Table of Contents

United Parcel Service, Inc.
55 Glenlake Parkway, N.E.
Atlanta, GA 30328

March 15, 2019

	UPS is Strong Today and CREATING our Tomorrow.

In short, UPS is Strong Today, and CREATING our Tomorrow. We embarked on this transformation from a position of strength, with a commitment to create our own future. UPS has a powerful brand, an exceptional and essential global network, and a broad product and solutions portfolio that is designed to meet the current and emerging needs of our customers. UPS produces strong cash flow, the industry’s highest margins, and a solid balance sheet.

Our transformation is designed to achieve three principal goals: generate high-quality revenue growth; drive efficiencies and cost reductions that will improve our margins; and further develop our talent as we continue to foster a culture of innovation.

The investments we are making in our network, people, technology and products will improve leverage in our global operations – and are creating greater differentiation for UPS in the markets we serve. Our customers will benefit from more flexibility, consistency and visibility in how packages are moved through our network. By enhancing the value we create for our customers, we will generate higher revenue per package, better balance between our business and residential-based volumes and a higher level of earnings growth.

We made substantial progress on the network investment initiatives we first discussed in early 2017. We are implementing technology that is making our network and our company more efficient, more flexible, more resilient, and more anticipatory. The result is a network that enables us to attract additional opportunities for high quality growth and generate improved operating margins.

We are capturing opportunities through digital technology and automation that are changing the way people and companies connect and communicate. Additionally, our advanced methods of optimizing the flows of freight and packages with available capacity results in improved transit times for our customers and better asset utilization and network efficiency. To build on those improvements and fulfill the growing demand for our services, we are significantly expanding capacity through comprehensive investments across our operations.

These improvements have succeeded in large part due to the innovative ideas and commitment to service our people bring to UPS everyday. We will continue to shape our culture so we can seize on the new market opportunities of the 21st century.

I want to encourage all of our shareowners to vote. This is your opportunity to share your views with the Company. We look for meaningful ways to engage with our investors as we continually seek to grow our business, improve governance and increase shareowner value. We are grateful to those shareowners who have previously shared their views. As we approach the Annual Meeting, I encourage you to contact us with any questions or feedback at 404-828-6059.

On behalf of the entire Board of Directors, thank you for your continued support of UPS.

David P. Abney
Chairman and Chief Executive Officer

4

Notice of Annual Meeting of Shareowners and 2019 Proxy Statement

Proxy Statement UNITED PARCEL SERVICE, INC. 55 Glenlake Parkway, N.E., Atlanta, Georgia 30328

This Proxy Statement contains important information on Company matters that require your vote at the 2019 Annual Meeting of Shareowners (the “Annual Meeting”). We are providing these proxy materials to you because you own shares of United Parcel Service, Inc. common stock and our Board of Directors is soliciting your proxy to vote your shares at the Annual Meeting. We are first mailing this Proxy Statement to our shareowners on or about March 15, 2019. The Annual Meeting will be held May 9, 2019, at 8:00 a.m. Eastern Time, at Hotel du Pont, 11th and Market Streets, Wilmington, Delaware.

All properly executed written proxies, and all properly completed proxies submitted by the Internet or telephone, that are delivered pursuant to this solicitation will be voted at the Annual Meeting in accordance with the directions given in the proxy, unless the proxy is revoked prior to completion of voting at the meeting. Only owners of record of shares of the Company’s common stock as of the close of business on March 11, 2019, the “Record Date”, are entitled to notice of, and to vote at, the Annual Meeting (or any adjournment or postponement of the meeting).

Proxy Statement Summary

This summary highlights information contained elsewhere in this Proxy Statement.

Following is a brief overview of some of our corporate governance policies and practices:

The board believes that the 2019 nominees are of an appropriate composition to effectively oversee and constructively challenge the performance of management in the execution of our strategy.

As a group, our 12 director nominees have the skills and experience to effectively oversee a global organization

Each year, the Nominating and Corporate Governance Committee assesses the skills and experience necessary for our board to function effectively, and considers where additional expertise may be needed. We believe that as a group, our 12 director nominees bring the requisite skills and experience to ensure the overall effectiveness of our Board.

The board has been meaningfully refreshed since 2010 with 7 independent directors joining, and 5 departing the board*

The board recognizes that it continually needs to monitor and improve the effectiveness of its operations and our directors. This is achieved through, among other practices, an annual detailed evaluation process that provides for quantitative ratings in key areas of board performance and through director education opportunities. The board consists of individuals with deep experience and knowledge of UPS, complemented by the fresh perspective of newer directors. Together, our directors work effectively as a team, and are highly focused on UPS’s success.

Our Chairman and CEO provides strong leadership and is supported – and constructively challenged – by an independent board

While our current CEO serves as Chairman, the board benefits from the oversight of 11* independent directors, including an engaged lead independent director; William “Bill” Johnson has served in this role since 2016.

We believe that diversity in our boardroom supports UPS’s continued success and advantage

	Gender Diversity*		Overall Diversity*		Age Diversity*

The table below provides summary information about the 12 director nominees. For more information see page 20.

Our Board of Directors employs practices that foster effective oversight of critical matters such as strategy, management succession planning, financial and other controls, risk management and compliance. The board reviews our major governance documents, policies and processes regularly in

the context of current corporate governance trends, regulatory changes and recognized best practices. The following sections provide an overview of our corporate governance structure and processes, including key aspects of our board operations.

Maintaining a board of individuals, independent of management and of the highest personal character, integrity and ethical standards is crucial. The Nominating and Corporate Governance Committee also seeks to create a board that reflects a range of professional backgrounds and skills relevant to our business, as well as diversity with respect to gender, age and ethnicity. Some of the most important skills and experiences our board seeks in potential director candidates are audit and financial proficiency, operator or general manager experience, and digital technology expertise. Our director biographies highlight the skills and experiences that led the board to conclude that the nominee should serve as a director.

