The FedEx 2018 annual meeting is September 24th. Vote AGAINST John A. Edwardson, Paul S. Walsh, Marvin R. Ellison, John C. (“Chris”) Inglis, Shirley Ann Jackson and Susan C. Schwabas, as well as the pay package. Vote FOR all three shareholder proposals.
FedEx (FDX) FedEx Corporation provides transportation, e-commerce, and business services worldwide. The company’s FedEx Express segment offers shipping services for delivery of packages and freight. Reading through 90+ pages of the proxy takes too much time. Your vote will make only a small difference but could be crucial. Below, how I voted and why.
If you have read these posts related to my portfolio and proxy proposals for the last 22 years and trust my judgment, skip the 8 minute read. See how I voted my ballot. Voting will take you only a minute or two. Every vote counts.
I voted with the Board’s recommendations 44% of the time. View Proxy Statement via SEC’s EDGAR system (look for DEF 14A).
Read Warnings below. What follows are my recommendations on how to vote the proxy in order to enhance corporate governance and long-term value.
FedEx 2018: ISS Rating
From the Yahoo Finance profile: FedEx Corporation’s ISS Governance QualityScore as of September 1, 2018 is 4. The pillar scores are Audit: 2; Board: 5; Shareholder Rights: 4; Compensation: 7.
FedEx 2018 Proxy Voting Guide: Board Proposals
1. FedEx 2018: Directors
Egan-Jones Proxy Services recommends For all board nominees, except John A. Edwardson, Paul S. Walsh. E-J, who they believe have an inherent conflict of interest serving on key Board committees after than ten years as directors, since are no longer considered independent. Agreed. Since I also voted against the compensation package (see below) I also voted against the members of that committee: Paul S. Walsh (Chairman), Marvin R. Ellison, John C. (“Chris”) Inglis, Shirley Ann Jackson and Susan C. Schwab.
2. FedEx 2018: Executive Compensation
FedEx 2018’s Summary Compensation Table shows the highest paid named executive officer (NEO) was Chairman and CEO Fredrick Smith at $16.7M. I’m using Yahoo! Finance to determine market cap ($68B) and I define large-cap as $10B, mid-cap as $2-10B, and small-cap as less than $2B. FedEx is a large-cap company.
According to the Equilar Top 25 Executive Compensation Survey 2015, the median CEO compensation at large-cap corporations was $10.3M in 2014, so pay was over that amount. FedEx shares outperformed the S&P 500 over the most recent one, two, and five year time periods. The ratio of the annual total compensation of the CEO to the median of the annual total compensation of all employees was 333:1.
Egan-Jones Proxy Services uses a proprietary rating compensation system to measures wealth creation in comparison to other companies. “Good” is their compensation rating for FedEx. They recommend a vote for the say-on-pay item.
Given above median pay, a high CEO to median employee pay ratio and my concern for growing wealth inequality:
Vote AGAINST. When I vote against a pay package I also vote against members of the compensation committee, since they recommended the package: Paul S. Walsh (Chairman), Marvin R. Ellison, John C. (“Chris”) Inglis, Shirley Ann Jackson and Susan C. Schwab.
3. FedEx 2018: Ratify Auditors
I have no reason to believe the auditor engaged in poor accounting practices or has a conflict of interest. Egan-Jones recommends voting against the auditor if they served for seven years. Independence becomes compromised by that time. The FedEx auditor served more than seven years. No other issues appear significant.
Vote FOR.
FedEx 2018: Shareholder Proposals
4. Shareholder Proposal: Lobbying Activity and Expenditure Report
This proposal from the Teamsters and Clean Yield is similar to many of my proposals on the same subject. E-J views implementation as an unnecessary expense. Last year, as similar proposal won 25%. I hope it fares better this year.
The US Supreme Court’s decision in Citizens United v. Federal Election Commission is based on a false premise. Justice Kennedy’s majority opinion justifies the decision by pointing to the Internet.
With the advent of the Internet… Shareholders can determine whether their corporation’s political speech advances the corporation’s interest in making profits, and citizens can see whether elected officials are ‘in the pocket’ of so-called moneyed interests.
The decision also said that disclosure
permits citizens and shareholders to react to the speech of corporate entities in a proper way. This transparency enables the electorate to make informed decisions and give proper weight to different speakers and messages.
And the Court expressed enthusiasm that technology today makes disclosure “rapid and informative.” Yet, corporations are not required to disclosure lobbying expenditures and political contributions to shareowners as Justice Kennedy believed. Vote FOR.
