Top executives at United Parcel Service Inc. (NYSE: UPS) took home outrageously high compensation last year, even though the parcel carrier missed many of its performance targets, like revenue growth and total shareholder returns.
In fact, UPS said in its March filings with the U.S. Securities and Exchange Commission (SEC) its three-year performance missed targets for revenue growth, operating return on invested capital, and total shareholder returns.
Even worse, the world's largest package delivery company also missed some of its financial targets for 2016. For example, UPS's net income fell 29% last year after it struggled to handle the rising costs of e-commerce.
Yet UPS CEO David Abney earned a surprising 21% more in total compensation in 2016 than the prior year, according to the new SEC filings. Abney took in a whopping $13.7 million, including a salary of $1.1 million (a 6.3% increase), stock awards of $10.2 million (a 22% increase), and long-term awards valued at $860,000.
The logistics company's board also lifted salaries an additional 10% for top executives during its September review, just six months after the typical annual salary review in March, which increased salaries about 4%, reported The Wall Street Journal on March 13.
The reason for the huge payouts: Experts say UPS is desperately trying to retain its leadership.
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"Sometimes you'll look and find there's been some lean times because the stock hasn't moved up much," said Stephen Hall, an outside compensation consultant, to WSJ. Hall was not involved in UPS's decision making. However, he said companies give such awards to keep executives from considering other offers.
"We'll offer one-time retention awards and put a lot on the table so they don't listen to a phone call from a competitor," explained Hall.
And it looks like that may be exactly what UPS is doing...
Over the past six months, UPS stock has remained stagnant at 0.23% growth, while the S&P 500 has risen 11.23% in the same period.