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 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 of Shareowners. We are first mailing this Proxy Statement to our shareowners on or about March 16, 2018. The Annual Meeting will be held May 10, 2018, 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 telephone or the internet, that are delivered pursuant to this solicitation will be voted at the 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 12, 2018, the “Record Date”, are entitled to notice of, and to vote at, the meeting (or any adjournment or postponement of the meeting).

Proxy Statement Summary

This summary highlights information contained elsewhere in this Proxy Statement.

Corporate Governance

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

The UPS Board

Our board is responsible for the oversight and success of our company. Beyond a broad range of skills and experiences, we seek to maintain an optimal mix of newer directors, who bring fresh perspectives, and longer-tenured directors, who have contributed to developing our strategy over time, and have acquired an in-depth understanding of our global organization. A majority of non-management directors ensures robust debate and challenged opinions in the boardroom, while diversity of gender, age and ethnicity contributes to a diverse range of views.

The board believes that the 2018 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 director nominees have the skills and experience to oversee a global organization

*includes experience with issues accompanying a large workforce, healthcare industry experience, and ecommerce expertise

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 13 director nominees bring the requisite skills and experience to ensure the overall effectiveness of our Board.

Our board has been meaningfully refreshed since 2010 with 7 new independent directors joining, and 5 retiring

	7 years median tenure			The board recognizes that it continually needs to monitor and improve the effectiveness of our directors. This is achieved through an annual detailed evaluation process, that provides for quantitative ratings in key areas of board performance. The board comprises 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.
		In February 2018, Christiana Smith Shi was recruited to the UPS board, demonstrating the board’s commitment to refreshment with highly-qualified independent nominees

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

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

	Gender Diversity		Overall Diversity		Age Diversity
	31% female		38% diversity of gender and ethnicity		62 years median age

Election of Directors

The table below provides summary information about our 13 director nominees. For more information see page 21.

* Lead Independent Director

Executive Compensation

Ratification of the Appointment of the Independent Registered Public Accounting Firm

Shareowner Proposals

The board recommends you vote AGAINST the shareowner proposals (1) requiring an annual report on lobbying activities, (2) reducing the voting power of our class A stock and (3) calling for the incorporation of sustainability metrics into executive compensation. More information about the proposals is available starting on page 65.

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.

The Nominating and Corporate Governance Committee reviews and recommends director nominees to the board, including candidates to fill vacancies. When evaluating director candidates, the Nominating and Corporate Governance Committee considers factors such as personal character, values and disciplines, ethical standards, diversity, other outside commitments, professional background and skills. This evaluation is done in the context of the board’s current needs. The board’s annual evaluation results also helps the Nominating and Corporate Governance Committee assess areas where additional expertise, skills or experience may be needed.

The Nominating and Corporate Governance Committee carefully evaluates each director candidate to ensure that existing and planned future commitments will not materially interfere with the candidate’s responsibilities as a UPS director. Maintaining a board of individuals of the highest personal character, integrity

and ethical standards is crucial. The Nominating and Corporate Governance Committee also seeks candidates who reflect a range of professional backgrounds and skills relevant to our business. Our director biographies highlight the experiences and qualifications that were among the most important in concluding that the nominee should serve as a director.

The Nominating and Corporate Governance Committee uses a variety of sources to identify candidates, including recommendations from independent directors or members of management, search firms, 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, other board members, and open discussions between the Committee and the full board.

The Nominating and Corporate Governance Committee recently improved its process for identifying, screening and recruiting director candidates by hiring an outside consultant. The consultant advised and assisted in process improvements and also provides an independent perspective of board candidates. Our newest director, Christiana Smith Shi, was identified by the consultant through this process. The updated process allows for active and ongoing consideration of potential directors with a long-term focus on company strategy.

The Nominating and Corporate Governance Committee regularly conducts an in-depth board composition analysis and maintains a list of potential director candidates according to desired competencies. The list of potential candidates is reviewed by the Nominating and Corporate Governance Committee frequently and updated as needed. The consultant helps evaluate potential candidates and supports the recruitment process.

The Nominating and Corporate Governance Committee considers shareowner proposed 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.

