AmazonScience/document-haystack

1UPS’s actual governance practices do not entrench management or the board2In many instances, dual-class capital structures have the purpose or effect of entrenching management or the 3board. UPS maintains robust corporate governance practices typical of more traditional capital structures, and its 4capital structure is not used for entrenchment purposes. The board regularly reviews and considers succession 5planning issues. Our CEO has served in that role only since June 2020, and we maintain an independent board 6chair. Also, since 2020, we have added five new board members, all of whom are diverse, and had four board 7members retire. In addition, during that time we added five new Executive Leadership Team members, three of 8whom are diverse, and had seven leave the Company.9UPS’s dual-class capital structure has an effective “sunset” exercised through both governance 10documents and corporate practice; no disparate financial treatment is allowed11UPS’s Certificate contains a number of provisions that provide additional safeguards against traditional dual-class 12concerns. For example, the Certificate contains provisions that provide an effective “sunset” provision on 13outstanding class A shares. This is accomplished through significant transfer restrictions; in most cases class A 14share transfers require or result in the conversion of those shares to class B shares. Further, the Company’s 15recent pay mix redesign - which has the effect of reducing the number of class A shares issued each year - will 16accelerate this reduction. As a result, the average annual decline in the number of outstanding shares of class A 17common stock has been 3% per year since the Company went public. 18These governance principles run counter to traditional notions of dual-class structures. In addition, the 19Certificate generally requires equal economic treatment of the class A and class B common stock, ensuring that 20holders of one class would not receive disparate economic or financial treatment as a result of the different 21voting rights.22UPS’s capital structure has contributed to its long-term success23The provisions underlying UPS’s dual-class capital structure do not impact management’s pursuit of long-term 24growth strategies, and avoid the drawbacks associated with excessive emphasis on the short-term. Management 25runs our Company with a sense of purpose by focusing on sustainable value creation benefiting all the 26Company’s stakeholders. In this regard, the interests of all UPS shareowners are aligned.27The interests of employees, who hold class A shares, go beyond UPS’s current stock price and include operating 28the Company with a broader focus, which is important to our long-term success. Our growth and achievements 29have been bolstered by the engagement our capital structure has inspired in our employees and retirees.30Eliminating this structure will not further improve UPS’s corporate governance or 31financial performance32UPS already maintains robust corporate governance practices, and our corporate structure and practices do not 33present risks typically associated with dual-class structures. Other than our CEO, all UPS director nominees are 34independent. All UPS directors are elected annually by a majority of votes cast in uncontested director elections, 35only independent directors serve on the board’s Audit, Compensation and Human Capital, Nominating and 36Corporate Governance and Risk Committees, and we have an independent Board Chair. Our board consists of an 37appropriate mix of newer and longer-tenured directors.38In recent periods, the board has voluntarily adopted a number of corporate governance principles aligned with 39marketplace developments. These include increasing disclosures around lobbying and participation in the political 40process, specifically assigning human capital oversight responsibilities to the Compensation and Human Capital 41Committee, assigning environmental sustainability oversight responsibilities to the Nominating and Corporate 42Governance Committee, and adding to the Company’s proxy statement and sustainability reports gender and 43ethnicity information for employees and directors.44For the foregoing reasons, the board believes that UPS’s current capital structure does not present governance 45risks and continues to be in the best interests of the Company and its stakeholders. Shareowners have agreed 46with this assessment when they rejected similar proposals every year since 2013.47The board recommends that shareowners vote AGAINST this proposal.487049 50Notice of Annual Meeting of Shareowners and 2024 Proxy Statement