 0.46 | % | $ | 70.70 | 2014 | $ | 545,115 | $ | 1,381,427 | ||||||||||||||
Lea N. Soupata | 12,744 | 0.48 | % | $ | 70.70 | 2014 | $ | 566,635 | $ | 1,435,963 |
(1) | Option grants during 2004 were made under the United Parcel Service, Inc. Incentive Compensation Plan. These options are issued at fair market value on the date of grant, vest five years from the date of grant and expire ten years from the date of grant. |
(2) | We are required to use a 5% and 10% assumed rate of appreciation over the ten-year option terms. This does not represent our projection of the future common stock price. The actual value, if any, the named executive officers will realize upon exercise of an option will depend upon the future value of the stock over the exercise price on the date the option is exercised. |
Number of Securities | Value of Unexercised | |||||||||||||||
Number of | Underlying Unexercised | In-the-Money | ||||||||||||||
Class A Shares | Options/SARs at | Options/SARs at | ||||||||||||||
Acquired on | Value | December 31, 2004(1) | December 31, 2004(2) | |||||||||||||
Name | Exercise | Realized | Exercisable/Unexercisable | Exercisable/Unexercisable | ||||||||||||
Michael L. Eskew | 33,108 | $ | 1,665,332 | 54,691/137,575 | $ | 1,690,411/$3,039,277 | ||||||||||
John J. Beystehner | 23,812 | $ | 1,197,744 | 34,785/51,155 | $ | 1,084,119/$1,123,517 | ||||||||||
Calvin Darden | 30,562 | $ | 1,537,269 | 37,758/52,268 | $ | 1,178,474/$1,161,676 | ||||||||||
D. Scott Davis | 0 | $ | 682,923 | 27,019/49,429 | $ | 819,797/$1,090,098 | ||||||||||
Lea N. Soupata | 34,382 | $ | 1,729,415 | 41,805/54,437 | $ | 1,305,386/$1,210,154 |
(1) | Represents stock appreciation rights and shares of class A common stock subject to options granted under the United Parcel Service, Inc. Incentive Compensation Plan. |
(2) | This number is calculated by subtracting the exercise price from the closing price of our class B common stock on December 31, 2004 ($85.46) and multiplying by the number of stock appreciation rights or shares underlying the unexercised options, as applicable. The amounts in this column may not represent amounts that actually can be realized. |
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Performance | ||||||||
or Other | ||||||||
Period Until | ||||||||
Number of | Maturation or | |||||||
Name | Units (#) | Payout | ||||||
Michael L. Eskew | 13,772 | 2004-2009 | ||||||
John J. Beystehner | 5,378 | 2004-2009 | ||||||
Calvin Darden | 4,984 | 2004-2009 | ||||||
D. Scott Davis | 4,984 | 2004-2009 | ||||||
Lea N. Soupata | 5,181 | 2004-2009 |
Estimated Annual Benefits Payable Upon Retirement | ||||||||||||||||||||||||
for Years of Service Indicated | ||||||||||||||||||||||||
Average Final Earnings | 15 Years | 20 Years | 25 Years | 30 Years | 35 Years | 40 Years | ||||||||||||||||||
$ 300,000 | $ | 69,525.00 | $ | 92,700.00 | $ | 115,875.00 | $ | 139,050.00 | $ | 162,225.00 | $ | 177,936.00 | ||||||||||||
$ 350,000 | $ | 82,025.00 | $ | 109,367.00 | $ | 136,708.00 | $ | 164,050.00 | $ | 191,392.00 | $ | 209,936.00 | ||||||||||||
$ 400,000 | $ | 94,525.00 | $ | 126,033.00 | $ | 157,542.00 | $ | 189,050.00 | $ | 220,558.00 | $ | 241,936.00 | ||||||||||||
$ 450,000 | $ | 107,025.00 | $ | 142,700.00 | $ | 178,375.00 | $ | 214,050.00 | $ | 249,725.00 | $ | 273,936.00 | ||||||||||||
$ 500,000 | $ | 119,525.00 | $ | 159,367.00 | $ | 199,208.00 | $ | 239,050.00 | $ | 278,892.00 | $ | 305,936.00 | ||||||||||||
$ 550,000 | $ | 132,025.00 | $ | 176,033.00 | $ | 220,042.00 | $ | 264,050.00 | $ | 308,058.00 | $ | 337,936.00 | ||||||||||||
$ 600,000 | $ | 144,525.00 | $ | 192,700.00 | $ | 240,875.00 | $ | 289,050.00 | $ | 337,225.00 | $ | 369,936.00 | ||||||||||||
$ 700,000 | $ | 169,525.00 | $ | 226,033.00 | $ | 282,542.00 | $ | 339,050.00 | $ | 395,558.00 | $ | 433,936.00 | ||||||||||||
$ 800,000 | $ | 194,525.00 | $ | 259,367.00 | $ | 324,208.00 | $ | 389,050.00 | $ | 453,892.00 | $ | 497,936.00 | ||||||||||||
$ 900,000 | $ | 219,525.00 | $ | 292,700.00 | $ | 365,875.00 | $ | 439,050.00 | $ | 512,225.00 | $ | 561,936.00 | ||||||||||||
$1,000,000 | $ | 244,525.00 | $ | 326,033.00 | $ | 407,542.00 | $ | 489,050.00 | $ | 570,558.00 | $ | 625,936.00 | ||||||||||||
$1,100,000 | $ | 269,525.00 | $ | 359,367.00 | $ | 449,208.00 | $ | 539,050.00 | $ | 628,892.00 | $ | 689,936.00 | ||||||||||||