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 2019 Annual Meeting” on page 75. In addition, in 2017 the board proactively adopted a proxy access bylaw as part of its ongoing commitment to strong corporate governance practices following thoughtful discussions with shareowners through the Company’s long-standing outreach program. The revised bylaws 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.

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 nominees’ 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 13 director nominees include a diverse range of individuals, including four women, one African-American, two Europeans and a nominee who spent his entire career in Asia. Furthermore, our directors’ ages range between 47 and 72 years.

The Nominating and Corporate Governance Committee regularly considers the long-term make-up of our Board of Directors and how the composition of our board changes over time. The Nominating and Corporate Governance Committee also considers the skills needed on our board as our business and the markets in which we do business evolve. Our board seeks to balance the knowledge and experience that comes from longer-term

board service with the new ideas and energy that can come from adding new directors to the board. Since 2010 we have added 7 new independent directors to our board and have had 5 directors retire. The median tenure for our director nominees of approximately 7 years reflects the balance the board seeks between different perspectives brought by long-serving directors and new directors.

Our Corporate Governance Guidelines include director independence standards that meet the listing standards set forth by the New York Stock Exchange (“NYSE”), which require a majority of our directors to be independent. Our Corporate Governance Guidelines are available on the governance section of our investor relations website at www.investors.ups.com.

The board reviewed each director nominee’s independence in February 2018 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.

As a result of this review, the board affirmatively determined that the following director nominees are independent: Rodney Adkins, Michael Burns, William Johnson, Candace Kendle, Ann Livermore, Rudy Markham, Franck Moison, Clark Randt, Christiana Smith Shi, John Stankey, Carol Tomé and Kevin Warsh. Only our Chairman and Chief Executive Officer, David Abney, is not an independent director nominee. All directors on the Audit Committee, Compensation Committee, Nominating and Corporate Governance Committee and Risk Committee are independent.

When considering the independence of director nominees Michael Burns, John Stankey, Franck Moison, and Carol Tomé, our board evaluated ordinary course business transactions and relationships between UPS and the organizations that employed these nominees or their immediate family members during 2017. 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.

Based on the periodic 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 throughout the year. David is available to all directors between meetings and meets regularly with the Lead Independent Director 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 2018, the independent directors of the board re-appointed William “Bill” Johnson as lead independent director. Bill has served as lead independent director since 2016. 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 CEO after each board meeting to provide feedback. He also meets with our largest shareowners to answer questions and to provide perspective on the Company’s culture and governance practices.

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

Furthermore, all of the directors on 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 discussed 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 the session, presides at the 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, as he or she deems appropriate.

The Chairman of our Board of Directors 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.

Our board also has a formal and detailed annual evaluation process. In addition, the charters of each of the Audit Committee, Compensation Committee, Nominating and Corporate Governance Committee and Risk Committee require an annual performance evaluation. The Nominating and Corporate Governance Committee oversees the annual board assessment process and the implementation of the annual committee assessments.

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.

The Chair of the Nominating and Corporate Governance Committee reviews the responses with the chairs of the other board committees. He or she also discusses the board evaluation results with the full board. Matters requiring follow-up are addressed by the Chair of the Nominating and Corporate Governance Committee or the chairs of the other committees as appropriate.

Feedback from these evaluations in 2017 led to several important changes in board operations, including improvements related to the format and timing of board meeting materials, board meeting agendas and recurring topics, the director orientation process, director search and recruitment practices, succession planning considerations, board committee structure, communications between board meetings, and strategy oversight.

Our Bylaws provide for majority voting in uncontested director elections. This means that in order to be elected, the number of votes cast for a director must exceed the number of votes cast against that director.

Any 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. The board

takes into account the factors considered by the Nominating and Corporate Governance Committee and any additional relevant information. Any director who offers to resign must recuse himself or herself from the board vote, unless the number of independent directors who were successful incumbents is fewer than three. The board will promptly disclose its decision regarding any director’s offer to resign, including its reasoning. If the board determines to accept a director’s offer to resign, the Nominating and Corporate Governance Committee will recommend whether and when to fill such vacancy or whether to reduce the size of the board.

