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

This Proxy Statement contains important information about the 2021 Annual Meeting of Shareowners (the “Annual Meeting”). We are providing these proxy materials to you because our Board of Directors is soliciting your proxy to vote your shares at the Annual Meeting. The Annual Meeting will be held online only on May 13, 2021, at 8:00 a.m. Eastern Time, at www.virtualshareholdermeeting.com/ UPS2021. Shareowners can participate, ask questions, vote and examine our shareowner list during the meeting through this website.

All properly executed written proxies, and all properly completed proxies submitted through the Internet or by 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 22, 2021 (the “Record Date”) are entitled to notice of, and to vote at, the Annual Meeting (or any adjournment or postponement of the Annual Meeting). We are first mailing this Proxy Statement on or about March 29, 2021.

Proxy Statement Summary

This summary highlights information contained elsewhere in this Proxy Statement.

Corporate Governance

Following are some of our key governance policies and practices:

Leadership Transition

On June 1, 2020, Carol Tomé assumed the role of Chief Executive Officer following David Abney’s retirement. In connection with the CEO transition, the board appointed William R. Johnson as independent Board Chair. Bill had been our independent Lead Director since 2016.

Our Board

The Board of Directors is elected annually by the shareowners and is responsible for the strategic oversight of UPS. Having a significant majority of non-management independent directors encourages robust debate and challenged opinions in the boardroom, while diversity - with respect to gender, age, ethnicity, skills, experience and other factors - contributes to consideration of a wide range of perspectives. Members of our board bring a broad range of professional skills and experiences. A mix of newer directors, who bring fresh viewpoints, and longer-tenured directors, who have contributed to developing our strategy over time and have acquired an in-depth understanding of our global organization, provides appropriate balance. For more information, see page 23.

Rudy Markham and Sandy Randt will not stand for reelection at the 2021 Annual Meeting because they have each reached the board’s retirement age. We thank Rudy and Sandy for their board service and for their significant contributions to UPS. The following summary information about our board includes information only relating to the director nominees.

Our directors bring a broad range of professional skills and experiences to the boardroom

The Nominating and Corporate Governance Committee regularly 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, experience and diversity to ensure the overall effectiveness of our board.

Diversity in our boardroom supports UPS’s continued success

	Gender		Ethnicity		Age

Our CEO provides strong leadership and is supported – and constructively challenged – by an independent board, including our independent Board Chair

Board oversight is provided by an independent board, led by an engaged independent Board Chair. Our CEO is the only director who is not independent.

Our board has been meaningfully refreshed; we added five new directors in 2020

The Nominating and Corporate Governance Committee regularly considers the long-term make-up of our Board of Directors and how board composition changes over time. They also consider the skills needed on our board as our business evolves.   The board consists of a combination of individuals with deep experience and knowledge of UPS, complemented by newer directors with fresh perspectives. Together, our directors work effectively as a team and are highly focused on UPS’s success.   The average tenure of the director nominees reflects an appropriate balance between different perspectives brought by long-serving directors and new directors.

Election of Directors

As a group, our 13 director nominees are appropriately skilled and experienced to effectively oversee and constructively challenge the performance of management in the execution of our strategy.

The board recommends you vote FOR each director nominee listed below. For more information, see page 23.

Executive Compensation

For more information, see page 34.

Annual Say on Pay Vote

2021 Omnibus Incentive Compensation Plan

The board recommends you vote FOR the 2021 Omnibus Incentive Compensation Plan.

Ratification of the Appointment of the Independent Registered Public Accounting Firm

The Board of Directors has appointed Deloitte & Touche LLP as our independent registered public accounting firm for the year ending December 31, 2021. The board recommends you vote FOR the ratification of the appointment of Deloitte & Touche LLP. For more information, see page 73.

Shareowner Proposals

The board recommends you vote AGAINST the shareowner proposals requesting the Company: prepare an annual report on lobbying activities; reduce the voting power of our class A stock from 10 votes per share to one vote per share; prepare a report on reducing our total contribution to climate change; transition to a public benefit corporation; and prepare an annual report assessing our diversity and inclusion efforts. More information about these proposals starts on page 76.

We are committed to maintaining robust governance practices that benefit the long-term interests of all stakeholders. We regularly review and update our corporate governance practices in response to the evolving needs of our business, shareowner

and other stakeholder feedback, regulatory changes, and other corporate developments. Following is 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 critical to the proper functioning of the board. The Nominating and Corporate Governance Committee also seeks to promote diversity in the boardroom with respect to gender, age,

ethnicity, skills, experience and other factors. Our directors’ biographies highlight the skills, experiences and backgrounds that the board considered when nominating these individuals to serve as directors.

Shareowner recommended director candidates are considered on the same basis as recommendations from other sources. Shareowners can recommend a candidate by writing to the following address: UPS Corporate Secretary, 55 Glenlake Parkway, N.E., Atlanta, Georgia 30328. Submissions must contain

the prospective candidate’s name and a detailed description of the experience, qualifications, attributes and skills that make the individual a suitable director candidate.

As part of our ongoing commitment to strong corporate governance practices, we adopted a proxy access bylaw for shareowners. 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, may include up to 20 percent of the board seats or two directors (whichever is greater), as director

nominees in UPS’s proxy materials for an annual meeting of shareowners. Our Bylaws set forth the requirements for the formal shareowner nomination process for director candidates. These requirements are described under “Other Information for Shareowners” on page 91.

A wide range of perspectives is critical to effective board deliberations, corporate governance and oversight. Diversity with respect to gender, age, ethnicity, skills, experience and other factors is a key consideration when identifying and recommending director nominees. The Nominating and Corporate Governance Committee assesses its diversity efforts through periodic evaluations of the board’s composition. While

the Company does not have a formal policy on board diversity, our Corporate Governance Guidelines emphasize diversity and the Nominating and Corporate Governance Committee actively considers diversity in recruitment and nominations of directors and also in its assessment of the board’s composition and effectiveness.

