Redesigned mip

[air_upser]

I don't think the shares are bought on the open market....remember they are A shares. On the open market, they are B shares. Although with the price dropping after the award you would think that was the case....maybe just everyone selling.
A couple of years ago, there was a proxy item to allow the Board of Directors to change the percentage of profits that are distributed via MIP. Don't know if they have or kept the 15% number. Regardless, after taxes it's more like 5%.

 

[susiedriver]

As a shareholder, I would like to believe that the company is trying to maximize return on investment.

If, in order to do that, it means that bonuses based on position, rather than production, are reduced, then so be it.

Cut the dead weight, maximize investment. It's the American Way.

 

[pretzel_man]

MIP shares are created from the shares UPS is authorized to distribute. Those shares are new shares. According to investor relations, when UPS buys back shares from the open market, those shares are retired.

MIP this year as in previous years was 15% of pre-tax profits.

A good source says that the MIP change will no longer tie it to 15% of profits. It will be based on how well UPS does in meeting other business targets.

There will also be a change in how its distributed... I hear not all will be given right away.

In theory, if UPS meets business targets, MIP will remain at about the level its been the last few years.

P-Man

 

[gb]

I think if MIP is "redesigned" to the disavantage of the participants there will be a mass exodus of UPS managemnt. Unfortunately, only the strong and capable will be the ones finding greener pastures. UPS managemet is not what it used to be on a comparative salary scale.

 

[speeddemon]

It shouldnt be, for the lack of productive work they put forth that actually impacts the company in a positive way.

 

[pretzel_man]

Have you seen the presentation?

Seems like a good thing to me. Good for the company in the long term which by definition will help the MIP participants.

Seems like the only people hurt are those that sell their MIP or who are planning on leaving.

P-Man

 

[desert]

I've seen the presentation, and it left me with more questions than answers. It hasn't been determined what kind of award would be presented, the 2 month, 4 month amounts were used as a reference only because that's what has been historically received over the past 10 years.

"The aggregate award will be based on the actual award multiples as determined by the Salary Committee} multiplied by the aggregate monthly salaries by award level(e.g. 1 unit, 2 unit)"

The company has yet to say what "targets" they will base it on. And if Mikey needs new shoes, what will keep the company from raising the MAR's to an unreachable level, or lowering the award multiples.
We've all seen how easily standards can change, with the 5.8 second allowance being taken away.

GB 2112 is right, the salary for UPS management is not what it should be. Drivers working 10 to 15 hours less per week than management, taking home a bigger paycheck, even with the bonus figured in.

The stock has been flat since going public, and is on a downward trend since January. No more 20 to 30 percent increases like we saw pre-stock market.

My opinion, the company has lost focus on customer service and is now driven by the price per share.
This redesigned MIP is just a way for the company to get management to jump higher by hanging the carrot a little bit farther out of reach than before.

And if you get too tired to jump, well, they can use the same carrot on the next fool.

 

[fully]

My only concern is if the same fools who set the 4th Quarter estimates will be the same people setting the targets. If they mess up as badly as they did on the estimates, the MIP is going to be really low this year, regardless of how the company does.

 

[downonbrown]

I have seen and presented the new MIP program (now known as a Bonus plan and no longer profit sharing) and it is not a good thing for UPS Management. We have removed a 15% profit sharing and replaced it with an arbritrary plan based on "street goals" that will hopefully keep the investors off Scott's back every 3 months.

Bottom line you will notice a significant reduction in your take home pay (just ask over and over what is going to happen on my W-2 in 2005). There is a 7%-10% cut in compensation for Supervisors and 13%-15% for Managers.

Our company has lost sight of the "next generation" of talented management. As stated previously, there is no long-term plan just the hopes that in 5-6 years there will be some "golden handcuffs" on the next generation of management and they will not leave because they have too much money on the table.

This is another good long-term decision for the older UPSers (who already have millions). There is no plan for wealth attainment for the "future". New UPSers may get a higher pay because the compensation has been reduced but there will not be any retro adjustments for the existing group of loyal brown-blooded UPSers.

The true impact of this decision will not be felt for 10 years or more. We have already lost our ability to hold our people accountable and achieve quality results through our tried and true processes and procedures. The customers have already noticed this and that is why FedEx is now #1 on Fortunes list.

Jim Casey would not have allowed this to happen and his vision of a management-owned and operated company is coming to an end.

 

[speeddemon]

Welcome to our world.

 

[my2cents]

Obviously, management represents a significant percentage of Class A shares and as a shareholder with a modest stake, this is an interesting thread to read because of its potential long range effect on share price. I'm wondering if a manager who works in logistics or international business development will see gains, while those who work in domestic operations could potentially see reduced payouts.

 

[tieguy]

The immediate effect from looking at the presentation is deferred compensation. If you do a good job this year you won't get the balance of the MIP award until 5 years from now. This will give us an immediate improvement on our earnings results. The only recipients getting the full award this year will be first year recipients.