Our board is responsible for overseeing our management of risk. The board created a Risk Committee comprised entirely of independent board members to assist in overseeing management’s identification and evaluation of enterprise risks. In particular, the Risk Committee focuses on strategic enterprise risks including, but not limited to, risks associated with technology, intellectual property and operations, such as the quality, adequacy and effectiveness of the Company’s data security, privacy, technology and information security policies, procedures, and internal controls; cybersecurity and cyber incident response; and business continuity and disaster recovery planning and capabilities. The Risk Committee met five times during 2017. In addition, the Company’s General Counsel, the Chief Information Officer,

and the head of the Company’s compliance and internal audit functions have regularly scheduled individual private meetings with the Risk Committee. The Risk Committee also provides an annual update to the full board on the Company’s enterprise risk management survey and risk assessment results. The update enables the board to provide feedback to the Company about significant enterprise risks, and to assess the Company’s identification of its most significant risk areas.

The Audit Committee has certain statutory, regulatory, and other responsibilities with respect to oversight of risk assessment and risk management. Specifically, the Audit Committee is responsible for overseeing policies with respect to financial risk

assessment, including guidelines to govern the process by which major financial and accounting risk assessment and management is undertaken by the Company. The Risk Committee coordinates with the Audit Committee as necessary and appropriate to enable the Audit Committee to perform its responsibilities.

The board’s other independent committees oversee risks associated with their respective areas of responsibility. For example, the Compensation Committee considers the risks to our business associated with our compensation policies and practices, with respect to both executive compensation and compensation generally. The Nominating and Corporate Governance Committee considers risks related to governance matters, including succession planning for the CEO and other senior officers. In addition, our full board regularly engages in discussions of the most significant risks that the Company has identified and how these risks are being managed. The board reviews periodic assessments from the Company’s ongoing enterprise risk management process that are designed to

identify potential events that may affect the achievement of the Company’s objectives or have a material adverse effect on the Company. The board also receives reports on risk management from senior officers of the Company and from the committee chairs regularly.

The Company’s General Counsel reports directly to our Chief Executive Officer, providing him with visibility into the Company’s risk profile. The head of the Company’s compliance and internal audit functions regularly reports to the Audit Committee, and each of the General Counsel, Chief Financial Officer and the compliance and internal audit department manager have regularly scheduled private sessions with the Audit Committee. The Board of Directors believes that the work undertaken by the committees of the board, together with the work of the full board and the Company’s senior management, enables the Board of Directors to effectively oversee the Company’s management of risk.

Our board has deep experience and expertise in the area of strategy development and has significant oversight of our corporate strategy and long-range operating plans. Acting as a full board and through each independent board committee, the board is fully engaged in the Company’s strategic planning process.

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 regarding the Company’s financial performance. In addition, the CEO communicates regularly with the board on important business opportunities, financial and operational performance, and other Company developments such as labor relations, customer interactions and media coverage.

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.

Succession planning and talent development are important at all levels within our organization. The board oversees management’s succession plan for key positions at the senior officer level, and most importantly for the Chief Executive Officer position. The board’s succession planning activities are ongoing and strategic. Most recently, the board supported the hiring of the Company’s first Chief Transformation Officer to help address challenges and opportunities associated with global ecommerce. 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.

Our Board of Directors held 5 meetings during 2017. Our directors are diligent with respect to meeting attendance. In the rare instances when a director cannot attend a meeting in person, they participate by teleconference. None of our directors attended less than 75% of the total number of board and any

committee meetings of which he or she was a member. Our directors are expected to attend the Annual Meeting. All directors who were serving on the board at the time of our 2017 Annual Meeting attended.

Our Audit Committee is responsible for overseeing our Code of Business Conduct, which includes policies regarding conflicts of interest. The Code requires employees and directors to avoid conflicts of interest, defined as situations where the person’s private interests conflict, or may appear to conflict, with the interests of UPS.

The board 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 independence and whether there is a business reason for UPS to enter into the

transaction. A copy of the policy is available on the governance section of our investor relations website at www.investors. ups.com. The Company did not engage in any related person transactions since January 1, 2017 that required disclosure in this Proxy Statement or under the Company’s policy.