The Nominating and Corporate Governance Committee uses a variety of sources to identify potential candidates, including recommendations from independent directors or members of management, outside consultants, discussions with other persons who may know of suitable candidates and shareowner recommendations. Prospective candidate evaluations typically include the Nominating and Corporate Governance Committee’s review of the candidate’s background and qualifications, interviews with Committee members and other board members, and open discussions between the Committee and the full board. An outside consultant helps identify, screen and recruit director candidates in consultation with the Nominating and Corporate Governance Committee. This process allows for active and ongoing consideration of potential directors with a long-term focus on Company strategy.

The Nominating and Corporate Governance Committee will consider shareowner recommended director candidates on the same basis as recommendations from other sources. Shareowners can recommend a director candidate to the Nominating and Corporate Governance Committee by submitting the name of the prospective candidate in writing to the following address: Corporate Secretary, 55 Glenlake Parkway, N.E., Atlanta, Georgia 30328. Submissions should describe the experience, qualifications, attributes and skills that make the prospective candidate a suitable director nominee.

In 2017, we proactively adopted a proxy access bylaw as part of our ongoing commitment to strong corporate governance practices following thoughtful discussions with shareowners

through the Company’s long-standing outreach program. We provide a single shareowner, or group of up to 20 shareowners, that has owned at least 3 percent of UPS’s outstanding stock continuously for at least three years, the ability to include director nominees in UPS’s proxy materials for an annual meeting of shareowners. Shareowners may include in the proxy materials the greater of 20 percent of the board seats or two directors. Our Bylaws set forth the requirements for the formal shareowner nomination process for director candidates. These requirements are described under “Other Information for Shareowners — Proxy Access, Shareowner Proposals and Nominations for Director at the 2020 Annual Meeting” on page 69.

Effective decision-making is facilitated by a variety of viewpoints. Diversity is an important consideration for the Nominating and Corporate Governance Committee when identifying director nominees. The Committee considers the board’s overall composition in light of race, gender, age and cultural background, as well as diversity in experience and skills relevant to the oversight of a complex global business. The

Nominating and Corporate Governance Committee assesses the effectiveness of its diversity efforts through periodic evaluations of the board’s composition.

Our 12 director nominees include a diverse range of individuals, including three women, one African-American, two Europeans and a nominee who spent his entire career in Asia. The director nominees range between 48 and 73 years of age.

The board reviewed each director’s independence in February 2019 and considered whether there were any relationships between UPS and each director, or any member of his or her immediate family. The board also examined whether there were any relationships between UPS and organizations where a director is a partner, principal shareowner or executive officer. This review allowed the board to determine whether any such relationships impacted a director’s independence. Specifically, the board evaluated certain ordinary course business transactions and relationships between UPS and the organizations that employed Michael Burns, Franck Moison, John Stankey, and

Carol Tomé, or their immediate family members. The board determined that none of these transactions or relationships were material to the Company, the individuals or the organizations with which they were associated.

As a result of this review, the board affirmatively determined that all our directors (which includes all of the director nominees other than Chairman and Chief Executive Officer David Abney) are independent. All members of the Audit Committee, Compensation Committee, Nominating and Corporate Governance Committee and Risk Committee are independent.

Based on the periodic evaluation and recommendation of the Nominating and Corporate Governance Committee, the board determines the most appropriate leadership structure for the Board of Directors at any given time. Historically, our Chief Executive Officer has served as Chairman of the Board, as all ten of our previous Chief Executive Officers also served as Chairman. This leadership structure has been effective for the Company.

The Nominating and Corporate Governance Committee makes recommendations to the board about who should serve as Chairman and Chief Executive Officer, and the board then selects the Chairman and Chief Executive Officer. The board determined that UPS Chairman and Chief Executive Officer David Abney is best positioned to continue to lead the board at this time and to focus

the board’s attention on the issues of greatest importance to the Company and its shareowners. David has primary responsibility for managing the Company’s day to day operations, and he draws on his extensive knowledge of our business, industry and competitive developments, key customers and business partners to set the board’s agenda. David communicates UPS’s strategy to shareowners, employees, regulators, customers and the public. He provides open and frequent feedback to board members on significant matters within and outside of the board meeting cycle. David is available to all directors between meetings and meets regularly with the lead independent director, as described below, to receive feedback from the board. He seeks to ensure that board meetings are productive and interactions with the directors facilitate a useful exchange of viewpoints.

Independent oversight is important to the board. Accordingly, in February 2016, the independent directors of the board appointed William “Bill” Johnson as lead independent director. Bill devotes significant time to understanding our business and communicating with the Chairman and other directors between meetings. He provides significant input into the board meeting agendas and he spends time with our Chairman and Chief Executive Officer after each board meeting to provide feedback. He also periodically meets with our largest shareowners to answer questions and to provide perspective on appropriate topics, such as the Company’s culture and governance practices.

Our lead independent director’s leadership authority and responsibilities include:

Furthermore, all of the members of each of the Audit Committee, the Compensation Committee, the Nominating and Corporate Governance Committee and the Risk Committee are independent. Each committee is led by a chairperson who sets the meeting agendas and reports to the full board on the committee’s work.

Additionally, the independent directors meet in executive session without management present as frequently as they deem appropriate, as described below. This structure provides the best form of leadership for the Company and its shareowners at this time.

Our independent directors hold executive sessions without management present as frequently as they deem appropriate, typically at the time of each regular board meeting. The lead independent director determines the agenda for each session, presides at each session and, after the session, acts as a liaison

between the independent directors and the Chairman and Chief Executive Officer. The lead independent director may invite the Chairman and Chief Executive Officer to join the session for certain discussions when deemed appropriate.

