United Parcel Service 2021 annual meeting is May 13, 5AM Pacific Time. To attend, vote, and submit questions during the Annual Meeting visit www.virtualshareholdermeeting.com/UPS2021. You will need your 16-digit control number found on your proxy card, voting instruction form, or the Notice of Internet Availability. Mine came by email. I recommend voting in advance. To enhance long-term value. Vote AGAINST Adkins, Burns, Johnson, Livermore, Shi, Stokes, Warsh, Pay, Stock Plan, and Auditor. Vote FOR Lobbying Payments and Policy, One-vote per Share, Report on Climate Change, and Convert to Public Benefit Corporation.
United Parcel Service (UPS) provides letter and package delivery, transportation, logistics, and financial services. Most shareholders do not vote. Reading through 100 pages of the proxy takes time but your vote could be crucial. Below, how I voted and why.
If you have read these posts related to my portfolio and proxy proposals for the last 25 years and trust my judgment, skip 8 minutes of reading. See how I voted my ballot. Voting will take you only a minute or two. Every vote counts.
United Parcel Service 2021: ISS & Sustainalytics Ratings
From the Yahoo Finance profile page: United Parcel Service, Inc.’s ISS Governance QualityScore as of April 30, 2021, is 10. The pillar scores are Audit: 1; Board: 5; Shareholder Rights: 10; Compensation: 5.
United Parcel Service 2021: Board Proposals
Directors who have served for much longer than 10 years should not be considered independent, so should not be members of important board committees requiring independence. For that reason, I voted against Rodney C. Adkins (2013), Michael J. Burns (2005), William R. Johnson (2009), and Ann M. Livermore (1997). Because I vote against the Pay plan, I also voted against members of the Compensation Committee. That added the following: Kevin Warsh, Christiana Smith Shi, and Russell Stokes.
Vote: AGAINST Adkins, Burns, Johnson, Livermore, Shi, Stokes, and Warsh.
2. Executive Compensation
UPS’s Summary Compensation Table shows the highest paid named executive officer (NEO) was Retired President of US Operations, George A. Willis, at $6.5M. However, the CEO is new. If you annualize Carol B. Tomé’s pay it works out to $14.3M (see page 59 of the proxy). I’m using Yahoo! Finance to determine market cap ($187B) and I define large-cap as $10B, mid-cap as $2-10B, and small-cap as less than $2B. UPS is a large-cap company.
According to MyLogIQ, the median CEO compensation at large-cap corporations was $12.9M. Carol B. Tomé’s annualize pay, at $14.3M, is higher. UPS shares beat the S&P 500 Index over the most recent one-, two-, and five-year time periods. The ratio of the annual total compensation of the CEO to the median of the annual total compensation of all employees was 323 to 1.
Given the high pay ratio, above median pay compared to peers, and my concern for growing income inequality, I voted Against it.
3. Omnibus Stock Plan
Pay is too high. I will not approve the omnibus stock plan.
4. Ratification of Independent Auditor
I have no reason to believe the auditor engaged in poor accounting practices or has a conflict of interest. Egan-Jones recommends voting against the auditor if they served for seven years. Independence becomes compromised by that time. Deloitte & Touche LLP served more than seven years. No other issues appear significant.
United Parcel Service 2021: Shareholder Proposals
5. Report on Lobbying Payments and Policy
This good corporate governance proposal of the type I have submitted at other companies, so of course, I voted FOR. This proposal was submitted by Boston Trust Walden Company.
Additional information on the company’s trade association memberships, payments, and oversight mechanisms would give shareholders a better understanding of our company’s lobbying activities and related risks and benefits.
6. Recapitalization Plan for all Stock to Have One-vote per Share
This proposal from John Chevedden is the most important measure on the ballot. It requests that our Board of Directors take steps to ensure that all of our company’s outstanding stock has an equal one-vote per share in each shareholder voting situation. Shareholders should have equal voting rights. That is fundamental. Without a voice, shareholders cannot hold management accountable.
7. Report on Climate Change
Trillium Asset Management filed this proposal requesting a report on how UPS plans to reduce its contribution to climate change and align with the Paris Agreement. We have to meet that goal of maintaining global temperature increases at or below 1.5 degrees Celsius to ensure a salubrious environment.
8. Convert to Public Benefit Corporation
This proposal is from my wife, Myra Young, with help from experts at The Shareholder Commons. It asks UPS to become a public benefit corporation (a “PBC”) in light of its adoption of the Business Roundtable Statement of the Purpose of a Corporation. That action would take us from public relations promises to legal reality. If adopted, UPS would be much more likely to reduce its externalized costs. That should increase their reputation while lowering adverse impacts to other companies in our portfolios and to our environment.
Proxy Insight reported no votes when I last checked.
In looking up a few funds in our Shareowner Action Handbook, I see Calvert voted For all items, except #8. CBIS voted Against the auditor, For all other items. Australia’s Local Government Super voted Against auditor and #8, For the rest. CalPERS voted Against Adkins, Livermore, Randt, Shi, Warsh, Pay; For all other items, including all shareholder proposals. Trillium voted Against Tome, Adkins, Burns, Johnson, Livermore, Moison, Shi, Warsh, Pay, Omnibus Stock Plan, and Auditor. Trillium voted For all other items, including all shareholder proposals.
- Directors: AGAINST Adkins, Burns, Johnson, Livermore, Shi, Stokes, and Warsh.
- Executive Pay: AGAINST
- Omnibus Stock Plan: AGAINST
- Auditor: AGAINST
- Lobbying Payments and Policy: FOR
- Recapitalization Plan for all Stock to Have One-vote per Share: FOR
- Report on Climate Change: FOR
- Convert to Public Benefit Corporation: FOR
United Parcel Service 2021: Issues for Future Proposals
Looking at insightia for anti-shareholder provisions:
- No right to call a Special Shareholders Meeting
- Independent Chair requirement lacking
- Shareholders cannot act by Written Consent
- Supermajority requirements
- Dual-class shares
United Parcel Service 2021: Mark Your Calendar
Shareowners proposals for inclusion in the 2022 proxy must be received by our Corporate Secretary at 55 Glenlake Parkway, N.E., Atlanta, Georgia 30328 no later than 6:00 p.m. eastern on November 29, 2021. Any proposal will need to comply with SEC regulations regarding the inclusion of shareowner proposals in Company-sponsored proxy material. As the rules of the SEC make clear, simply submitting a proposal does not guarantee its inclusion.
Be sure to vote for each item on the proxy. Any items left blank get automatically voted in favor of management’s recommendations. (See Broken Windows & Proxy Vote Rigging – Both Invite More Serious Crime). I generally vote against pay packages where NEOs were paid above median in the previous year but make exceptions if warranted. According to Bebchuk, Lucian A. and Grinstein, Yaniv (The Growth of Executive Pay), aggregate compensation by public companies to NEOs increased from 5 percent of earnings in 1993-1995 to about 10 percent in 2001-2003.
Few firms admit to having average executives. They generally set compensation at above average for their “peer group.” Peer groups are often chosen by aspiration. The “Lake Woebegone effect” may be nice in fictional towns, “where all the children are above average.” However, corporations live in the real world. All CEOs are above average. Ignoring that fact partly explains why their collective pay spiraling out of control. We need to slow the pace of money going to the 1% or our economy will fail to serve the majority. The rationale for peer group benchmarking is a mythological market for CEOs. For more on the subject, see CEO Pay Machine Destroying America.