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 these transactions and relationships that occurred since January 1, 2017 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.

Shareowner engagement is an essential aspect of corporate governance. We are receptive to shareowner engagement, and we are committed to transparency and proactive interactions with our investors.

Our management team participates in numerous investor meetings to discuss our business, our strategy and our financial results each year. 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.

We inform our board through our Compensation Committee and our Nominating and Corporate Governance Committee

about our conversations with key investors concerning our executive compensation and governance practices. Our directors carefully consider feedback from institutional investors and other shareowners. The Compensation Committee also annually engages an independent compensation consultant to review executive compensation trends that may be important to our investors.

The design of our executive compensation program is guided by our executive compensation philosophy and core principles described in the Compensation Discussion and Analysis on page 30. 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.

Any shareowners or interested parties who wish to communicate directly with our board, with our non-management directors as a group or with the lead independent director may do so by writing to the Corporate Secretary, 55 Glenlake Parkway, N.E., Atlanta, Georgia 30328. Please specify to whom your letter should be directed. After review by the Corporate Secretary,

appropriate communications will be promptly forwarded to the addressee. Advertisements, solicitations for business, requests for employment, requests for contributions, matters that may be better addressed by management or other inappropriate materials will not be forwarded to our directors.

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 goal 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 of Directors and to our Nominating and Corporate Governance Committee.

UPS Public Affairs 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 and oversight with respect to our political activities. We publish a semi-annual report disclosing the following information, 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, Compensation, Nominating and Corporate Governance and Risk Committees 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 13 persons named below for election as directors at the Annual Meeting. The nominees shall serve until the next Annual Meeting and until their respective successors are elected and qualified. Each nominee, other than Christiana Smith  Shi, was elected by shareowners at our last Annual Meeting. Christiana Smith Shi was first appointed to our board in 2018 and was identified as a director candidate by the Nominating and Corporate Governance Committee’s director search and recruitment firm. If any nominee is unable to serve as a director, the board may reduce the number of directors that

serve on the board or choose a substitute nominee. Any nominee for whom more votes are cast against than are cast for must offer to resign from the board.

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.

We provide both cash and equity awards to our non-employee directors. Our employee directors do not receive any compensation for service as a director. Directors are reimbursed for their expenses related to board membership.

The Compensation Committee of the Board of Directors conducts a review of director compensation generally every other year. The Compensation Committee’s independent compensation consultant, Frederic W. Cook & Co., Inc. (“Cook”), provides advice on the competitiveness of the company’s non-employee director compensation program and recommends changes to ensure compensation remains market competitive. In 2017, 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 in the amount of $170,000. RSUs are fully vested on the date of grant and held by the director until he or she separates from the UPS Board of Directors, at which time the RSUs are paid out in shares of class A common stock. 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 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 satisfy this objective, and to align the interests of our executives with those of our shareowners, through a program in which a significant portion of executive compensation is based upon performance.

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 2018 Proxy Statement and incorporated by reference in the Annual Report on Form 10-K for the year ended December 31, 2017 filed with the Securities and Exchange Commission.

The following Compensation Discussion and Analysis describes the Compensation Committee’s decisions regarding our executives’ compensation for 2017.

The Compensation Committee

Ann M. Livermore, Chair
Rodney C. Adkins
Clark T. Randt, Jr.
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) outside advisors and consultants to assist in carrying out its responsibilities. In 2017, the Committee retained Cook to act as the Compensation Committee’s independent compensation advisor. Cook reports directly to the Chair of the Compensation Committee and provides no additional services to UPS.

In November 2017, the Compensation Committee requested and received information regarding Cook’s independence and the existence of any potential conflicts of interest, including the following factors: (1) other services provided to UPS by the consultant (if any); (2) fees paid by UPS as a percentage of the consulting firm’s total revenue; (3) policies or procedures

maintained by the consulting firm that are designed to prevent a conflict of interest; (4) any business or personal relationships between the individual consultants involved in the engagement and a member of the Compensation Committee; (5) any company stock owned by the individual consultants involved in the engagement; and (6) any business or personal relationships between UPS executive officers and the consulting firm or the individual consultants involved in the engagement. The Compensation Committee discussed these considerations and concluded that Cook is independent and that the engagement of Cook did not raise any conflict of interest.