The Chairman and the board’s lead independent director frequently discuss the performance of the board and the board’s committees, and have informal discussions about individual director contributions to the board. The lead independent director shares feedback from these discussions with the full board and with individual board members.

All board and committee members complete a detailed evaluation questionnaire each year. The board questionnaire provides for quantitative ratings in key areas, including overall board effectiveness, meeting effectiveness, access to information, information format, board committee structure, access to management, succession planning, meeting

dialogue, communication with the CEO, operational reporting, financial oversight, capital structure and financing, capital spending, long-term strategic planning, risk oversight, crisis management and time management. The questionnaire also allows directors to provide written feedback and make detailed anonymous comments.

Feedback from these evaluations in 2018 led to several important changes in board operations, including changes to board meeting agendas and recurring topics, additional attention to the succession planning process, and board committee membership rotations.

In accordance with our director voting policy, any incumbent director who does not receive a majority of the votes cast must offer to resign from the board. The Nominating and Corporate Governance Committee will recommend to the board whether to accept or reject the director’s offer to resign after considering all relevant factors. The board will act on the recommendation within 90 days following certification of the election results.

Setting the strategic course of the Company involves a high level of constructive engagement between management and the board. Management develops and prioritizes strategic plans on an annual basis. Management then reviews these strategic plans with the board during an annual board strategy meeting, along with the Company’s challenges, industry dynamics, and legal, regulatory and governance developments, among other factors.

Management provides the board with comprehensive updates throughout the year regarding the implementation and results of the Company’s strategic plans, as well as monthly updates

This process allows the board to understand and impact the Company’s strategic plans, including plans related to return of capital to shareowners, mergers and acquisitions, competitive challenges, changing marketplace conditions and operational technologies. As a result, the board has substantial oversight of the development and implementation of the Company’s strategic plans and the board is able to effectively monitor the Company’s progress with respect to the strategic goals and objectives.

The board also regularly evaluates succession plans in the context of the Company’s overall business strategy and with a focus on risk management. Potential leaders interact with board members through formal presentations and during informal events. More broadly, the board is regularly updated on key talent indicators for the overall workforce, including diversity, recruiting and development programs.

The board has adopted a written related person transactions policy that applies to any transaction or series of transactions in which: (1) the Company or any of its subsidiaries is a participant; (2) any “related person” (executive officer, director, greater than 5% beneficial owner of the Company’s common stock, or an immediate family member of any of the foregoing) has or will have a material direct or indirect interest; and (3) the aggregate amount involved since the beginning of the Company’s last completed fiscal year will exceed or may reasonably be expected to exceed $100,000.

The policy provides that related person transactions that may arise during the year are subject to Audit Committee approval or ratification. In determining whether to approve or ratify a transaction, the Audit Committee will consider, among other factors it deems appropriate, whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third-party, the extent of the related person’s interest in the transaction, whether the transaction would impair

At least annually, each director and executive officer completes a detailed questionnaire that discloses any business relationships that may give rise to a conflict of interest, including transactions where UPS is involved and where an executive officer, a director or a related person has a direct or indirect material interest. We also review the Company’s financial systems and related person transactions to identify potential conflicts of interest. The Nominating and Corporate Governance Committee reviews the information from the questionnaire and our financial systems and makes recommendations to the Board of Directors regarding the independence of each board member. We have immaterial normal course of business transactions and relationships with companies with which our directors are associated. The Nominating and Corporate Governance Committee reviewed the transactions and relationships that occurred since January 1, 2018 and believes they were entered into on terms that are both reasonable and competitive and did not affect director independence. Additional transactions and relationships of this nature may be expected to take place in the ordinary course of business in the future.

During this proxy season, our management team contacted holders of over 43% of our class B common stock to discuss our corporate governance practices and executive compensation programs. We also proactively correspond with key investors throughout the year.

We have taken into account the views of our shareowners when making many of our governance and disclosure decisions in recent years, including:			The Compensation Committee’s consideration of shareowner feedback, along with the market information and analysis provided by its independent compensation consultant, have influenced a number of changes to our executive compensation program over the past several years:
●Proactively adopting proxy access; ●Appointing a lead independent director; ●Adopting prohibitions on hedging and pledging of Company stock by executive officers and directors; ●Expanding disclosure about the board’s role in strategic planning; ●Enhancing disclosure and governance regarding political contributions; ●Expanding sustainability disclosure; ●Enhancing disclosure about board refreshment and board succession planning, as well as our board self-evaluation process; ●Enhancing disclosure about diversity; ●Expanding the Audit Committee’s report in the proxy statement; and ●Updating the presentation of our proxy statement to enhance readability and understanding by our shareowners.			●Increasing the performance-based equity component in our compensation program; ●Eliminating single-trigger equity vesting following a change in control; ●Adding relative total shareowner return as a metric in our Long-Term Incentive Plan; ●Providing additional detail around the performance measures used for our annual and long-term incentive plans; ●Eliminating tax gross-ups; ●Adding an individual payout cap to our annual incentive plan; and ●Enhancing executive compensation disclosure, including how the metrics in our Long-Term Incentive Plan align with long-term value creation for our shareowners.

Our management team participates in numerous investor meetings throughout the year to discuss our business, our strategy and our financial results. These meetings include in-person, telephone and webcast conferences, as well as headquarters and facility visits within the United States and in key international locations. In addition, our lead independent director meets with our largest shareowners to answer questions and to provide perspective on the Company’s culture and governance practices.

Materials from our investor presentations, including information on the work of our board and its committees, are available on our investor relations website at www.investors.ups.com.