The board has evaluated each director’s independence and considered whether there were any relevant 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 or was a partner, principal shareowner or executive officer. Specifically, the board evaluated certain ordinary course business transactions and relationships between UPS and the organizations that currently or in the prior year employed Eva Boratto, Mike Burns, Wayne Hewett, Angela Hwang, Kate Johnson, Russell Stokes, and John Stankey, or their immediate family members, as an executive officer. The board also evaluated the ordinary course business transactions and relationships between UPS and any organizations where Rod Adkins, Wayne Hewett, Christiana Smith Shi, Sandy Randt, and Kevin Warsh, or their immediate family members, were a partner or principal shareowner. In each

case, no such transactions exceeded the thresholds in UPS’s Corporate Governance Guidelines. 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.

The board has determined that each of the director nominees (other than our current Chief Executive Officer, Carol Tomé), is independent. The board also determined that Rudy Markham and Sandy Randt, who served as directors since 2020 but will not stand for reelection, are each independent. With respect to former directors that served since 2020, the board has determined that each such director who served (other than our retired Chief Executive Officer, David Abney), including John Stankey, was 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 board leadership structure, including who should serve as Board Chair, and whether the roles of Board Chair and Chief Executive Officer should be separated or combined.

In connection with the election of Carol Tomé as our Chief Executive Officer, the board determined that it was in the best interests of the Company to enable Carol to focus on leading the Company, and separated the roles of Chair and Chief Executive Officer. Effective October 1, 2020, Bill Johnson, who had been serving as our independent Lead Director, was appointed Board Chair.

Bill has served on our board since 2009 and had served as independent Lead Director since 2016. He has deep institutional knowledge of the Company and provides strong continuity of leadership. He devotes significant time to understanding our business and communicating with the Chief Executive Officer, and other directors, between meetings. He draws on his

extensive knowledge of our business, industry, strategic priorities and competitive developments to set the board’s agendas in collaboration with the Chief Executive Officer, and he seeks to ensure that board meetings are productive and interactions with the directors facilitate a useful exchange of viewpoints. Carol is available to all directors between meetings and meets regularly with the Board Chair, and with the directors as a group, to receive feedback from the board. Bill’s collaboration with Carol allows the board to focus attention on the issues of greatest importance to the Company and its shareowners and our CEO to focus primarily on leading the Company.

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 at each board meeting, as described below.

Directors hold executive sessions without management present at each regular board meeting. The Board Chair determines the agenda and presides at each session. The Board Chair generally

invites the Chief Executive Officer to join a portion of the executive session to receive feedback from the board and when deemed appropriate otherwise.

The board employs both an ongoing informal and a formal annual process to evaluate its performance and the contributions of individual directors to the successful execution of the board’s obligations. The Board Chair frequently considers the

performance of the board and the board’s committees, and has informal discussions about individual director contributions to the board. The Board Chair shares feedback from these discussions with the full board and with individual board members.

Our Bylaws provide for majority voting in uncontested director elections. The number of votes cast for a nominee must exceed the number of votes cast against that person. Any incumbent director who does not receive a majority of the votes cast must offer to resign from the board.

In such an event, 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 will take 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.

The Company’s Chief Legal and Compliance Officer, Chief Information Officer, and the Vice President of Compliance and Internal Audit 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 Risk Committee also coordinates with the Audit Committee to enable the Audit Committee to perform its risk related responsibilities.

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. The Chief Legal and Compliance Officer, Chief Financial Officer and Vice President of Compliance and Internal Audit each have regularly scheduled private sessions with the Audit Committee.

In addition, the Company’s Chief Legal and Compliance Officer reports directly to our CEO, providing visibility into the Company’s risk profile. The board believes that the work undertaken by its committees, together with the work of the full board and the Company’s senior management, enables effective oversight of the Company’s management of risk. For more information about the board’s committees and their responsibilities, see page 31.

Setting the strategic course of the Company involves a high level of constructive engagement between management and the board. Acting directly and through each board committee, the board is fully engaged in the Company’s strategic planning process. Management develops and prioritizes strategic plans on an annual basis. Management then reviews these plans with the board, along with the Company’s challenges, opportunities, industry dynamics, and legal, regulatory and governance developments, among other factors, during an annual board strategy meeting.

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, risks and other Company developments such as labor relations, customer interactions and media coverage, both during and outside the regular board meeting cycle.

This process allows the board to leverage its substantial experience and expertise in strategy development to execute effectively on its oversight responsibility of our corporate strategy and long-range operating plans.

Succession planning and talent development are important at all levels within our organization. The board oversees management’s emergency and long-term succession plans at the executive officer level, most importantly the CEO position. The board annually reviews succession plans for senior management including the CEO, all in the context of the Company’s overall business strategy and with a focus on risk management. More broadly, the board is regularly updated on key talent indicators for the overall workforce, including diversity, recruiting and development programs.

The board’s succession planning activities are ongoing and strategic, and are supported by board committees and independent third-party consultants as needed. In addition, the CEO annually provides an assessment to the board of senior

leaders and their potential to succeed at key senior management positions. As a part of this process, potential leaders interact with board members through formal presentations and during informal events.

We have also instituted a formal director engagement program in which directors meet with individual Executive Leadership Team members, visit Company operations, participate in employee events and receive in-depth subject matter updates outside of the regular board meeting process. These additional engagements encourage the ongoing exchange of ideas and information between directors and management, facilitate the board’s oversight responsibilities, and support succession planning efforts.

The board held seven meetings during 2020. Also during 2020, the Audit Committee met eleven times, the Compensation Committee met seven times, the Nominating and Corporate Governance Committee met five times and the Risk Committee met three times. The Executive Committee did not meet in 2020. Prior to board meetings, the Board Chair and the board’s committee chairs work with management to determine and prepare agendas for the meetings. Board meetings generally occur over two days. Board committees generally meet on the first day of the board meeting, followed by the board meeting. The second day typically consists of reports from each committee chair to the full board, additional presentations by internal

business leaders or others with expertise in various subject matters, and an executive session consisting of only independent board members. The executive sessions are chaired by our Board Chair.

All of our independent directors attended greater than 90% of the total number of board and any committee meetings of which he or she was a member in 2020. Our directors are expected to attend each annual meeting, and all directors who were then members of the board attended the 2020 Annual Meeting. The independent directors met in executive session at all of the board meetings held in 2020.