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

The Compensation Committee considers market data in making compensation decisions, however, compensation is not targeted at a particular percentile. Market data is just one of a variety of factors considered by the Compensation Committee when determining base salary, annual and long-term equity awards, and total compensation levels.

General compensation survey data provides the Compensation Committee with information about UPS compensation levels relative to comparable sized companies. In addition,

the Compensation Committee evaluates pay practices and compensation levels for a peer group of companies. These companies typically have global operations, a diversified business, and annual sales and market capitalizations comparable to UPS. The peer group considered by the Compensation Committee in determining 2017 compensation, which is unchanged from the peer group used for 2016 compensation, consisted of the following companies:

The Compensation Committee considers the differentials between executive officer compensation and the compensation paid for other UPS positions. The Compensation Committee also considers the additional responsibilities of the Chief Executive

Officer compared to other executive officers. In addition, internal comparisons are made to ensure that compensation paid to executive officers is reasonable compared to their direct reports.

Each year, the Chief Executive Officer assesses the Named Executive Officers and provides feedback to the Compensation Committee. In addition, the Compensation Committee evaluates the Chief Executive Officer’s performance on an annual basis. The Compensation Committee chair discusses the results of the evaluation with the full board in executive session. During the

evaluation, the board considers the Chief Executive Officer’s strategic vision and leadership, execution of UPS’s business strategy and achievement of business goals. Other factors include the Chief Executive Officer’s ability to make long-term decisions that create competitive advantage, and overall effectiveness as a leader and role model.

Central Elements of
UPS Executive Compensation

Other Elements of Compensation

Base salary is intended to provide our NEOs with a fixed level of cash compensation. The Compensation Committee considers a number of factors in determining the annual base salaries of the Named Executive Officers. Base salaries are typically set in March and become effective in April. In March 2017, the Compensation Committee approved a 3.0% base salary increase for David Abney, the CEO, and an average 3.0% increase to the

other NEOs’ base salaries. While company performance is the most important factor, scope of responsibility, leadership, market data and internal compensation comparisons are all considered. No single factor is weighted more heavily than another. The April 2017 salary increases for Named Executive Officers were generally aligned with the salary increase budget for other salaried employees.

MIP Performance Incentive Award — Overview

The MIP Performance Incentive award is designed to align pay with annual company performance. Based on the formula approved by the Compensation Committee for 2017, the maximum executive officer MIP awards are based on a pool of 0.5% of adjusted net income in total. The CEO’s maximum is

20% of the pool, and each other NEO’s maximum is 7.25% of the pool. The same performance measure and maximum allocations were approved by the Compensation Committee for 2018. In addition, the maximum MIP award for any individual is capped at $5 million, regardless of the size of the pool.

The maximum incentive pool approach is intended to align pay with actual company performance. The awards are granted under the 2015 Incentive Compensation Plan (the “2015 Plan”) and are determined based on the Compensation Committee’s discretion. The Committee may approve awards that are less than the maximum (negative discretion) but may not exceed the funded maximum amount for each NEO.

The Compensation Committee considered the following primary factors in exercising its negative discretion:

MIP Performance Incentive awards for executive officers are considered performance-based compensation fully at risk based on company performance. The evaluation metrics used for the MIP Performance Incentive awards are consolidated revenue growth (year-over-year growth in revenue generated from all products and services worldwide), adjusted consolidated earnings per share growth (year-over-year growth in total profits on an after tax, per share basis, after excluding the impact of certain items deemed unrelated to normal operations), and consolidated average daily package volume growth (year-over-year growth in consolidated package volume divided by the number of operating weekdays during the year).

The earned award, if any, is provided two-thirds in restricted performance units (“RPUs”), which vest 20% per year over a five year period, 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 RPUs and dividing by the applicable closing price of our class B common stock on the NYSE. Because of the five year vesting schedule, we do not maintain additional holding period requirements. When dividends are paid on UPS common stock, an equivalent value is credited to the participant’s bookkeeping account in additional RPUs. The additional RPUs are subject to the same vesting schedule as the original MIP RPUs.