$1,200,000 | $ | 294,525.00 | $ | 392,700.00 | $ | 490,875.00 | $ | 589,050.00 | $ | 687,225.00 | $ | 753,936.00 | ||||||||||||
$1,300,000 | $ | 319,525.00 | $ | 426,033.00 | $ | 532,542.00 | $ | 639,050.00 | $ | 745,558.00 | $ | 817,936.00 | ||||||||||||
$1,400,000 | $ | 344,525.00 | $ | 459,367.00 | $ | 574,208.00 | $ | 689,050.00 | $ | 803,892.00 | $ | 881,936.00 | ||||||||||||
$1,500,000 | $ | 369,525.00 | $ | 492,700.00 | $ | 615,875.00 | $ | 739,050.00 | $ | 862,225.00 | $ | 945,936.00 |
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Executive Compensation Guiding Principles |
• | Manager-Owner concept plays a central role in the success of UPS |
• | UPS has a long-standing policy of promotion from within wherever possible |
• | Compensation is related to performance |
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• | Executives are provided with the opportunity to own stock |
• | Incentive compensation and equity awards comprise a greater portion of compensation for senior positions |
• | Compensation is validated against benchmark data |
Elements of the UPS Compensation Program |
• | Base salary |
• | Annual incentives |
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• | Long-term incentives |
• | Benefits and perquisites |
Review of CEO Compensation |
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Conclusion |
The Compensation Committee |
Victor A. Pelson, Chair | |
Gary E. MacDougal | |
John W. Thompson |
Compensation of Directors |
Annual Retainer | $ | 65,000 | ||
Committee Chair’s Meeting Fee | $ | 4,000 | ||
Committee Member’s Meeting Fee | $ | 2,500 | ||
Phantom Stock Units Grant | Yes | |||
Restricted Performance Unit Grant | Yes | |||
Reimbursement for Expenses Related to Board Membership | Yes |
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Dollar Value of $100 Investment at December 31 | ||||||||||||||||||||||||
1999 | 2000 | 2001 | 2002 | 2003 | 2004 | |||||||||||||||||||
UPS class B common stock | $ | 100.00 | $ | 86.25 | $ | 81.00 | $ | 94.92 | $ | 113.80 | $ | 132.46 | ||||||||||||
DJ Transport | $ | 100.00 | $ | 100.38 | $ | 91.05 | $ | 80.60 | $ | 106.26 | $ | 135.75 | ||||||||||||
S&P 500 | $ | 100.00 | $ | 90.90 | $ | 80.09 | $ | 62.39 | $ | 80.29 | $ | 89.02 |
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• | reviewed and discussed with management UPS’s audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2004, | |
• | discussed with Deloitte & Touche the matters required by Statement of Accounting Standards No. 61, as amended, and | |
• | received from and discussed with Deloitte & Touche the communications from Deloitte & Touche required by Independence Standards Board Standard No. 1 regarding their independence. |
The Audit Committee |
Carol B. Tomé, Chair | |
John W. Thompson | |
Ann M. Livermore* |
* | Ann Livermore was a member of the Audit Committee during 2004 and until March 17, 2005. |
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Fiscal Year Ended | |||||||||
2004 | 2003 | ||||||||
Audit Fees(a) | $ | 12,232,045 | $ | 5,999,600 | |||||
Audit-Related Fees(b) | 347,361 | 756,317 | |||||||
Total audit and audit-related fees | 12,579,406 | 6,755,917 | |||||||
Tax Fees(c) | 2,964,159 | 7,395,328 | |||||||
All Other Fees | 0 | 0 | |||||||
Total Fees | $ | 15,543,565 | $ | 14,151,245 | |||||
(a) | Includes fees for the audit of our annual financial statements, Sarbanes-Oxley Section 404 attestation procedures, statutory audits of foreign subsidiary financial statements, and services associated with securities filings. |
(b) | Includes fees for due diligence related to acquisitions, audits in connection with acquisitions, employee benefit plan audits, and accounting consultations. |
(c) | Fees for tax services billed in 2004 and 2003 consisted of tax compliance and tax planning and advice. |
• | Fees for tax compliance services totaled $3.0 million and $7.2 million in 2004 and 2003, respectively. Fees for such services in 2003 were unusually high due to the culmination of a large project that lasted 18 months for which the fees were due only at completion. Tax compliance fees in 2004 included $1.1 million resulting from payments to convert previously contingent fee arrangements to fixed fees. Tax compliance services are services to document, compute and obtain government approval for amounts to be included in tax filings based upon preexisting facts or transactions that have already occurred and consisted primarily of the following: |