Our responsible participation in the U.S. political process is important to the success of our business and the protection of shareowner value. We participate in this process in accordance with good corporate governance practices. Our Political Contributions and Lobbying Policy (“policy”) is available at www.investors.ups.com. The following discussion highlights our practices and procedures regarding political contributions and lobbying:

Political contributions are made in a legal, ethical and transparent manner that we believe best represents the interests of our shareowners. All political and lobbying activities are conducted only with the prior approval of our Public Affairs department and in accordance with the terms of our policy. Senior management works with Public Affairs to focus our involvement at all levels of

government on furthering our business objectives and our goals of protecting and enhancing shareowner value. The president of our Public Affairs department reviews all UPS political and lobbying activities and regularly reports to the board and to the Nominating and Corporate Governance Committee.

Our Public Affairs department is responsible for coordinating our lobbying activities, including engagements with federal, state, and local governments. UPS is a member of a variety of trade associations and other tax exempt organizations that engage in lobbying. The Company may participate in lobbying activities when involvement is consistent with specific UPS business objectives. These decisions are subject to board oversight and are regularly reviewed by the Nominating and Corporate Governance Committee.

We have comprehensive policies, practices and tracking mechanisms to support and govern our lobbying activities. These mechanisms cover compliance with laws and regulations regarding the lobbying of government officials, the duty to track and report lobbying activities, and the obligation to treat lobbying costs and expenses as nondeductible for tax purposes. All lobbying contacts with covered government officials must be coordinated with and approved by the president of our Public Affairs department.

We are committed to meaningful transparency with respect to our political activities. We publish a semi-annual report disclosing the following information at our investor relations website at www.investors.ups.com, all of which is reviewed and approved by the Company’s Nominating and Corporate Governance Committee prior to publication:

UPS also files a publicly available federal Lobbying Disclosure Act Report each quarter, providing information on activities associated with influencing legislation through communications with any member or employee of a legislative body or with any covered executive branch official. The report also provides disclosure on expenditures for the quarter, describes the specific pieces of legislation that were the topic of communications, and identifies the individuals who lobbied on behalf of UPS.

UPS files similar periodic reports with state agencies reflecting state lobbying activities which are also publicly available.

We are one of the world’s largest private employers. We serve millions of customers around the world, we operate in more than 220 countries and territories, and many investors include our shares in their portfolios. Our success depends on economic stability, global trade and a society that welcomes opportunity. We understand the importance of acting responsibly as a business, an employer and a corporate citizen.

Engagement on sustainability issues is important to our stakeholders. Our board delegates authority for day-to-day management of economic, environmental, and social topics to UPS management. The board oversees economic, environmental and social issues and is in touch with stakeholder concerns through a number of processes. For example, the board is regularly briefed on issues of concern for customers, unions, employees, retirees and investors. Furthermore, the board oversees all efforts by UPS management to develop our values, strategies and policies related to economic, environmental, and social impacts.

UPS was among the first Fortune 100 companies to appoint a chief sustainability officer. Our chief sustainability officer regularly reports to the board regarding sustainability strategies, priorities, goals, and performance. In addition, members of the board review the contents of our sustainability report each year and provide feedback to the Company.

Economic, environmental and social risks are part of our comprehensive enterprise risk management program. The board reviews the effectiveness of our risk management and due diligence processes related to economic, environmental, and social topics. In addition, the board actively considers economic, environmental and social issues in connection with the board’s involvement in UPS’s strategic planning process.

Each year we publish a corporate sustainability report showcasing the aspirations, achievements and challenges of our commitment to balancing the social, economic and environmental aspects of our business. The report is available at www.sustainability.ups.com.

Our Corporate Governance Guidelines are available on the governance section of our investor relations website at www.investors.ups.com. The charters for each of the Audit Committee, Compensation Committee, Nominating and Corporate Governance Committee and Risk Committee also are available on the governance section of our investor relations website. Each committee reviews its charter annually to determine if any

changes are needed. In addition, the Nominating and Corporate Governance Committee reviews the Corporate Governance Guidelines on an annual basis and recommends any changes to the board for approval. When making changes to the committee charters or Corporate Governance Guidelines, we consider current governance trends and best practices, advice from outside sources and input from our investors.

The board has nominated the 12 persons named below for election as directors at the Annual Meeting. The nominees will serve until the next Annual Meeting and until their respective successors are elected and qualified. Each nominee was elected by shareowners at our last Annual Meeting. If any nominee is unable to serve as a director, which we do not anticipate, the board may reduce the number of directors that serve on the board or choose a substitute nominee. Any nominee who is currently a director, and for whom more votes are cast against than are cast for, must offer to resign from the board. Current director

Candace Kendle’s board service will conclude at the 2019 Annual Meeting. We thank her for her many years of dedicated service to the Company and the Board of Directors.

Biographical information about the nominees for director appears below, including information about the experience, qualifications, attributes and skills considered by our Nominating and Corporate Governance Committee and board in determining that the nominee should serve as a director. For additional information about how we identify and evaluate nominees for director, see “Corporate Governance — Selecting Director Nominees” on page 10.

There have been no significant increases in director compensation over the last few years. In 2018, our non-employee directors received an annual cash retainer of $105,000. The chairs of the Compensation, Nominating and Corporate Governance and Risk Committees received an additional annual cash retainer of $20,000, and the chair of the Audit Committee received an additional annual cash retainer of $25,000. Our lead independent director received an additional annual cash retainer of $25,000. Cash retainers are paid on a quarterly basis. Non-employee directors may defer retainer fees by participating in the UPS Deferred Compensation Plan, but we do not make any Company or matching contributions under this plan. There are no preferential or above-market earnings in the UPS Deferred Compensation Plan.