2017 MIP Performance Incentive Award Results

Net income for 2017 was $4.9 billion. After excluding the after tax impact of increased pension expenses due to a mark-to-market loss, and income tax benefits attributed to the 2017 Tax

Cuts and Jobs Act, the Company’s 2017 adjusted net income was $5.3 billion which results in a maximum incentive pool for executive officers of $26.5 million. The maximum award for David Abney is therefore $5.3 million, and $1.9 million for the other Named Executive Officers.

The Compensation Committee exercised negative discretion to reduce the maximum available for each executive officer after consideration of the factors listed above. A specific weight is not assigned to any of the factors considered by the Compensation Committee in exercising its discretion. After assessing the above-described considerations, the Compensation Committee applied the 2017 MIP factor for non-executive MIP participants (90%) as described above, and then made further adjustments based on individual performance as described in the following section.

Individual Performance Adjustments

The Compensation Committee maintains discretion to adjust awards earned under the MIP up (but not beyond the funded maximum amount for each NEO) or down based on its assessment of each NEO’s individual performance. The Compensation Committee takes into consideration the recommendations of our CEO with respect to the NEO other than himself. The Compensation Committee also considers the results of the board’s annual evaluation of the CEO, which includes ratings on areas such as:

Following its review of individual performance during 2017, the Compensation Committee determined that some of our NEOs individual performance during 2017 warranted adjustments of their MIP awards.

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

David Abney, Chief Executive Officer

David and the leadership team of UPS drove strong international revenue and profit growth, and strong U.S. revenue growth in 2017. His efforts to capitalize on economic growth afforded shareholders with solid returns while allowing the company to increase investments in facilities and technology. In response to the challenges of anticipating and responding to the dynamics of the B2C environment, David initiated a transformation effort to shift the company’s capital footing to drive further investment and growth opportunities.

Richard Peretz, Chief Financial Officer

Chief Financial Officer Richard Peretz helped guide UPS to achieving target earnings per share, and initiated projects to utilize new technologies to improve speed to insight in financial reporting. Midway through the year, Richard assumed responsibility for Global Business Services and began an initiative to develop roadmaps for long-term expansion of services to reduce cost throughout the business. While financial objectives for International and Supply Chain exceeded plan, financial results for US operations fell short of expectations.

James Barber, Chief Operating Officer

Our International and Supply Chain business units posted solid gains during 2017 with both revenue and profits above targets. Volume growth reversed multi-year declines and grew significantly. To drive this turnaround, Jim Barber launched multiple successful growth and service initiatives in these business units. 2017’s success was also punctuated by returns on efforts to grow in emerging markets including the award of the logistics contract for Expo 2020 in Dubai.

Alan Gershenhorn, Chief Commercial Officer

Alan Gershenhorn, Chief Commercial Officer, initiated the transformation effort across the company, advanced key public policy initiatives, successfully completed three acquisitions (including two which significantly improve UPS customer brokerage capabilities), and launched new products and product expansion efforts. Alan’s leadership in these areas in 2017 helped UPS exceed growth targets in key sectors.

Myron Gray, President, U.S. Operations

For Myron Gray, President, U.S. Operations, 2017 yielded both gains and opportunities. Revenue growth for U.S. Small Package and Freight exceeded plans, the company successfully launched Saturday Ground delivery, and expanded operations into new facilities. Service quality, however, was a challenge throughout the year and profits for U.S. Small Package fell short of expectations.

The 2017 MIP Performance Incentive Evaluation Metrics and actual results are shown in the following table.

The table below shows the maximum funded MIP Performance Incentive award pools based on the adjusted net income formula, the target MIP Performance Incentive award, and the actual MIP Performance Incentive award based on the Compensation Committee’s discretion. The MIP award, if earned, is provided two-thirds in RPUs and one-third in cash.

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 MIP ownership incentive award is paid in the same proportion of RPUs and cash as the MIP performance incentive award. 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.