i. | Assistance in preparing amended state tax returns related to state apportionment changes and enterprise zone tax credits, including assistance necessary to document and obtain state approval for such credits, | |
ii. | Assistance in preparing federal refund claims to deduct certain costs incurred in recent years to acquire various subsidiaries and businesses, and |
iii. | Assistance in preparing and reviewing various tax return filings in foreign jurisdictions. |
• | Fees for tax planning and advice services totaled $0 and $0.2 million in 2004 and 2003, respectively. Tax planning and advice are services related to proposed transactions or advice that alters a transaction to obtain a particular tax result. |
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Number of securities remaining | ||||||||||||
Number of securities to be | available for future issuance | |||||||||||
issued upon exercise | Weighted-average exercise | under equity compensation | ||||||||||
of outstanding options, | price of outstanding options, | plans (excluding securities | ||||||||||
warrants and rights | warrants and rights | reflected in column (a)) | ||||||||||
(a) | (b) | (c) | ||||||||||
Plan category | ||||||||||||
Equity compensation plans approved by security holders(1) | 19,680,676 | $ | 59.93 | 34,745,180 | ||||||||
Equity compensation plans not approved by security holders | — | N/A | — | |||||||||
Total(2) | 19,680,676 | 34,745,180 | ||||||||||
(1) | Includes the United Parcel Service, Inc. Incentive Compensation Plan, the United Parcel Service, Inc. Discounted Employee Stock Purchase Plan and the UPS Qualified Stock Ownership Plan. Includes restricted performance units granted under the Incentive Compensation Plan. The weighted average exercise price does not take these awards into account. |
(2) | Does not include options to purchase an aggregate of 200,549 shares, at a weighted average exercise price of $63.29, granted under plans assumed in connection with acquisition transactions. No additional options may be granted under these plans. |
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1. the director is, or has been within the past three years, an employee of the Company, or an immediate family member of the director is, or in the past three years has been, an executive officer of the Company, other than on an interim basis; | |
2. (A) the director or an immediate family member is a current partner of a firm that is the Company’s external auditor; (B) the director is a current employee of such a firm; (C) the director has an immediate family member who is a current employee of such a firm and who participates in the firm’s audit, assurance or tax compliance (but not tax planning) practice; or (D) the director or an immediate family member was within the last three years (but is no longer) a partner or employee of such a firm and personally worked on the Company’s audit within that time. | |
3. the director, or a member of the director’s immediate family, is or in the past three years has been, an executive officer of another company where any of the Company’s present executives concurrently served on the compensation committee; | |
4. the director, or a member of the director’s immediate family, has, in any twelve-month period within the past three years, received any direct compensation from the Company in excess of $100,000, other than compensation for service on the Board or any of its committees, compensation received by the director’s immediate family member for service as a non-executive employee of the Company, and pension or other forms of deferred compensation for prior service with the Company; or | |
5. the director is a current employee, or a member of the director’s immediate family is an executive officer, of another company that makes payments to or receives payments from the Company, or during any of the last three fiscal years has made payments to or received payments from the Company, for property or services in an amount that, in any single fiscal year, exceeded the greater of $1 million or 2% of the other company’s consolidated gross revenues. For purposes of this section, a contribution to a tax-exempt entity is not a “payment.” |
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UNITED PARCEL SERVICE, INC.
