This excerpt taken from the UPS DEF 14A filed Mar 17, 2008.
Management Incentive Program
This program is designed to align pay with annual company performance. Participants in the plan, which include approximately 35,000 of our management employees at all levels, have the opportunity to earn an annual incentive award when we meet target performance objectives. Incentives paid above target are possible if we exceed our performance objectives. The Compensation Committee exercises its judgment on the payout level for the plan based on considerations including company performance relative to target objectives, the general economic environment, and performance trends.
The award is structured one-half in cash (or the equivalent cash value in shares of UPS class A stock, at the participants election) and other half in restricted stock units, which is discussed in more detail under Long Term Incentives. Annual Management Incentive Program awards are issued under the UPS Incentive Compensation Plan, which was approved by shareowners in 1999.
For approximately 11,000 of the more senior managers among the plan participants, including the Management Committee, the target award level for the overall Management Incentive Program is four months base salary, plus the Ownership Incentive Award described below. For the remaining plan participants, the overall target award level ranges from one to three months base salary, plus the Ownership Incentive Award. These target award levels have been the same since 2005 when the Management Incentive Program was redesigned to better align
management and shareowner interests. The target payouts were based on and are consistent with the long-term average payouts under the previous design.