Ownership levels for the 2017 awards were determined as of December 31, 2017 by totaling the number of UPS shares in the participant’s family group accounts and the participant’s unvested restricted units and deferred compensation shares. The number of UPS shares is multiplied by the closing price of a class B share on the NYSE on December 31, 2017. All of the eligible Named Executive Officers earned the maximum MIP ownership incentive award.

Our long-term incentive programs provide participants with grants of equity-based incentives that are intended to reward performance over a multi-year period. Our 2017 equity programs included the Long-Term Incentive Performance (“LTIP”) award program and the Stock Options Program. The overlapping

performance cycles under the LTIP incentivize sustained financial performance over time, while the Stock Options Program rewards stock price appreciation which has a direct link to shareholder experience. All 2017 awards were granted under the 2015 Plan. Target amounts are set as a percent of annualized base salary.

2017 LTIP Award Program

The LTIP award program is designed to strengthen the performance component of our executive compensation package, enhance retention of key talent, and align the interests of shareowners with the incentive compensation opportunity for executives. Approximately 500 members of our senior management team, including the Named Executive Officers, participate in this program.

In 2014, the Compensation Committee revised the structure of the LTIP award program in order to improve shareowner alignment and to further enhance the long-term focus of the award by providing for the establishment of three-year performance goals. The performance measures selected by the Compensation Committee for the 2017 LTIP awards were growth in consolidated revenue, operating return on invested capital (“ROIC”) and relative total shareowner return (“TSR”) – each of which is measured independently and applied equally in determining final payouts. A target award of RPUs is granted to executive officers

and certain other eligible managers at the beginning of the three-year performance measurement period. The actual number of RPUs that participants will receive is determined after the end of the three-year performance measurement period, based on achievement of the established performance goals.

The relative TSR portion of the awards are earned based on our TSR relative to the 17 peer companies listed previously as measured from January 1, 2017 through December 31, 2019, a three-year performance period. The Committee believes that these companies are the most appropriate comparators for measuring the success of our executives in delivering shareowner value. The peer group companies have business operations in the markets where we compete, have similar revenue and market capitalization, have similar global scope and are competitors for executive talent.

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.

2017 LTIP Target Award Values

In March 2017, the Compensation Committee approved 2017 target award values for the three-year 2017 LTIP awards at 700% of base salary for the Chief Executive Officer, and 450% of base salary for the other NEOs. The 2017 LTIP target award values for other executive officers was 350% of base salary, based on the positions held as of March 2017. Target award values in 2017 that increased over the target values for 2016 were made to drive organizational performance, promote the competitiveness of UPS executive compensation, and align the financial interests of our executives to long-term value creation for our shareowners and company.

Target award 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 management team.

The threshold, target and maximum number of RPUs that can be earned by the Named Executive Officers under the 2017 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 measurement period ending December 31, 2019 and is based on achievement of the performance goals for the three-year period. The maximum LTIP award that can be earned is 200% of target.

Stock Option Program

The Compensation Committee believes that stock options provide a significant link to company performance and motivate recipients to maximize shareowner value. The optionholder receives value only if our stock price increases. Stock options also have retention value; the optionholder will not receive value from the options unless he or she remains employed during the vesting period (except in the case of retirement, death or disability during the vesting period).

Our non-qualified stock options vest 20% per year over five years and expire ten years from the date of grant. Unvested stock options vest automatically upon 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 grant features. The number of stock options granted to the NEOs is shown in the Grants of Plan-Based Awards table.

2017 Stock Option Award Values

In March 2017, the Compensation Committee approved 2017 target award values for stock options at 90% of base salary for the Chief Executive Officer and 50% of base salary for the other NEOs. As with the 2017 LTIP award target values, the stock option target award values for 2017 represent an increase over the target values for 2016, and were made to drive organizational performance, promote the competitiveness of UPS executive compensation, and align the financial interests of our executives to long-term value creation for our shareowners and company.

Total 2017 Long-Term Equity Incentive Award Target Values

The total long-term incentive opportunity granted to the Named Executive Officers in 2017, based upon a percentage of annualized base salary, is shown below.