We are committed to conducting our business in accordance with the highest ethical principles. Our Code of Business Conduct is applicable to anyone who represents UPS, including our

directors, executive officers and all other employees and agents of UPS. A copy of our Code of Business Conduct is available on our investor relations website at www.investors.ups.com.

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 has adopted a 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 the Audit Committee’s 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 under the same or similar circumstance, the extent of the related person’s interest in the transaction, whether the transaction would impair independence of a

non-employee director and whether there is a business reason for UPS to enter into the transaction. A copy of the policy is available on our investor relations website at www.investors.ups.com. The Company did not engage in any related person transactions since January 1, 2020 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 regarding 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 questionnaires 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, 2020 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.

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. We also prohibit our executive officers and directors from entering into pledges of UPS stock. Furthermore, our employees, officers, and directors are prohibited from engaging in short sales of UPS stock.

Shareowner engagement is an essential aspect of corporate governance. 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 key site visits. Our Investor Relations team reports to the board periodically on these interactions as well as on investor sentiment.

During this proxy season, our management team contacted holders of over 46% of our class B common stock to discuss Environmental Social and Governance (“ESG”) matters,

including our corporate governance policies and practices, our sustainability efforts, our commitments to social justice and executive compensation matters. We also proactively correspond with key investors throughout the year. We inform the board about our conversations with investors through reporting to the Compensation Committee and the Nominating and Corporate Governance Committee. The Compensation Committee also annually engages an independent compensation consultant to review executive compensation trends that may be important to our investors.

Shareowners or other interested parties who wish to communicate directly with our board, with our non-management directors as a group or any specific director, may do so by writing to the UPS 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.

Our responsible participation in the U.S. political process is important to our success 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 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.

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.

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

We also file 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 the world’s largest package delivery company, a leader in the U.S. less-than-truckload industry and a premier provider of global supply chain management solutions. We operate one of the largest airlines in the world, as well as the world’s largest private fleet of alternative-powered vehicles. We are a global leader in logistics, serving approximately 1.7 million shipping customers and 11.8 million delivery customers each business day in over 220 countries and territories. 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.

Economic, environmental and social sustainability risks and opportunities are considered as part of our comprehensive enterprise risk management program. The board regularly reviews the effectiveness of our risk management and due diligence processes related to material sustainability topics. In addition, the board actively considers these factors in connection with the board’s involvement in UPS’s strategic planning process. The board delegates authority for day-to-day management of sustainability topics to management. Our chief sustainability officer reports directly to the Company’s Chief Executive Officer and regularly reports to the board regarding sustainability strategies, priorities, goals and performance. In addition, the board is regularly briefed on issues of concern for customers, unions, employees, retirees and investors. Furthermore, the board oversees efforts of management to develop our values, strategies and policies related to economic, environmental and social impacts.

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 reviewed by the board prior to publication. Below is a list of key goals outlined in our most recent report:

For more information, please visit www.sustainability.ups.com.

Our success is also dependent upon our people, working together with a common purpose. We have approximately 543,000 employees (excluding temporary seasonal employees), of which 458,000 are in the U.S. and 85,000 are located internationally. Our global workforce includes approximately 93,000 management employees (43% of whom are part-time) and 450,000 hourly employees (51% of whom are part-time).

We believe that UPS employees are among the most motivated, highest-performing people in the industry and they provide a meaningful competitive advantage for us. We offer competitive benefits and pay, a range of continuous training, talent development and promotional opportunities.

We believe in creating an inclusive and equitable environment that represents a broad spectrum of backgrounds, cultures and stakeholders. By leveraging diverse perspectives and creating inclusive environments, we can improve organizational effectiveness, cultivate innovation, and drive growth.

Our Board of Directors and Board committees provide oversight on human capital matters through a variety of methods and processes. These include regular updates and discussion around human capital transformation efforts, technology initiatives impacting the workforce, health and safety matters, employee survey results related to culture and other matters, hiring and retention, employee demographics, labor relations and contract

negotiations, compensation and benefits, succession planning and employee training initiatives. We believe the board’s oversight of these matters helps identify and mitigate exposure to labor and human capital management risks, and is part of the broader framework that guides how we attract, retain and develop a workforce that aligns with our values and strategies.

In addition, in 2020, we created the role of Chief Diversity, Equity and Inclusion Officer, a new position on the Company’s Executive Leadership Team, reporting directly to our CEO. The creation of this role is a significant step forward for UPS to build a more inclusive and equitable environment.

We offer competitive compensation and benefits. In addition, our long history of employee stock ownership aligns the interests of our management team with shareholders. In the U.S., benefits provided to our non-union employees typically include:

We invest in our people by offering a range of other benefits, such as paid time off, retirement plans, and education assistance. In the U.S., these other benefits are generally provided to non-union employees without regard to full-time or part-time status.

As we expand and enter new markets, and seek to capture new opportunities and pursue growth, we need employees to grow and innovate along with us. We believe that transforming the UPS employee experience is foundational to our success. This requires a thoughtful balance between the culture we have cultivated over the years and the new perspectives we need to take the business into the future.

We are investing in capabilities that will transform our business, including investments in employee opportunities to support growth. Additionally, we are investing in training for 40,000 management employees on professionalism and performance as well as unconscious bias, diversity and inclusion to ensure our actions match our values.

We are committed to industry-leading employee health, safety, and wellness programs across our growing workforce. We develop a culture of health and safety by:

Our local health and safety committees coach employees on UPS’s safety processes and are able to share best practices across work groups. Our safety methods and procedures are increasingly focused on the variables associated with residential delivery environments, which have become more common with the growth in e-commerce. We monitor our performance in this area through various measurable targets including lost time injury frequency and the number of recorded auto accidents.

More than three-quarters of our U.S. employees are represented by unions, primarily those employees handling or transporting packages. In addition, approximately 3,000 of our pilots are represented by the Independent Pilots Association. Throughout our global operations, we work with many other unions, associations, and work councils.

We bargain in good faith with the unions that represent our employees. We frequently engage union leaders at the national level and at local chapters throughout the United States. We participate in works councils and associations outside the U.S., which allows us to respond to emerging regional issues abroad. This work helps our operations to build and maintain productive relationships with our employees.