INVESTOR RELATIONS B1F7
55 GLENLAKE PARKWAY, N.E.
ATLANTA, GEORGIA 30328
VOTE BY INTERNET — www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time on May 4, 2005. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.
ELECTRONIC DELIVERY OF FUTURE SHAREHOLDER COMMUNICATIONS
If you would like to reduce the costs incurred by United Parcel Service, Inc. in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e–mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access shareholder communications electronically in future years.
VOTE BY PHONE — 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time on May 4, 2005. Have your proxy card in hand when you call and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to United Parcel Service, Inc., c/o ADP, 51 Mercedes Way, Edgewood, NY 11717.If you vote by Internet or phone, you do not need to return this card.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: X
UNITED PARCEL SERVICE, INC.
1. | Election of a board of directors to serve until the 2006 annual meeting of shareowners. | For All | Withhold All | For All Except | To withhold authority to vote for one or more nominee(s), mark “For All Except” and write the nominee’s number(s) on the line below. | |||||||||||
01) John J. Beystehner | 06) Victor A. Pelson | |||||||||||||||
02) Michael L. Eskew | 07) Lea N. Soupata | |||||||||||||||
03) James P. Kelly | 08) John W. Thompson | |||||||||||||||
04) Ann M. Livermore | 09) Carol B. Tomé | o | o | o | ||||||||||||
05) Gary E. MacDougal | 10) Ben Verwaayen |
For | Against | Abstain | ||||||||||||||||
2. | Ratification of the appointment of Deloitte & Touche LLP as UPS’s auditors for the year ending December 31, 2005. | o | o | o | ||||||||||||||
3. | In their discretion upon such other matters as may properly come before the meeting or any adjournment thereof. |
Sign exactly as name appears hereon. For joint accounts all co-owners should sign. Executors, administrators, custodians, trustees, etc. should so indicate when signing.
Yes | No | |||||||||
Please indicate if you plan to attend this meeting. | o | o | ||||||||
Signature [PLEASE SIGN WITHIN BOX] | Date | Signature (Joint Owners) | Date |
UNITED PARCEL SERVICE, INC.
for the Annual Meeting of Shareowners to be held on May 5, 2005
I hereby appoint MICHAEL L. ESKEW and ALLEN E. HILL, or either of them, with power of substitution, as attorneys and proxies to vote all of the shares of stock outstanding in my name as of March 7, 2005 at the annual meeting of shareowners of United Parcel Service, Inc. to be held at the Hotel du Pont, 11th and Market Streets, Wilmington, Delaware 19801, on May 5, 2005, and at any or all adjournments thereof, and I hereby instruct and authorize the attorneys to vote as stated on the reverse side. (If you sign and return this proxy but no direction is made, this proxy will be voted FOR the election of the nominees listed in Proposal 1 and FOR Proposal 2.)
If I participate in the UPS Qualified Stock Ownership Plan and Trust, I direct the Trustee to vote the stock in the manner stated on the reverse side. (If you sign and return this proxy but no direction is made, the Trustee will vote the shares FOR the election of the nominees listed in Proposal 1 and FOR Proposal 2. If this card is not returned or is returned unsigned, the Trustee will vote the shares in the same proportion as the shares for which voting instructions are received from other participants.)
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)