2015 LTIP Performance Targets and Results

In March 2015, the Compensation Committee approved LTIP target award values for the NEOs for the three-year performance period running from 2015 through 2017. The performance targets and actual results for completed performance period for the 2015 LTIP awards are in the tables below.⁽¹⁾ The combined Total Payout for 2015 LTIP RPU Award based on 2015 through 2017 performance period was 86%.

The RPUs for the 2015 LTIP are now earned, meaning the amount of the award for the 2015 – 2017 performance period has been determined. Units earned under the 2015 LTIP award vested on December 31, 2017. Special vesting rules apply to terminations by reason of death, disability or retirement, as discussed in greater detail under “Potential Payments Upon Termination or Change in Control.” A participant’s earned RPU account will be adjusted quarterly for dividends paid on class A common stock. Awards that vest will be distributed in the form of class A common stock.

The benefits and perquisites offered to the Named Executive Officers are generally the same or similar to programs offered to the entire UPS management team, with the exception of financial planning and executive health services. 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.

Qualified and Non-Qualified Pension Plans

Named Executive Officers 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 Named

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 Service

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. All Named Executive Officers were provided 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 management and to members of our Board of Directors. The guidelines further our core philosophy that managers 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 other executive officers. The target for our non-employee directors is five times their annual retainer. Shares of

class A common stock, deferred units and vested and unvested RSUs and RPUs are considered owned for purposes of calculating ownership. Managers and directors are expected to reach target ownership within five years of adoption of the guideline or the date that the manager or director became subject to the guideline.

As of December 31, 2017, all of the Named Executive Officers met or exceeded their stock ownership guidelines, excluding any shares pledged. In addition, all of our non-employee directors who have been subject to the stock ownership guidelines for at least five years exceed their target ownership. RSUs are required to be held by the 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 future 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

The 2015 Plan contains a clawback provision for all awards granted under the plans. In addition, the 2018 proposed plan has a similar clawback provision. 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 2015 Plan, our 2012 Omnibus Incentive Compensation Plan (“2012 Plan”) and our 2009 Incentive Compensation Plan (“2009 Plan”).

Employment or Change in Control Agreements

We do not have employment agreements, separate change in control agreements or severance agreements with any of our Named Executive Officers. The 2015 Plan requires a “double trigger” — both a change in control and a qualifying termination of employment — to accelerate the vesting of awards. 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 for all equity 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 substantial 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.

Under Section162(m) of the Internal Revenue Code, compensation paid to certain Named Executive Officers in excess of $1 million is generally not tax deductible. Prior to the enactment of the Tax Cuts and Jobs Act of 2017 (the “Tax Act”), this limitation did not apply to compensation paid to the chief financial officer or to compensation based on achievement of predetermined objective performance goals if certain requirements were met. The interests of our shareowners are best served by not restricting the Compensation Committee’s discretion and flexibility in crafting compensation plans and arrangements. The Compensation Committee, however, has structured certain awards with the intention of complying with the performance-based compensation exemption from Section 162(m). A number of requirements must be met for particular compensation to qualify, however, there can be no assurance that any compensation awarded would be fully deductible under all circumstances. In addition, in appropriate circumstances the Compensation Committee may approve elements of compensation for certain executive officers that are not fully deductible.

The exemption from Section 162(m)’s deduction limit for performance-based compensation has been repealed, effective for taxable years beginning after December 31, 2017, such that compensation paid to our Named Executive Officers, including our Chief Financial Officer, in excess of $1 million will not be deductible unless it qualifies for transition relief applicable to certain arrangements in place as of November 2, 2017. Despite the Compensation Committee’s efforts to structure certain awards to be exempt from Section 162(m) and therefore not subject to its deduction limits, there can be no assurance that these awards will be fully deductible because of ambiguities and uncertainties as to the application and interpretation of Section 162(m) and the regulations issued thereunder, including the uncertain scope of the transition relief under the legislation repealing Section 162(m)’s exemption from the deduction limit. In addition, the Compensation Committee reserves the right to modify compensation that was initially intended to be exempt from Section 162(m) if it determines that such modifications are consistent with the Company’s best interests.