United Parcel Service Co. gave its chairman and CEO compensation valued at $10.7 million last year, down 7 per cent from the year before, according to an Associated Press analysis.
D. Scott Davis got a 3 per cent increase in salary, to $1,049,703, but most of his compensation came in the form of stock awards.
The company says those awards went down in value because UPS failed to hit targets for revenue growth, return on investment and other financial measurements.
Davis got stock awards worth $8.7 million on the day they were granted, compared with 2011 awards valued at nearly $9.5 million.
Davis also got options last year that were worth $463,675 on the grant date, $426,034 in cash incentives, and $40,292 in other compensation.
The company disclosed its compensation for Davis and four other top executives to the Securities and Exchange Commission earlier this month.
Last year increases in pension expenses and other one-time items drove UPS’ net income down 79 per cent to $807 million, the lowest level since 2008. The company’s adjusted profit and revenue each rose 2 per cent.
The Atlanta company struggled with the sluggish global economy and a shift by customers to using slower and cheaper delivery options. In January UPS told investors that the first quarter of 2013 would be “relatively flat,” and it offered profit forecasts for the quarter and full year that fell below analysts’ expectations.
Shares of UPS rose less than 1 per cent during 2012, although they have climbed 16.5 per cent since the start of 2013 amid some signs of an improving economy.
Davis, 61, has been CEO of the Atlanta-based company since 2008 and was chief financial officer before that. He joined UPS in 1986 when it bought the Oregon-based technology company where he was CEO.
The Associated Press formula calculates an executive’s total compensation during the last fiscal year by adding salary, bonuses, perks, above-market interest that the company pays on deferred compensation and the estimated value of stock and stock options awarded during the year. The AP formula does not count changes in the present value of pension benefits. That makes the AP total slightly different in most cases from the total reported by companies to the Securities and Exchange Commission.
The value that a company assigned to an executive’s stock and option awards for 2012 was the present value of what the company expected the awards to be worth to the executive over time. Companies use one of several formulas to calculate that value. However, the number is just an estimate, and what an executive ultimately receives will depend on the performance of the company’s stock in the years after the awards are granted. Most stock compensation programs require an executive to wait a specified amount of time to receive shares or exercise options.