Non-employee directors also receive an annual restricted stock unit (“RSU”) grant valued at approximately $170,000. RSUs are fully vested on the date of grant and are required to be held by the director until he or she separates from the board, at which time the RSUs are paid out in shares of class A common stock.

Dividends earned on each award are reinvested in additional units at each dividend payable date and are subject to the same payment schedule as the original award. This holding period increases the strength of the alignment of directors’ interests with those of our shareowners. The annual equity grant is prorated based on the portion of the year that a director serves on the board.

The Compensation Committee of the Board of Directors conducts a review of director compensation generally every other year to ensure the program is structured consistent with best practices and current trends. The Compensation Committee’s independent compensation consultant, Frederic W. Cook & Co., Inc. (“FW Cook”), provides advice on the competitiveness of the Company’s non-employee director compensation program and recommends changes to ensure compensation remains market competitive. During the Compensation Committee’s most recent review of director compensation, it was determined that total board compensation was below our peer group median.

The Compensation Committee is responsible for reviewing and approving compensation for the executive officers, establishing the performance goals on which the compensation plans and programs are based and setting the overall compensation principles that guide the Compensation Committee’s decision-making. The Compensation Committee’s over-arching objective is to maintain an executive compensation program that supports the long-term interests of our shareowners, including our many employee shareowners. We seek to align the interests of our executives with those of our shareowners through a program in which a significant portion of compensation is performance-based and is significantly linked to shareowner returns. We seek to attract, retain and motivate executives who make significant contributions to the Company’s success and allow them to share in the success of the Company.

The Compensation Committee has reviewed the Compensation Discussion and Analysis and discussed it with management. Based on that review, the Compensation Committee recommended

to the Board of Directors that the Compensation Discussion and Analysis be included in the 2019 Proxy Statement and incorporated by reference in the Annual Report on Form 10-K for the year ended December 31, 2018 filed with the Securities and Exchange Commission.

The following Compensation Discussion and Analysis describes the Compensation Committee’s decisions regarding our executives’ compensation for 2018.

The Compensation Committee

Ann M. Livermore, Chair
Rodney C. Adkins
Rudy H.P. Markham
Clark T. Randt, Jr.
Christiana Smith Shi
Kevin M. Warsh

The UPS executive compensation program is administered by the Compensation Committee of the Board of Directors. The Compensation Committee has sole authority to engage and terminate the services of outside advisors and other consultants to assist in carrying out its responsibilities. In 2018, the Compensation Committee retained FW Cook to act as the

Compensation Committee’s independent compensation advisor. FW Cook reports directly to the Chair of the Compensation Committee and provides no additional services to UPS.

The following table summarizes the roles of the key participants in the executive compensation decision-making process.

Other Elements of Compensation

The MIP Performance Incentive award is designed to align pay with annual Company performance by linking payouts to the achievement of pre-established financial and non-financial metrics. Target MIP Performance Incentive awards for each NEO are based on a percentage of base salary (165% of base salary for the CEO and 130% of base salary for all other NEOs) subject to a $5 million maximum. Awards are determined by the Compensation Committee, taking into consideration the following:

A specific weight is not assigned to any of the factors considered by the Compensation Committee when determining earned awards. MIP Performance Incentive awards for executive officers are considered performance-based compensation fully at risk based on Company performance.

The earned award, if any, is provided two-thirds in restricted performance units (“RPUs”) and one-third in cash. The number of RPUs granted is determined by calculating the dollar value of the portion of the MIP award allocated to equity and dividing by the applicable closing price of our class B common stock on the NYSE on the date of the award. Note however, that a newly hired eligible employee’s first MIP award will be paid entirely in the Company’s fully-vested class A shares.

Commencing with MIP Performance Incentive awards for 2018, the Compensation Committee has determined to provide the equity payout in RPUs that settle in class A shares and vest on the first anniversary of the grant. The Compensation Committee approved these terms in order to more closely align annual compensation with annual performance under the MIP, and to improve the market competitiveness of UPS incentive pay design.

The 2018 target opportunity for each NEO was:

The performance metrics used for the NEOs’ MIP Performance Incentive awards in 2018 were:

The 2018 MIP evaluation metrics targets and results were as follows:

The 2018 MIP factor for non-executive MIP participants was:

Individual accomplishments during 2018 that were considered by the Committee when determining final awards are described below.

David Abney, Chief Executive Officer

David and the leadership team overcame a number of challenges in 2018. Successful negotiations of a labor agreement with the Teamsters Union as well as managing an organizational transformation and driving a successful peak season. David’s focus on high-quality revenue initiatives as well as growth manifested positive returns to shareowners. Effectively managing capital investments, driving transformation objectives, and execution of investments and initiatives elevated revenues and improved operational efficiencies that provide the company sustainable returns well into the future.

Richard Peretz, Chief Financial Officer

Chief Financial Officer, Richard Peretz’s efforts in 2018 helped guide UPS to achieve target earnings per share as well as generate excellent cash flow to stimulate reinvestment into our global network and provide positive returns to shareowners. Richard, along with our Chief Procurement Officer led Transformation efforts to realign our Procurement function to achieve significant savings.

James Barber, Chief Operating Officer

Jim assumed additional responsibilities in 2018 as the Chief Operating Officer. In this new role, Jim was instrumental in guiding the business units to achieve increased operational capacity, service and productivity. The US Small package business unit processed record volume with exceptional on-time service during the peak holiday season. International achieved record results, with the Supply Chain and Freight segments remaining strong.

Scott Price, Chief Strategy and Transformation Officer

Chief Marketing Officer, Kevin Warren joined the UPS Management Committee in June of 2018. Through Kevin’s leadership, a focused go to market strategy has been established around the organizational strategic imperatives with a particular emphasis on small and medium-sized businesses. Kevin and the Marketing team have launched work streams to drive performance through strategic pricing and churn reduction, as well as continuing to build digital marketing capabilities.