The second benifit is again to the company and that is retention of management. This years award is partitioned with half being spread out over 5 years in equal payments. So this year half of my award in cash and half deferred over 5 years. Next year half in cash half deferred. At the point 20 percent of this years deferred mip drops into my account. The following year same split and now I get 40 percent of the deferred from year one and year two dropped into my account. If I leave for any reason other than retirement , full disability or death then I lose whatever has been deferred.
While I would not be surprised to see some of our newer management leave initially eventually the deferred stock will start kicking in and give any management person thinking of leaving early something to think about. Any way you shake this plan its a terrific deal for the company and I am at a loss to see one thing that benifits the individual. In fact I don't know if you could find one individual in management that was dissatisfied with the present MIP system.

The company listed the following benifits to teh individual:
1) highlighted investment flexibility,

2)tax breaks

3)increased award from the deferred stock basically reinvesting its own dividends.

 

[pretzel_man]

To clarify a few points from my perspective:

If a manager is not leaving until retirement, the deferred compensation is a good thing. Pay less taxes and the stock is not taxed until vesting. That means its working for the individual over that period of time.

Second, if you look at the business objectives identified, three are growth initiatives, and two are cost initiatives. Seems like a good thing where everyone should focus.

That gets us to the fact that "maybe" less than 15% of profits will be given out.

As was said, this along with the deferred vesting is a good deal for the company...

If its a good deal for the company, then its a good thing for the stock.

I'd much rather see a growth in stock than a higher MIP.

If this gets us there, its good for everyone, isn't it?

By the way, lets say the company gives out 13.5% of profits instead of 15%. That's $75M that the company would keep.

Where would it go? A new building? More sales people?, I don't know, but I bet it goes someplace that is good for UPS stock.

Isn't that what MIP was about in the first place?

P-Man

 

[tieguy]

I'm not a financial expert by any means. It appears that what we have here is a one time opportunity for the company to defer the MIP expense and therefore give the impression of increased earnings in the fourth quarter of 2005. That 50 percent or 7.5 percent of the profits that is deferred will show as an increase in net earnings this fourth quarter. This will give the impression that we have increased our earnings when we really deferred the expense. Now if I thought the market would respond favorably to this deferral of expense then I would be 100 percent for it. But as all of you have seen we have had way too many quarters of record earnings being met with a big yawn by the market.

Again lets be honest here this is not being done for our benifit. I am not crying over this issue but I am not crazy about a system where doing a good job today gets me paid in 5 years. I think at the very least those who have been under the old system for most of their careers should have the option of continuing under the old system.

As you look at the new system the single biggest factor that will affect our stock performance will be volume growth. Significant volume growth will get this stock moving. The market looks at fdx doing the twenty percent growth a year and gets excited. Most do not know that most of the growth fdx is experiencing is coming directly from the post office which has lost significant market share in the past 4 years. They don't understand this information and this company does a poor job of explaining it.

 

[my2cents]

I've heard management receives extra compensation for not selling one's shares. Is this true and if yes, is this part of the redesigned MIP equation? Overall, it sounds like the company is trying to "smooth" the MIP expenses over time to keep the stock price stable.

 

[proups]

Let's see: If I am in a MIP job, I still get my monthly paycheck. That hasn't changed.

I still get my half-month's check in December. That hasn't changed.

The company now changes what essentially was a profit sharing plan for management into a performance based plan. Ooops! Now there is a major change!!

UPS asks every employee outside of the MIP plan participants to perform. What is wrong with asking those that benefit from the MIP plan to perform?

 

[moreluck]

proups.....some of the perks you mentioned are not automatic. They are given based on performance. I have seen mgrs. NOT receive the so-called Xmas bonus and other perks because they just plain didn't perform and didn't deserve. Nothing in mgmt. is "for sure" or set in concrete.....except that if you don't do your job, you'll get fired.

 

[tieguy]

"The company now changes what essentially was a profit sharing plan for management into a performance based plan. Ooops! Now there is a major change!!"

Pro this plan has always been a performance based plan. Each management person has to be recommended in September based on their performance. The MIP award itself is based on 15 percent of profit.The more profit the greater the award. The performance criteria now change each year and it appears will be reported on each time earnings are reported on. Hopefully this will give our stock some momentum. I personally don't think the investment world understands transportation companies very well. If we can get the investment community to except our benchmarks as valid then perhaps we can get them to appreciate how well we really are doing.

This past year has certainly been an odd year. UPSers as a whole did extremely well. We reported many positive results on all fronts. Record profits again. The investment community responded very positively by driving our stock price up. Then wham. Snowstorm at the worst possible time. Blown projections and now we are all struggling to understand where we went wrong.

 

[pretzel_man]

Lets think about it this way....

If profits drop 10% in 2005, should management get 90% of the 2004 MIP? Is that right?

I would be the stock would drop more than that 10% profit drop.

This is designed to have everyone keep the main thing the main thing. Growing the company...

P-Man

 

[tieguy]

good point. problem is the profits not dropping but growing and yet our stock has taken a beating.