5. Shareholder Proposal: Right to Act by Written Consent
E-J’s policy is to support the ability to take action by written consent of holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting. This proposal meets that criteria. I wrote it for my wife, Myra K. Young. Of course I voted FOR.
Similar proposals won 67% support at both Allstate and Sprint. It won 51% support at the 2010 FDX AGM. Last year the topic won majority votes at Western Union, Ryder System, and BorgWarner Inc. Last year the topic also won votes higher than 44% at Cognizant, EMCOR Group, eBay, Gilead Sciences, Nasdaq, Capital One Financial, and AT&T.
Vote FOR.
6. Shareholder Proposal: Shareholder Approval of Bylaw Changes
Proponent John Chevedden argues such shareholder oversight is warranted at FedEx because 5 FedEx directors each had 15 to 47 years long-tenure. Long-tenure can impair the independence of a director no matter how well qualified. And independence is an all-important qualification for a Director. And these long-tenured directors controlled 40% of the FedEx Audit Committee and Executive Pay Committee.
E-J believes that adoption of the bylaw will enhance shareholder engagement, ensuring that shareholder rights are protected in every amendment submitted for approval. “After evaluating the details pursuant to the shareholder proposal and in accordance with the Egan-Jones’ Proxy Guidelines, we recommend a vote FOR this Proposal.”
Vote FOR.
FedEx 2018 CorpGov Recommendations
Proxy Democracy is still down. I seek contributions to bring it back to life. Proxy Democracy provided information on votes cast in advance of annual meetings by institutional investors at thousands of companies. If you think that is worthy of financial support, please contact me.
Proxy Insight reported the votes of Australia’s Super, Calvert. and Trillium. Teachers voted for all items, including my shareholder proposal. Australia’s Super voted FOR or abstained on all items. Calvert voted against Walsh, executive pay and proposal 6. Trillium voted against all directors, executive pay and proposal 6. They voted for ratify auditors, report lobbying and written consent.
CorpGov Votes:
- Directors: AGAINST John A. Edwardson, Paul S. Walsh, Marvin R. Ellison, John C. (“Chris”) Inglis, Shirley Ann Jackson and Susan C. Schwabas.
- Ratify Executive Pay: AGAINST.
- Auditor: FOR.
- Lobbying Activity and Expenditure Report: FOR
- Right to Act by Written Consent: FOR
- Shareholder Approval of Bylaw Changes: FOR
FedEx 2018: Issues for Future Proposals
Looking at SharkRepellent.net for anti-shareholder provisions:
- No action can be taken without a meeting by written consent. Voting in favor of Proposal #5 would cure.
- Proxy access ‘lite’ provision whereby a group of no more than 20 stockholders holding at least 3% of the outstanding common stock continuously for at least three (3) years may nominate 2 directors or 20% of the board.
- Special meetings can only be called by shareholders holding not less than 20% of the voting power, instead of 15%.
FedEx 2018: Mark Your Calendar
Stockholder proposals (other than director nominations) intended to be presented at FedEx’s 2019 annual meeting must be received by FedEx no later than April 15, 2019, to be eligible for inclusion in FedEx’s proxy statement and form of proxy for next year’s meeting. Proposals should be addressed to FedEx Corporation, Attention: Corporate Secretary, 942 South Shady Grove Road, Memphis, Tennessee 38120.
Warnings
Be sure to vote each item on the proxy. Any items left blank are voted in favor of management’s recommendations. (See Broken Windows & Proxy Vote Rigging – Both Invite More Serious Crime). I generally vote against pay packages where NEOs were paid above median in the previous year but make exceptions if warranted. According to Bebchuk, Lucian A. and Grinstein, Yaniv (The Growth of Executive Pay), aggregate compensation by public companies to NEOs increased from 5 percent of earnings in 1993-1995 to about 10 percent in 2001-2003.
Few firms admit to having average executives. They generally set compensation at above average for their “peer group,” chosen by aspiration. While the “Lake Woebegone effect” may be nice in fictional towns, “where all the children are above average,” it doesn’t work well for society to have all CEOs considered above average, with their collective pay spiraling out of control. We need to slow the pace of money going to the 1% if our economy is not to become third world. The rationale for peer group benchmarking is a mythological market for CEOs. For more on the subject, see CEO Pay Machine Destroying America.
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