After assessing the above-described considerations, the Compensation Committee approved the following 2018 MIP Performance Incentive awards for each NEO. The award is paid two-thirds in restricted performance units (“RPUs”), which vest one year after the award is approved, and one-third in cash, which is paid when the award is approved, except with respect to new-hires, who received the entire award in the form of fully-vested class A shares.

MIP Ownership Incentive Award

We encourage employees to maintain substantial ownership of the Company’s stock through our MIP Ownership Incentive award. All MIP participants are eligible for an additional incentive award up to the equivalent of one month’s salary by maintaining significant ownership of UPS equity securities. The amount of the award is equal to the value of the participant’s equity ownership, multiplied by an ownership incentive award percentage. The ownership incentive award percentage is 1.25% for the Chief Executive Officer and 1.50% for the other Named Executive Officers, and the maximum award that can be earned is one month’s salary. The MIP Ownership Incentive award, to the extent earned, is paid in the same proportion of equity and cash as the MIP Performance Incentive award.

Ownership levels for the 2018 awards were determined as of December 31, 2018 by totaling the number of UPS shares in the participant’s family group accounts and the participant’s eligible unvested restricted units and deferred compensation shares. The number of UPS shares determined for purposes of an NEO’s ownership level is multiplied by the closing price of a class B share on the NYSE on December 31, 2018.

A target award of RPUs is granted to participants at the beginning of the three-year performance period. The actual number of RPUs that participants receive is determined after the end of the three-year performance period, based on actual performance versus the established performance goals.

Adjusted consolidated revenue and adjusted ROIC are non-GAAP financial measures. We believe that these non-GAAP measures are appropriate for the determination of our incentive compensation award results because they exclude items that may not be indicative of, or are unrelated to, our underlying operations and provide a useful baseline for analyzing trends in our underlying business. Non-GAAP financial measures should be considered in addition to, and not as an alternative for, our reported results prepared in accordance with GAAP. Our non-GAAP financial information does not represent a comprehensive basis of accounting. Therefore, our non-GAAP financial information may not be comparable to similarly titled measures reported by other companies.

This design combines internal business performance measures as well as an external relative performance measure. This combination balances efforts to motivate and reward the management team for our operational and financial success, while ensuring rewards remain aligned with shareowner interests and returns. A description of each performance measure follows:

Growth in Adjusted Consolidated Revenue

Growth in adjusted consolidated revenue measures the Company’s long-term success in growing our business as compared with the targets adopted at the beginning of the performance period. On the grant date, the Compensation Committee approves an average consolidated projected revenue growth target for the three-year performance period (the target is the projected average annual revenue growth percentage of the three years of the performance period). Following the completion of the performance period, the Committee will certify the actual revenue growth and the performance result compared to the target (each year’s growth percentage will be compared to the target and assigned a payout percentage; the average of the three payout percentages will be the final performance result). At the end of the performance period, the Committee will certify the final revenue payout percentage for the grant. For purposes of calculating adjusted consolidated revenue, GAAP total revenue is adjusted to exclude the effect of unusual or infrequently occurring items, charges for restructurings (employee severance liabilities, asset impairment costs, and exit costs), discontinued operations, extraordinary items and the cumulative effect of changes in accounting treatment. In addition, consolidated revenue is calculated on a currency constant basis.

Adjusted Operating Return on Invested Capital

Adjusted operating return on invested capital measures the Company’s ability to generate the highest long-term returns on its capital allocation decisions. On the grant date, the Compensation Committee approves a ROIC target for the three-year performance period. Following the completion of the performance period, the Committee will certify the actual adjusted operating ROIC and the comparison of actual adjusted operating ROIC with the target. The target is the average of each of the three years projected operating

ROIC (operating income for the three-year period divided by the sum of average invested capital for the three-year period). For purposes of determining the performance results: GAAP operating income is adjusted to exclude pension mark-to-market adjustments, the effect of unusual or infrequently occurring items, charges for restructurings (employee severance liabilities, asset impairment costs, and exit costs), discontinued operations, extraordinary items and the cumulative effect of changes in accounting treatment; and GAAP invested capital is adjusted to exclude the impacts of certain items that were not anticipated in establishing the ROIC target, such as incremental invested capital from business acquisitions, the effect of unusual or infrequently occurring items, restructuring reserves, or other extraordinary items.

Relative Total Shareowner Return

Relative TSR is measured by covering our TSR to the TSR a peer group of companies during a three-year performance period. The Compensation Committee evaluates the peer group annually to determine if the companies included in the group are the most appropriate comparators for measuring the success of our executives in delivering shareowner value.

The maximum payout for the TSR portion of the award is capped at 200% of target. If our TSR over the three-year measurement period is negative, even if it exceeds the median of the peer group, the maximum payout percentage for the TSR portion of LTIP awards is capped at 100% of target.

2018 LTIP Awards

The Compensation Committee approved the following target values as a percent of base salary for the 2018 LTIP awards:

Target values are based on internal pay comparison considerations and market data regarding total compensation of comparable positions at similarly sized companies. Differences in the target award values are based on increasing levels of responsibility among the executive officers.

The threshold, target and maximum number of RPUs that can be earned by the Named Executive Officers under the 2018 LTIP is shown in the Grants of Plan-Based Awards table. The actual number of RPUs that the Named Executive Officers will receive is determined following the completion of the performance period ending December 31, 2020 and is based on achievement of the performance goals for the three-year period described above. TSR is measured based on our TSR compared to the 17 peer companies listed previously as measured from January 1, 2018 through December 31, 2020, the three-year performance period. The maximum LTIP award that can be earned is 200% of target.