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

Corporate Governance Guidelines annually and recommends any changes to the board for approval. When considering changes to our committee charters or Corporate Governance Guidelines, we take into account current governance trends and best practices, changes in regulatory requirements, advice from outside sources and input from stakeholders.

What am I voting on? Shareowners are being asked to elect each of the 13 director nominees named in this Proxy Statement to hold office until the 2022 Annual Meeting and until their respective successors are elected and qualified.

Voting Recommendation: Our Board of Directors recommends that shareowners vote FOR the election of each nominee.

Vote Required: A director will be elected if the number of votes cast for that director exceeds the number of votes against that director.

The board has nominated the persons named below for election as directors at the Annual Meeting. As previously noted, Rudy Markham and Sandy Randt are not standing for reelection because they have reached the Board’s retirement age. We thank Rudy and Sandy for their board service and for their significant contributions to UPS.

If elected, all nominees will serve until the next Annual Meeting and until their respective successors are elected and qualified. All nominees, other than Eva Boratto, Wayne Hewett, Angela Hwang, Kate Johnson and Russell Stokes, were elected by shareowners at our last Annual Meeting. These five nominees were identified as director candidates by members of management and by the Nominating and Corporate Governance Committee’s independent director search firm. This search firm also evaluated each candidate’s qualifications and backgrounds to determine if the individual would be an appropriate addition to the board.

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.

Biographical information about the director nominees 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 11.

The board has four committees composed entirely of directors meeting the NYSE’s and our director independence requirements: the Audit Committee, the Compensation Committee, the Nominating and Corporate Governance Committee, and the Risk Committee. Information about each of these committees is provided below. The board also has an Executive Committee

that may exercise all powers of the Board of Directors in the management of our business and affairs, except for those powers expressly reserved to the board under Delaware law or otherwise limited by the board. Carol Tomé is the Chair, and Ann Livermore and Bill Johnson also serve on the Executive Committee. The Executive Committee did not hold any meetings during 2020.

We compensate our non-employee directors with a mix of cash and equity. Equity compensation links director pay to the value of Company stock and aligns the interests of directors more closely with those of long-term shareowners. Our CEO does not receive any compensation for service as a director. Directors are also 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 to ensure the program structure is consistent with best practices and current trends. The Compensation Committee engages its independent compensation consultant, Frederic W. Cook & Co., Inc. (“FW Cook”), to provide 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 in 2019, it was determined that total board compensation was below our peer group median.

Based on that review, our board increased non-employee director compensation for the first time in three years as follows: an annual cash retainer of $110,000, and an annual restricted stock unit (“RSU”) award of $175,000. The Board of Directors also increased the annual retainer paid to the independent lead director to $35,000. The chairs of the Compensation, Nominating and Corporate Governance and Risk Committees receive an additional annual cash retainer of $20,000, and the Chair of the Audit Committee receives an additional annual cash retainer of $25,000.

In connection with the CEO transition, the board designated Bill Johnson to assume the role of independent Chairman, effective October 1, 2020. Based on the recommendation of FW Cook and taking into account, among other things, benchmarking data and expected commitment, the Compensation Committee recommended and our board approved the following additional payments for the independent Chair: annual cash retainer of $160,000 and an annual RSU award of $70,000. These payments replaced any payments Bill Johnson received for serving as independent lead director.

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 contributions to this plan. There are no preferential or above-market earnings in the UPS Deferred Compensation Plan. 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 convert to shares of class A common stock. Dividends earned on shares subject to director RSUs are deemed reinvested in additional units at each dividend payable date and are subject to the same terms as the original grant. This holding period increases the strength of the alignment of directors’ interests with those of our long-term shareowners.

The Compensation Committee (as used in this Executive Compensation section, the “Committee”) is responsible for setting the principles that guide compensation decision-making, establishing the performance goals under our executive compensation plans and programs, and approving compensation for the executive officers.

We are focused on maintaining an executive compensation program that supports the long-term interests of the Company’s shareowners. We align the interests of our executives with those of all of our shareowners by linking a significant portion of executive compensation to Company performance and shareowner returns. The Company’s programs are also designed to attract, retain and motivate executives who make substantial contributions to the Company’s performance by allowing them to share in the Company’s success.

Our significant efforts in the past year included designing compensation arrangements supporting the Company’s CEO transition, the appointment of a non-executive independent Board Chair, new appointments to the Executive Leadership Team, and Executive Leadership Team retirements, as well as developing and implementing an appropriate executive compensation structure and performance goals in the midst of a global pandemic. The Committee’s compensation framework,

with the support of our independent compensation consultant, enabled us to successfully navigate these challenges consistent with our compensation principles.

The Committee has reviewed the Compensation Discussion and Analysis and discussed it with management. Based on our review and discussions, the Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the 2021 Proxy Statement and incorporated by reference in the Annual Report on Form 10-K for the year ended December 31, 2020 filed with the Securities and Exchange Commission.

The following Compensation Discussion and Analysis describes the Committee’s principles, strategy and programs regarding 2020 executive compensation.

The Compensation Committee

Ann Livermore, Chair
Rodney Adkins
Clark Randt, Jr.
Christiana Smith Shi
Russell Stokes
Kevin Warsh

UPS’s executive compensation programs are designed to:

The Committee is responsible for setting the principles that guide compensation decision-making, establishing the performance goals under our executive compensation plans and programs, and approving compensation for the executive officers. In carrying out its responsibilities, the Committee is empowered to engage and terminate the services of outside advisors and other

consultants. In 2020, the Committee retained FW Cook to act as the Committee’s independent compensation advisor. FW Cook reports directly to the Committee and provides no additional services to UPS. The following table summarizes the key roles in the executive compensation decision-making process.

In November 2020, the Committee reviewed FW Cook’s independence and the existence of any potential conflicts of interest. The Committee evaluated the following factors: (1) other services provided to UPS by FW Cook (if any); (2) fees paid by UPS as a percentage of FW Cook’s total revenue; (3) policies or procedures maintained by FW Cook 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 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 FW Cook or the individual consultants involved in the engagement.

