This excerpt taken from the UPS DEF 14A filed Mar 17, 2008.
Elements of UPS Compensation
The components of the compensation program for our Management Committee are:
Each of these components is discussed below.
The Compensation Committee considers a number of factors in determining annual base salary increases of Management Committee members. While performance is the most important factor, leadership, internal equity
comparisons and market data are all considered by the Compensation Committee when determining annual salary adjustments for Management Committee members.
The following table shows annual base salaries as set for the NEOs in 2006 and 2007 and the overall percentage increase.
The Compensation Committee generally makes annual salary determinations at its first meeting of the year, and the new salaries are effective as of March 1 of that year. In 2007, UPS approved an average base salary increase of 3.5% for all management employees other than members of the Management Committee. The Compensation Committee considered this increase, as well as performance, leadership and peer group data that showed that the NEOs were generally well below the median with respect to base salary levels at other companies.
Based on these considerations, the Compensation Committee approved base salary increases effective March 1, 2007 for Mike Eskew, Jim Winestock and John McDevitt of between 3.5% and 3.6%, which was consistent with the average base salary increase for all management employees. For Scott Davis, the Compensation Committee considered the additional responsibilities assumed by him as vice chairman in awarding him an increase of 19.0%. For David Abney, the Compensation Committee also considered the additional responsibilities assumed by him as chief operating officer, and his base salary increase was 9.0%, effective as of January 1, 2007.
As described in more detail below, annual and long-term incentive compensation is structured similarly across much of our management group. The target award levels are generally structured as a multiple of annual or monthly base salary, with the applicable multiple reflecting the job responsibility of the participant. This structure generally has been in place for a number of years and reflects our historical practices.
The following table provides an overview of our annual incentive awards. Each is described in more detail below.