Stock Option Program and 2018 Stock Option Awards

The Compensation Committee believes that stock options provide a significant link to Company performance and motivate recipients to maximize shareowner value. The option holder receives value only if our stock price increases. Stock options also have retention value; the option holder will not receive value from the options unless he or she remains employed during the vesting period.

Stock options vest 20% per year over five years and expire ten years from the date of grant. Unvested stock options vest automatically upon termination of employment because of death, disability or retirement. In light of the five-year vesting schedule, we do not maintain additional holding period requirements. Grants do not include dividend equivalents or any reload features.

In March 2018, the Compensation Committee approved 2018 target award values for stock options at 90% of base salary for the Chief Executive Officer, 50% of base salary for the Chief Operating Officer, the Chief Financial Officer and the Chief Strategy and Transformation Officer, and 30% of base salary for the other NEOs. The number of stock options granted to the NEOs in 2018 is shown in the Grants of Plan-Based Awards table.

Total 2018 Long-Term Equity Incentive Award Target Values

The total long-term incentive opportunity granted to the Named Executive Officers in 2018, based upon a percentage of annualized base salary, is shown below.

Generally, we do not pay discretionary bonuses in cash or stock, or make other discretionary payments, to our executives. However, in order to attract external senior executive talent to participate in the transformation of our business, the Compensation Committee approved certain payments to two external executive hires to the Company’s Management Committee. The payments were made to compensate the executives for compensation forfeited at their prior employers and transition them into our incentive programs.

Under the terms of his employment offer letter described below, in 2018 Scott Price was entitled to receive; (i) a cash transition payment of $500,000; and (ii) a one-time RSU grant valued at

$4 million which vests in 20% increments annually, from January 2018 through January 2022, subject to his continued employment through each applicable vesting date or termination without cause.

Under the terms of his employment offer letter described below, in 2018 Kevin Warren was entitled to receive; (i) a cash transition payment of $950,000; and (ii) a one-time RSU grant valued at $3 million which vests in one-third increments annually, from January 2019 through January 2021, subject to his continued employment through each applicable vesting date or termination without cause.

The benefits and perquisites provided to our Named Executive Officers are not a material part of executive compensation and are largely limited to those offered to our employees generally, or that we otherwise believe are necessary or appropriate to attract and retain executive talent. We believe certain perquisites help facilitate our NEOs’ ability to carry out their responsibilities, maximize working time and minimize distractions. Additional information on these benefits can be found in the program descriptions below.

The UPS 401(k) Savings Plan

The UPS 401(k) Savings Plan is offered to all U.S.-based employees who are not subject to a collective bargaining agreement and who are not eligible to participate in another savings plan sponsored by UPS or one of its subsidiaries. We generally match 50% of up to 5% of eligible pay contributed to the UPS 401(k) Savings Plan for eligible employees hired on or before December 31, 2007, 100% of up to 3.5% of eligible pay contributed to the plan for eligible employees hired on or after January 1, 2008, and 50% of up to 6% of eligible pay contributed to the plan for employees hired on or after July 1, 2016. The match is paid in shares of class A common stock. Effective for newly eligible plan participants on or after July, 2016, we also generally provide a Retirement Contribution based on years of service and expressed as a percentage of eligible compensation (5% for 0-4 years, 6% for 5-9 years, 7% for 10-14 years and 8% for 15 or more years).

Qualified and Non-Qualified Pension Plans

Certain executive officers are eligible to participate in our qualified retirement program, the UPS Retirement Plan. Benefits payable under the plan are subject to the maximum compensation limits and the annual benefit limits for a tax-qualified defined benefit plan as established by the Internal Revenue Service. Amounts

exceeding these limits are paid pursuant to the UPS Excess Coordinating Benefit Plan, which is a non-qualified restoration plan designed to replace the amount of benefits limited under the tax-qualified plan. Without the Excess Coordinating Benefit Plan, the executive officers would receive a lower benefit as a percent of final average earnings than the benefit received by other participants in the UPS Retirement Plan.

Financial Planning Services

Our executive officers are eligible for a financial services benefit. The Company reimburses fees from financial and tax service providers up to $15,000 per year, including the cost of personal excess liability insurance coverage.

Executive Health Services

UPS’s business continuity is best facilitated by avoiding any prolonged or unexpected absences by members of its senior management team. In 2018, executive officers were offered certain executive health services, including comprehensive physical examinations.

Discounted Employee Stock Purchase Plan

We have maintained a Discounted Employee Stock Purchase Plan since 2001. The plan provides all U.S.-based employees, including the Named Executive Officers, and some internationally based employees, with the opportunity to purchase up to $10,000 in our class A common stock annually at a discount to the market price of our stock. The plan complies with Section 423 of the Internal Revenue Code. Our class A common stock may be acquired under the plan at a purchase price equal to 95% of the fair market value of the shares on the last day of each calendar quarter. Share purchases are made on a quarterly basis.

Stock Ownership Guidelines

The board has adopted stock ownership guidelines that apply to executive officers and to members of our Board of Directors. The guidelines further our core philosophy that executive officers should also be long-term owners of our Company. Target ownership is eight times annual salary for our Chief Executive Officer and five times annual salary for our other executive officers. The target for our non-employee directors is five times their annual retainer. Shares of class A common stock (excluding any pledged shares), deferred units and vested and unvested RSUs and RPUs awarded under our equity incentive plans are considered owned for purposes of calculating ownership. Executive officers and directors are expected to reach target ownership within five years of adoption of the guideline or the date that the executive officer or director became subject to the guideline.