After evaluating these factors, the Committee concluded that FW Cook is independent and that the engagement of FW Cook did not raise any conflict of interest.

In determining and setting compensation targets and payouts, the Committee evaluates, among other things, pay practices and compensation levels at a peer group of companies. The Committee considers advice from its independent compensation consultant in determining the peer group. Because of the limited number of directly comparable companies to UPS – global logistics providers with significant market capitalizations - the companies included in the peer group typically have global operations, diversified businesses, and annual sales and market capitalizations comparable to UPS. Other more general considerations include

percentage of foreign sales, capital intensity, operating margins, size of employee population and whether the company also includes UPS in their peer group. 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 peer group for 2020 compensation purposes (the “2020 Peer Group”) did not change from 2019 and consisted of the following:

In addition, the Committee considers other market data, including general compensation survey data from comparably sized companies. Although the Committee considers this data in

executing its responsibilities within the construct of our executive compensation programs, compensation was not targeted to a particular percentile within the 2020 Peer Group or otherwise.

The Committee also generally considers the differentials between executive officer compensation and the compensation paid for other UPS positions, and generally considers the additional responsibilities

of the CEO compared to other executive officers. Internal comparisons are made to help ensure that compensation paid to executive officers is reasonable compared to their direct reports.

Each year, the CEO assesses the performance of all executive officers (other than the CEO) and provides feedback to the Committee. In addition, the Committee evaluates the CEO’s performance on an annual basis. The Compensation Committee Chair discusses the results of the evaluation with the full board (other than the CEO) in executive session. During the evaluation,

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

Other Elements of Compensation

Base salaries provide our NEOs with a fixed level of cash compensation, and are designed to provide an appropriate level of financial certainty. The Committee considers a number of factors in determining the NEOs’ annual base salaries. While

Company and individual performance are the most important factors, scope of responsibility, leadership, market data and internal compensation comparisons are all considered. No single factor is weighted more heavily than another.

Taking all of those factors into account, in March 2020, the Committee approved a 3% base salary increase for our former CEO, who was expected to continue serving as an employee through December 31, 2020. Further, the Committee approved the overall

compensation for our current CEO, including her annual base salary. The Committee also approved base salary increases for the other NEOs as shown in the Summary Compensation Table below.

Management Incentive Program Performance Incentive Award — Overview

Management Incentive Program (“MIP”) performance incentive awards are designed to motivate management and align pay with annual Company performance by linking payouts to the achievement of pre-established metrics, while allowing adjustments for individual performance. Annual MIP performance incentive award opportunities are provided as a percentage of base salary, subject to a $5 million maximum for each NEO. Payouts are determined by the Committee, taking into consideration the following:

The factors considered by the Committee when determining award payouts are not assigned a specific weighting. The awards are considered performance-based compensation fully at risk based on Company performance. The award, if earned, is paid two-thirds in restricted performance units (“RPUs”) and one-third in cash. The number of RPUs granted is determined by dividing the dollar value of the portion of the MIP award paid in RPUs by the closing price of our class B common stock on the NYSE on the grant date of the award. RPUs are settled in shares of class A common stock. 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. RPUs paid as MIP performance incentive awards generally vest on the first anniversary of the grant date, furthering the retention component of the award.

To further our stock ownership philosophy, the initial MIP incentive award earned by newly hired employees is paid entirely in vested class A shares, with no cash component. These shares are vested upon grant. As a newly hired employee, our current CEO’s 2020 MIP award was paid entirely in class A shares.

2020 MIP Performance Incentive Awards

In February 2020, and prior to the uncertainty caused by the global coronavirus pandemic, the Committee adopted financial performance metrics and goals for the NEOs’ MIP performance incentive awards as follows:

After monitoring and considering the economic impact and uncertainty caused by the coronavirus pandemic, including the Company’s withdrawal of its previously issued earnings guidance for the full year 2020, actual first-quarter 2020 financial performance and challenges around longer-term forecasting, the Committee determined it was appropriate to revise the performance goals under the previously approved financial performance metrics for MIP performance incentive awards by bifurcating the 2020 performance period into two six-month performance periods. The Committee discussed with management and its independent compensation consultant then-current expected financial performance, the initially approved performance goals under the 2020 MIP, risks related to the potential severity and duration of the coronavirus pandemic and the other matters described above. The Committee then set the following amended goals:

The MIP financial performance metrics, goals and results were as follows:

The Committee maintains discretion to adjust awards earned under the MIP up (but not above the maximum amount for each NEO) or down based on its qualitative assessment of each NEO’s individual performance. For evaluation of the CEO’s performance, the Committee considers the results of the board’s annual evaluation of the CEO, which includes ratings on:

For NEOs other than the CEO, the Committee takes into consideration the recommendations of the CEO. Individual accomplishments during 2020 that were considered by the Committee when determining final awards are described below. The Committee did not consider George Willis’s performance, and he did not receive any MIP payout, as he was not employed by UPS on the date required to be eligible for payout under a MIP award.

Carol Tomé

Carol Tomé joined UPS on June 1, 2020 as Chief Executive Officer after serving as a member of the board since 2003. Carol quickly revamped the strategy, defined the “better not bigger” framework, streamlined priorities, and focused the organization on simplification, ease, and speed. Carol aligned success metrics around customer satisfaction, employee commitment, and shareowner returns. Responding rapidly to U.S. social unrest, she commissioned an Equity, Justice and Action Task Force to address concerns and impact change. Under her leadership, UPS posted the highest revenue and profit in the Company’s history and has increased shareowner value.

David Abney

At the start of 2020, David led a quick response to the challenges faced by the pandemic before announcing his retirement after 46 years of UPS service. By emphasizing employee safety and customer service, he paved the way for UPS to navigate uncertainty. The multi-year strategic investments UPS made in healthcare supply chain capabilities under David’s leadership proved invaluable in positioning UPS for success as the pandemic disrupted traditional shipping patterns. David led a smooth Chief Executive Officer transition to Carol.

