How Much Does the CEO of UPS Make?

Carol Tomé, the CEO of UPS, commands a substantial compensation package. In 2022, her total compensation amounted to approximately $19 million. This figure encompasses a base salary, stock awards, option awards, non-equity incentive plan compensation, and changes in pension value and deferred compensation earnings.

Understanding CEO Compensation at UPS

CEO compensation isn’t just about a salary; it’s a complex equation reflecting performance, company size, and overall market dynamics. Let’s delve into the components that constitute Carol Tomé’s remuneration package at UPS.

Base Salary: The Foundation

The base salary forms the bedrock of any executive’s compensation. In 2022, Carol Tomé’s base salary was $1.65 million. This represents a fixed amount paid regularly, providing a stable income regardless of short-term company performance. It acknowledges the day-to-day responsibilities and leadership role inherent in being the CEO of a global logistics giant.

Stock Awards: Aligning Interests

Stock awards are a powerful tool used to align the CEO’s interests with those of the shareholders. By receiving shares of company stock, the CEO becomes invested in the long-term success of the company. UPS awarded Carol Tomé stock valued at approximately $10.8 million in 2022. The value of these awards can fluctuate depending on the company’s stock price, further incentivizing the CEO to drive growth and profitability.

Option Awards: Incentivizing Growth

Option awards provide the CEO with the right to purchase company stock at a predetermined price (the “exercise price”) within a specified timeframe. If the stock price rises above the exercise price, the CEO can exercise the options, buying the stock at the lower price and profiting from the difference. In 2022, Carol Tomé received option awards valued at roughly $2.9 million. This component directly incentivizes the CEO to increase shareholder value.

Non-Equity Incentive Plan Compensation: Performance-Based Rewards

Non-equity incentive plan compensation is tied to the achievement of specific performance goals. These goals can be financial metrics (like revenue growth or profitability) or operational targets (like efficiency improvements or customer satisfaction scores). The nature of these goals are decided by the compensation committee. For achieving pre-determined metrics, Tomé received $3.3 million in non-equity incentive plan compensation in 2022. This rewards executives for tangible results that benefit the company as a whole.

Other Compensation: The Fine Print

Beyond the major categories, other forms of compensation contribute to the overall package. These can include benefits, perquisites, and contributions to retirement plans. Changes in pension value and deferred compensation earnings for Carol Tomé totaled roughly $151,000 in 2022. While individually smaller, these elements contribute to a comprehensive and competitive compensation package designed to attract and retain top talent.

Benchmarking CEO Pay: Context is Key

While $19 million sounds like a significant sum (and it is!), it’s important to consider it within the broader context of CEO compensation trends and UPS’s industry peers. Comparing Tomé’s compensation to that of CEOs at similar-sized companies in the logistics and transportation sectors provides a valuable perspective on whether it is in line with market standards. Factors like company performance, market capitalization, and the complexity of the business also play a role in determining appropriate compensation levels.

Furthermore, comparing her compensation to that of previous UPS CEOs offers insight into how the company values leadership and performance over time. Examining the relationship between CEO pay and company performance reveals how closely compensation is aligned with shareholder returns and overall business success.

The Role of the Compensation Committee

The compensation committee, typically comprised of independent members of the Board of Directors, plays a crucial role in setting CEO compensation. The committee’s primary responsibility is to ensure that the compensation package is fair, competitive, and aligned with the company’s strategic goals and shareholder interests. They carefully consider various factors, including company performance, industry benchmarks, and the CEO’s individual contributions. The committee also relies on external consultants to provide independent analysis and recommendations. This rigorous process aims to strike a balance between attracting and retaining top talent while ensuring that compensation is justified and transparent.

Frequently Asked Questions (FAQs) About UPS CEO Compensation

Here are some frequently asked questions about the CEO compensation at UPS, providing additional insights:

1. How is CEO pay determined at UPS?

The Compensation Committee of the Board of Directors determines CEO pay. They use benchmarks, performance metrics, and external consultants to create a fair and competitive package aligned with shareholder interests.

2. What are the key performance indicators (KPIs) used to determine Carol Tomé’s bonus?

Key performance indicators include revenue growth, operating profit, customer satisfaction scores, and strategic initiatives. Specific targets are set annually and directly impact the non-equity incentive plan compensation.

3. How does UPS’s CEO pay compare to other logistics companies?

UPS’s CEO pay is generally competitive with that of other large logistics and transportation companies. However, specific comparisons depend on company size, performance, and geographic location.

4. What percentage of Carol Tomé’s compensation is performance-based?

A significant portion of Carol Tomé’s compensation is performance-based, including stock awards, option awards, and non-equity incentive plan compensation. This typically constitutes over 50% of her total compensation package.

5. How does the CEO’s compensation align with shareholder value?

Stock and option awards align the CEO’s interests with shareholders. Increases in stock price directly benefit both the CEO and shareholders. Furthermore, KPIs tied to performance-based bonuses often focus on driving profitability and sustainable growth, directly benefiting the shareholders.

6. Does UPS have clawback provisions in its executive compensation plans?

Yes, UPS has clawback provisions. These provisions allow the company to recover compensation from executives in cases of financial restatements due to misconduct.

7. How often does the Compensation Committee review CEO pay?

The Compensation Committee reviews CEO pay annually. They assess performance, market trends, and company strategy to make informed decisions.

8. Is there a limit on executive compensation at UPS?

While there isn’t a strict numerical limit, the Compensation Committee aims to ensure that compensation is reasonable and justified based on performance and market conditions.

9. How does the CEO’s compensation impact the average UPS employee?

The CEO’s compensation is a small fraction of the overall expense budget. While it can be a sensitive topic, proponents argue that effective leadership drives company success, which ultimately benefits all employees through job security, better benefits, and potential wage increases.

10. Where can I find details about executive compensation at UPS?

Details about executive compensation are disclosed in UPS’s annual proxy statements, which are filed with the Securities and Exchange Commission (SEC). These documents are publicly available on the SEC website.

11. What is the trend in UPS CEO compensation over the past 5 years?

While specific numbers fluctuate annually, the general trend in UPS CEO compensation over the past 5 years has been relatively stable with increases based on performance.

12. What are some of the challenges Carol Tomé faces as CEO of UPS?

Some of the challenges Carol Tomé faces as CEO of UPS include managing labor relations, navigating evolving e-commerce landscape, maintaining operational efficiency, ensuring sustainable business practices, and competing with other major logistics companies.

Understanding CEO compensation requires a nuanced perspective, taking into account the complexities of the business, the role of the compensation committee, and the broader economic environment. While the numbers may seem large, they represent a reflection of the value placed on leadership and its impact on a global company like UPS.