As of December 31, 2018, all of the Named Executive Officers who have been subject to the guidelines for at least five years exceeded their target stock ownership. In addition, all of our non-employee directors who have been subject to the stock ownership guidelines for at least five years exceeded their target stock ownership. RSUs are required to be held by a non-employee director until he or she separates from the UPS Board of Directors.

Hedging and Pledging Policies

We prohibit our executive officers and directors from hedging their ownership in UPS stock. Specifically, they are prohibited from purchasing or selling derivative securities relating to UPS stock and from purchasing financial instruments that are designed to hedge or offset any decrease in the market value of UPS securities. Additionally, in 2014 we adopted a policy prohibiting our directors and executive officers from entering into pledges of UPS securities, including using UPS securities as collateral for a loan and holding UPS securities in margin accounts. Executive officers are encouraged (but not required) to unwind any existing pledges. Furthermore, our employees, officers and directors are prohibited from engaging in short sales of UPS stock.

Clawback Policy

Our incentive compensation plans contain clawback provisions for all awards granted under the plans. If the Compensation Committee determines that financial results used to determine the amount of any award are materially restated, and that an executive officer engaged in fraud or intentional misconduct, we will seek repayment or recovery of the award from that executive officer. This clawback applies to all awards granted under the 2018 Plan, the 2015 Plan, our 2012 Omnibus Incentive Compensation Plan (“2012 Plan”) and our 2009 Incentive Compensation Plan (“2009 Plan”).

Employment, Change in Control or Severance Agreements

We do not enter into employment agreements providing for the continuation of employment of an executive, or separate change in control agreements with any of our executive officers, including our Named Executive Officers. Our Compensation Committee believes that UPS has created a culture where long tenure for executives is the norm. As a result, executive officers serve without employment contracts, as do most of our other U.S.-based non-union employees. However, in order to attract senior executive talent from outside the Company to participate in the transformation of our business, we executed an employment offer letter with Scott Price, effective November 28, 2017, in connection with his hiring as our Chief Transformation Officer. We also executed an employment offer letter with Kevin Warren, effective May 5, 2018, in connection with his hiring as our Chief Marketing Officer. These offer letters have no specified duration and provide that employment is on an at-will basis.

Under the terms of Scott Price’s offer letter, he is entitled to, among other things, the cash transition and equity payment described above under “2018 Employment Transition Payments”, as well as cash transition payments of $2.0 million in each of March 2019 and 2020, subject to his continued employment on those dates. Under the terms of Kevin Warren’s offer letter, he is entitled to, among other things, the cash transition and equity payments described above under “2018 Employment Transition Payments”, as well as cash transition payments of $750,000 in each of June 2019 and 2020, subject to his continued employment on those dates. Both offer letters also define annual base salary levels, eligibility to participate in the MIP, LTIP and Stock Option programs, and eligibility for relocation benefits and other employee benefits, all consistent with those received by our other senior executives. Both offer letters also provide that the equity payments described in the “2018 Employment Transition Payments” section above will continue to vest in the event that the NEO is terminated without cause.

Scott Price and Kevin Warren also entered into protective covenant agreements with us which, in the event they are terminated without cause during the first two years of employment, provide for (i) separation pay equal to two years’ salary, (ii) continued vesting of their one-time RSU grants, and (iii) with respect to Kevin Warren, the payment of any unpaid transition payments (see “2018 Employment Transition Payments” described above). In the event either of them are terminated without cause after the first two years of employment, the Company is obligated to make such payments and continue vesting such grants if it elects to enforce post-termination non-compete covenants connected to those agreements.

The 2018 Plan requires a “double trigger” — both a change in control and a qualifying termination of employment — to accelerate the vesting of awards that are not continued or assumed by a successor entity. Equity awards granted to the

Named Executive Officers prior to May 7, 2009 are subject to a single trigger, while equity awards granted after that date are subject to the double trigger.

Equity Grant Practices

Grants of awards to executive officers under all of our equity incentive programs are approved by the Compensation Committee. Stock options have an exercise price equal to the NYSE closing market price on the date of grant.

We regularly engage with our shareowners on executive compensation matters. At our 2017 Annual Meeting of Shareowners, over 88% of votes cast approved our compensation program as described in our 2017 proxy statement. In making compensation decisions, the Compensation Committee carefully considered the results of the most recent say on pay vote as well as many other factors as described herein and did not make any changes to our compensation programs as a result of the most

recent say on pay vote. In addition, a majority (over 61%) of votes cast for the shareowner “say on frequency” vote at our 2017 Annual Meeting expressed a preference for having a say on pay vote every three years. As a result, our next say on pay vote is scheduled for the 2020 Annual Meeting. We welcome input from our shareowners on our compensation policies and compensation program at any time, not just in the years when we conduct a say on pay vote.

The Compensation Committee had previously structured annual and long-term incentive compensation awards with the intention of complying with the performance-based compensation exemption from Section 162(m) of the Internal Revenue Code, which allows a tax deduction for compensation paid to certain Named Executive Officers in excess of $1 million. The Compensation Committee did, however, reserve the right to modify compensation that was initially intended to be exempt from Section 162(m) and to pay compensation that was not deductible under Section 162(m) if it determined that such modifications or payments were needed to attract, retain, or provide incentives to our NEOs, and were consistent with the Company’s best interests.

Now that the exemption from Section 162(m)’s deduction limit for performance-based compensation has been repealed by the Tax Cuts and Jobs Act of 2017 (the “Tax Act”), the Compensation Committee expects that compensation granted or paid in 2018 and future tax years will not be fully deductible for income tax purposes. The Compensation Committee intends to maintain the strong pay-for-performance alignment of our incentive compensation programs and believes the interests of our shareowners are best served by not limiting the Compensation Committee’s discretion and flexibility in crafting compensation plans and arrangements, even though some compensation awards may result in non-deductible compensation expenses.