Brian Newman

In the face of economic uncertainty, Brian protected our liquidity, guided the organization to generate higher total revenue and operating profit, and significantly improved our planning and forecasting activities. Brian tightened the linkage between investments and returns. In 2020, his role expanded to include Global Business Services and Mergers and Acquisitions, where he focused on improving the end-to-end customer experience and successfully navigated the carve out transaction to sell UPS Freight. Under his leadership, total shareholder value grew by approximately 50% in 2020.

Nando Cesarone

2020 was a transitional year for Nando as he spent the majority of the year leading our International business, which first felt the effects of COVID-19, and assumed his current role leading our U.S. business in the third quarter. As the pandemic traveled across the globe, Nando worked cross functionally to overcome countless obstacles while processing record volume levels. He led the team to keep our supply chain moving by prioritizing employee safety and operational service excellence to ensure customers received essential goods. Leading a smooth peak season with industry-leading service levels, Nando was instrumental in delivering the highest revenue and profit in our history.

Kate Gutmann

In 2020, Kate quickly reacted to the dynamics of the pandemic by focusing on risk management to limit UPS’s exposure, while at the same time maintaining good customer relationships. Kate focused her efforts on operationalizing our “better not bigger” framework and implemented revenue management strategies. Kate’s sales and solutions teams were instrumental in delivering the highest revenue and profit in our Company’s history, leaning into small and medium-sized businesses that yielded significant growth. At the beginning of the year, Kate assumed responsibility for our newly-formed healthcare business which posted strong results and positioned us well as vaccine distribution began, with Kate serving as a principal healthcare spokesperson for the Company.

Juan Perez

Juan led the Information Technology and Engineering functions with tremendous agility and responsiveness throughout the year. The IT team provided a seamless way for UPSers to work remotely during the pandemic. Enterprise technology platforms were implemented to modernize Human Resources and Finance, and the customer digital experience for Supply Chain Solutions was improved. Increased automated sort capacity supported record volume, and tools that enabled the dynamic allocation of volume to capacity enabled agile adjustments to constantly changing conditions. He personally invested in our peak preparation, working closely with his counterparts to deliver one of the Company’s best peak seasons.

2020 MIP Ownership Incentive Award

One of UPS’s core principles is the importance of UPS stock ownership. We encourage employees to maintain a substantial ownership interest in UPS stock through equity compensation programs, including our MIP ownership incentive award. All MIP participants are eligible for an additional ownership 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 as of December 31 of each year, multiplied by an ownership incentive award percentage set out below, up to a maximum award of one month’s salary. The MIP ownership incentive award, to the extent earned, is paid in the same proportion of cash and equity as the MIP performance incentive award.

Ownership levels are determined 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 the last trading day of the year.

2020 MIP Payout

After assessing the above-described considerations, the Compensation Committee approved the following MIP performance incentive award payouts for each NEO, other than George Willis. George did not receive a 2020 MIP award because he retired prior to the MIP eligibility date.

2021 MIP Performance Incentive Award Metrics

In order to better align executive compensation with shareowner returns and the Company’s strategy going forward, the Committee considered and approved revised performance measures for the Company’s 2021 MIP performance incentive award. Consolidated revenue growth will continue to be used as a performance measure, along with two new performance measures; consolidated operating profit and consolidated return on invested capital.

Our two principal long-term incentive programs, the Long-Term Incentive Performance (“LTIP”) award program and the Stock Option program, provide participants with grants of equity-based incentives that are intended to reward performance over a multi-year period and serve as a retention mechanism. The overlapping performance cycles under the LTIP program incentivize sustained financial performance. The Stock Option program rewards stock price appreciation, which is directly linked to shareowner returns.

In 2020, working with its independent compensation consultant, the Committee revised the performance measures for the LTIP program as described below. Prior to 2020, the LTIP performance measures were Growth in Adjusted Consolidated Revenue, Adjusted Return on Invested Capital and Relative Total Shareholder Return. Each performance measure was equally weighted and accounted for one-third of the award payout. Outstanding target awards (under the 2018 and 2019 LTIP award program) continue to be measured under the performance measures in effect when the awards were granted.

Total Long-Term Equity Incentive Award Target Values

LTIP target values are determined based on internal pay comparison considerations and market data regarding total compensation for comparable positions at similarly situated companies. Differences in the target award values are based on varying levels of responsibility among the NEOs. The LTIP target opportunity granted to eligible NEOs in 2020, based upon a percentage of annualized base salary, is shown below.

LTIP Program

The LTIP program is designed to strengthen the performance-based 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 470 members of our senior management team, including the NEOs, participate in this program. The program improves shareowner alignment and further enhances the long-term focus of the award by establishing longer-term

performance goals. Further, the program is designed to combine internal and external relative business performance measures. This combination balanced efforts to motivate and reward the management team for operational and financial success, while ensuring rewards are aligned with shareowner interests and returns.

A target award of RPUs is granted to participants at the beginning of the three-year performance period. The number of RPUs that can be earned by the NEOs under the LTIP award is shown in the Grants of Plan-Based Awards table. The actual number of RPUs that NEOs will receive will be determined following the completion of the performance period, based on achievement of the performance measures described below. The maximum LTIP award that can be earned is 220% of target.

Dividends payable on the number of shares underlying participants’ RPUs are allocated in the form of dividend equivalent units (“DEUs”). DEUs are subject to the same conditions as the underlying award. Awards that vest are distributed in shares of class A common stock. Special vesting rules apply to terminations by reason of death, disability or retirement during the performance period, as discussed under “Potential Payments Upon Termination or Change in Control.”

As described above, in 2020 the Committee, working with its independent compensation consultant, determined it was appropriate to approve performance measures different than those applicable to prior awards in order to more closely correlate compensation and shareholder returns. The performance measures selected by the Committee for the LTIP awards were adjusted earnings per share growth and adjusted free cash flow. Each measure will be evaluated independently and applied equally in determining final payouts. The final payout percentage for the award will be subject to modification based on the Company’s total shareholder return (“RTSR”) as a percentile rank relative to the total return on the stocks of the companies listed on the Standard & Poor’s 500 Composite Index (the “Index”). A description of each performance measure and the operation of the RTSR modifier follows:

Adjusted Earnings Per Share Growth¹

Adjusted earnings per share growth measures our success in increasing profitability as compared with targets adopted at the beginning of the performance period. Adjusted earnings per share is determined by dividing the Company’s adjusted net income available to common shareowners by the diluted weighted average shares outstanding during the performance period. For this purpose, adjusted net income is determined by reference to our publicly reported adjusted net income. The adjusted earnings per share growth target is the projected average annual adjusted earnings per share growth during each of the years within the applicable performance period. The actual adjusted earnings per share growth for each year of the applicable performance period will be compared to the target and assigned a payout percentage; the average of the three payout percentages will be used to calculate the final payout percentage under this metric. Following the completion of the applicable performance period, the Committee will certify (i) the actual adjusted earnings per share growth for the performance period; (ii) the actual adjusted earnings per share growth for the performance period as compared to the target; and (iii) the final payout percentage for this metric.

Adjusted Free Cash Flow¹

Adjusted free cash flow measures our ability to generate cash after accounting for capital expenditures. Adjusted free cash flow is determined by reducing the Company’s adjusted cash flow from operations by adjusted capital expenditures and proceeds from disposals of fixed assets, and adjusting for net changes in finance receivables, other investing activities and discretionary pension contributions. The adjusted free cash flow target is the projected aggregate adjusted free cash flow generated during the applicable performance period. Following the completion of the applicable performance period, the Committee will certify (i) the actual adjusted free cash flow for the performance period; (ii) the actual adjusted free cash flow for the performance period as compared to the target; and (iii) the final payout percentage for this metric.

Relative Total Shareowner Return

Total shareholder return measures the total return on an investment in UPS stock to an investor (stock price appreciation plus dividends). This total return is compared with the total return on the stock of the companies listed on the Index at the beginning of the applicable performance period. The Committee will assign a percentile rank relative to the companies listed on the Index based on RTSR. Following the completion of the Performance Period, the Committee will certify the Company’s RTSR and the payout modifier for that performance period, if any, as follows:

2020 LTIP Award Grant

After monitoring and considering the economic impact and uncertainty caused by the coronavirus pandemic, and the challenges around long-term forecasting, the Committee made initial 2020 LTIP award grants in May 2020. Based on this uncertainty, the Committee determined it was appropriate to subdivide the three-year performance period for the 2020 LTIP program award into two tranches. The first tranche measured the achievement of the performance targets and the impact of the payout modifier for the portion of the 2020 LTIP performance period from January 1, 2020 through December 31, 2020. The results from this performance period will be used to determine 20% of the RPUs earned under the 2020 LTIP program award. The second tranche will measure the achievement of the performance targets and impact of the payout modifier for the portion of the 2020 LTIP performance period from January 1, 2021 through December 31, 2022. The results from this performance period will be used to determine 80% of the RPUs earned for the 2020 LTIP Program award. The Committee determined it was appropriate to more heavily weight the results from the second tranche of the performance period in order to maximize the at-risk nature of the award.

Because the 2020 LTIP award contains two tranches with separate performance goals, and the performance goals for the 2021-2022 performance period were not approved in 2020, in accordance with generally accepted accounting principles, the grant date fair value of the 2020 LTIP award in the “Stock Awards” column of the Summary Compensation Table below includes only the grant date fair value of the award for the 2020 performance period. The grant date fair value of the 2020 LTIP award attributable to the 2021-2022 performance period will be included in this table next year, as applicable. Furthermore, the target and maximum number of RPUs that can be earned by the NEOs under the 2020 LTIP award shown in the Grants of Plan-Based Awards table only includes 20% of the of the total target and calculated maximum RPUs awarded under the 2020 LTIP award. The actual number of RPUs that NEOs will receive will be determined following the completion of the full three-year performance period. The remaining 80% of the 2020 LTIP award RPUs that can be earned by the NEOs will be included in this table next year.

Stock Option Program and 2020 Stock Option Awards

The Committee believes that stock options provide significant incentives, as a direct link between Company performance and maximization of 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 generally 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. The number of stock options granted to the NEOs in 2020 is shown in the Grants of Plan-Based Awards table.

Generally, we do not pay discretionary bonuses in cash or stock, or make other discretionary payments, to our executives. In recent periods, however, in order to attract and retain senior executive talent to participate in the transformation of our business, the Committee determined it was appropriate to make certain limited payments to external executives hired to the Company’s Executive Leadership Team. A portion of the payments to the external hires were made to compensate the executives for compensation forfeited at their prior employers and transition them into our incentive programs. In addition, in connection with hiring of a new CEO in 2020, the Committee determined it was appropriate to provide certain incentives to various executive officers in order to provide for the retention of their services through a transition period.

In connection with his announced retirement and in order to assist with the transition of matters through his retirement date and in view of his ongoing services, on March 11, 2020, UPS entered into an agreement (the “Transition Agreement”) with David Abney. Pursuant to the Transition Agreement, David received his base salary through his retirement date and received a 2020 MIP target award valued at 165% of base salary. In addition, he received a 2020 LTIP target award valued at 300% of base salary. The Transition Agreement includes customary non-competition, non-solicitation and non-disparagement covenants in favor of the Company.

Under the terms of his 2019 employment offer letter described below, Brian Newman was entitled to: (i) a grant of RSUs with a value of $5,500,000, which vested in March 2020; (ii) a performance-based cash award with a target value of $3,000,000, payable in equal installments in March 2021 and March 2022, with the actual payout based on the Company’s performance

under the LTIP for periods ending December 31, 2020 and December 31, 2021, respectively; and (iii) a cash transition payment of $600,000 paid in March 2020. These amounts are subject to repayment on a prorated basis if Brian Newman resigns without “good reason” or is terminated for “cause” within 36 months following his September 2019 start date.

As described above, in order to provide for the retention of the services of certain executive officers in connection with our CEO transition, in May 2020, we entered into retention arrangements with each of Nando Cesarone, Kate Gutmann, Juan Perez and George Willis. The Committee initially intended that these agreements contain both performance and time vesting components, and that the performance components be different than the metrics under our MIP and LTIP programs. Due to the ongoing uncertainty created by the COVID-19 pandemic and the importance of the retention agreements to the Company, the Committee ultimately determined that the awards would be solely time based. Nando Cesarone, Kate Gutmann and Juan Perez each received $3.0 million in RSUs which vest as follows: 25% on May 13, 2021, 25% on May 13, 2022 and 50% on May 13, 2023, provided they remain an employee of UPS through the applicable vesting date. George Willis entered into an agreement pursuant to which he was granted $4.0 million in RSUs which would have vested had he remained employed by the Company through the above vesting dates; however, he forfeited the right to any payment under this agreement upon his retirement. In accordance with the rules and regulations of the SEC, the full value of these unvested awards is included in each individual’s 2020 compensation as reported in the Summary Compensation Table below. These agreements contain customary non-competition, non-solicitation and non-disclosure covenants in favor of the Company.

The benefits and perquisites provided to our NEOs 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. In addition, in 2020 the Company approved the use of corporate chartered aircraft by Brian Newman for personal reasons, which is not expected to be a

regular practice. This approval was directly related to the COVID-19 pandemic and the Company’s belief that Brian should not travel by commercial aircraft at that time.

The UPS 401(k) Savings Plan

Participation in 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 1, 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. In accordance with the terms of the Excess Coordinating Benefit Plan, following a participant’s retirement, the Company pays an amount equal to the Social Security and Medicare taxes due on the present value of the benefits provided under the 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 2020, 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 NEOs, 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. 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

In furtherance of one of UPS’s core principles relating to the importance of UPS stock ownership, we maintain stock ownership guidelines that apply to executive officers and members of the board. 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 the date that the executive officer or director became subject to the guideline.

As of December 31, 2020, all of the NEOs 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 non-employee directors until separation from the board.

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, we have 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. 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 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 may seek repayment or recovery of the award from that executive officer. This clawback applies to all outstanding awards granted under our current and prior incentive plans. The 2021 Plan also includes clawback provisions.

Employment and Severance Arrangements; Change in Control Payments

The board believes that UPS has created a culture where long tenure for executives is the norm. As a result, we do not enter into agreements providing for the continuation of employment of an executive, or separate change in control agreements with any of our executive officers, including our NEOs, or other U.S.-based non-union employees.

However, in recent periods, in order to attract and retain senior executive talent to participate in the transformation of our business and in furtherance of the board’s succession planning efforts, we have deemed it appropriate to enter into a limited number of employment offer letters, transition agreements and retention arrangements. These offer letters and retention arrangements set out certain compensation terms in connection with the individual’s employment by UPS, but provide that employment is on an at-will basis. Some of the compensation described in the employment offer letters was designed to compensate the executives for compensation forfeited at their prior employers and transition them into our incentive programs. The potential compensation provided by the retention arrangements to certain NEOs is intended to further incentivize those officers to continue their employment with UPS. Transition agreements and retention arrangements have been utilized as a part of our succession planning process to help enable smooth leadership transitions.

In connection with her appointment as Chief Executive Officer, on March 11, 2020, the Company entered into an employment offer letter with Carol Tomé. The offer letter provides for: (i) an annual base salary of $1,250,000; (ii) a MIP award target of 165% of base salary, which for 2020 was prorated and payable in vested Class A common stock; (iii) a LTIP program award target of 735% of base salary; and (iv) a stock option grant target of 90% of base salary. Carol also entered into a protective covenant agreement, which protects UPS’s confidential information and includes non-competition and non-solicitation covenants in favor of UPS. It also provides her with continued payment of her base salary for up to 24 months if her employment is terminated by UPS without “cause” within two years following her start date. In the event she is terminated without cause after the first two years of employment, the Company is obligated to make such payments if it elects to enforce post-termination non-compete covenants connected to those agreements.

For a description of the transition agreement entered into with David Abney, see “Employment Transition Payments” above.

Under Brian Newman’s 2019 offer letter, he became entitled to: (i) a grant of UPS restricted stock units with a value of $5,500,000, which vested in March 2020; (ii) a performance-based cash award with a target value of $3,000,000, payable in equal installments in March 2021 and March 2022, with the actual payout based on the Company’s performance under the LTIP for periods ending December 31, 2020 and December 31, 2021, respectively; and (iii) a cash transition payment of $600,000 paid in March 2020. These amounts are subject to repayment on a prorated basis if he resigns without “good reason” or is terminated for “cause” within 36 months following his September 2019 start date. This offer letter also sets out 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.

In connection with the entry into the offer letter, Brian Newman entered into a protective covenant agreement with us which, in the event he is terminated without cause during the first two years of employment, provides for separation pay equal to two years’ salary. In the event he is terminated without cause after the first two years of employment, the Company is obligated to make such payments if it elects to enforce post-termination non-compete covenants connected to those agreements. Brian is also entitled to the continued vesting of his performance-based cash award (see “Employment Transition Payments” described above).

Under the terms of the retention arrangements with Nando Cesarone, Kate Gutmann and Juan Perez, each entered into customary non-competition, non-solicitation and non-disclosure agreements in favor of the Company. In the event that any of them are terminated without cause or resign for “good reason”, their RSU awards will continue to vest on the schedule set out above. George Willis also entered into a similar agreement in favor of the Company.

All outstanding equity awards that are continued or assumed by a successor entity in connection with a change in control require a “double trigger” in order for vesting to accelerate; that is, they also require a qualifying termination of employment prior to any acceleration of vesting.

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.

Our shareowners have the opportunity to vote annually, on an advisory basis, to approve the compensation of our NEOs as set out in the Compensation Discussion and Analysis section and in the compensation tables and accompanying narrative disclosure in the proxy statement. See “Proposal 2 – Advisory Vote to

Approve Named Executive Officer Compensation.” In the most recent advisory vote on executive compensation, taken at the 2020 Annual Meeting of Shareowners, over 88% of votes cast approved our NEO compensation as described in our 2020 Proxy Statement. The Compensation Committee carefully considered

the results of this vote as well as many other factors in determining the structure and operation of our executive compensation programs. In addition, we regularly engage with our shareowners

on ESG matters, including executive compensation matters. We use the results of these engagements to inform board discussions on our corporate governance policies and pay practices.