FedEx 2021 annual meeting is September 27, 10AM Pacific Time. To attend, vote, and submit questions during the Annual Meeting visit here. You will also need your control number. Of course, I recommend voting in advance. Enhance corporate governance and long-term value, vote AGAINST Griffith, Jackson, Martin, Ramo, Schwab, Steiner, Walshding, Pay and Auditor; FOR all shareholder proposals.
FedEx Corporation provides transportation, e-commerce, and business services in the United States and internationally. Most shareholders do not vote. Reading through 100+ pages of the proxy takes time but your vote 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 25 years and trust my judgment, skip 7 minutes of reading. See how I voted my ballot. Voting will take you only a minute or two. Every vote counts.
Alignment of Values and Election Contributions 2021: ISS Rating
From the Yahoo Finance profile page: FedEx Corporation’s ISS Governance QualityScore as of July 1, 2021 is 5. The pillar scores are Audit: 7; Board: 8; Shareholder Rights: 5; Compensation: 5.
FedEx 2021: Board Proposals
Egan-Jones Proxy Services recommends Withhold against the following: (1E) Brad Martin, (1F) Joshua Cooper Ramo, (1I) David Steiner, and (1K) Paul Walsh. According to Egan-Jones’ Proxy Guidelines a director whose tenure on the Board is 10 years or more is considered affiliated, except for diverse nominees. Key Board committees namely Audit, Compensation and Nominating committees should be comprised solely of Independent outside directors for sound corporate governance practice.
I believe diverse directors are equally subject to loss of independence after 10 years. I also believe there are plenty of excellent potential candidates who meet diversity criteria, so there is no reason to exclude them. Therefore, I am also recommending against Shirley Jackson and Susan Schwab. Since I am also voted against compensation, I voted against all the members of the compensation committee, which includes Susan Griffith, the only member unnamed above.
Vote: AGAINIST Susan Griffith, Shirley Jackson, Brad Martin, Joshua Cooper Ramo, Susan Schwab, David Steiner, and Paul Walsh.
2. Advisory Vote on Executive Compensation
FedEx’s Summary Compensation Table shows the highest paid named executive officer (NEO) CEO/Chairman Fredrick W. Smith at $14.3M. I’m using Yahoo! Finance to determine market cap ($68B). 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 MyLogIQ, the median CEO compensation at S&P 500 corporations was $14M in 2020. FedEx shares substantially underperformed the S&P 500 over the most recent one-year amd 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 311 to 1.
Egan-Jones Proxy Services found pay aligned with the long-term interest of its shareholders. They recommend voting For.
Calvert voted Against, with the following rationale: A vote AGAINST this proposal is warranted. CEO total pay increased considerably year-over-year due primarily to sizeable one-time equity awards. This is particularly concerning for many investors given the Compensation Committee’s decision to reinstate the STI program mid-year after granting one-time equity awards to the CEO and other named executives in lieu of the STI. Moreover, there are ongoing concerns regarding the granting of majority time-based LTI awards, the use of tax reimbursement for restricted stock awards and the inordinate amount of perquisite compensation for the CEO.The company’s long term incentive compensation is not sufficiently tied to financial performance.
The Teamsters filed a letter: The Compensation Committee’s response to the COVID-19 pandemic, as it relates to executive pay, not only derails pay for performance at FedEx, but demonstrates excessive generosity towards founder, and largest single shareholder, CEO Frederick Smith. Granting CEO Smith, and the rest of the executive team, special equity awards in lieu of participating in the Annual Incentive Compensation (“AIC”) plan, only to reinstate the bonus plan midway through the year, amounts to double-dipping; and in the case of CEO Smith, a set of incentive awards, which by the end of the fiscal year approximated to nearly $10 million in value, or nearly four times his target bonus. Allowing double-dipping for any executive is objectionable enough, but granting a special option award, purportedly for retention and incentive purposes to the company’s founder alongside a large, regular option award – is beyond the pale. Accordingly, we urge fellow shareholders to vote against the Advisory Vote to Approve Executive Compensation (“Say-on-Pay”) at FedEx’s annual shareholder meeting on September 27.
Trillium voted Against: CEO pay is not tied to ESG performance. The previous year’s restricted shares and stock options awarded to the CEO vest over less than five years. The company CEO-worker pay ratio exceeds 50:1.
3. Ratification of Independent Auditor
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. Ernst & Young LLP has served as the auditor for 19 years. No other issues appear significant.
FedEx 2021: Shareholder Proposal
4. Independent Board Chairman
The proposal is from my wife (Myra Young) so, of course, I voted in favor. The role of the CEO is to run the day-to-day operations. A major role of Board of Directors is to monitor the CEO. Combining the roles of CEO and Chairman is an obvious conflict of interest.
As Calvert indicates: A vote FOR this proposal is warranted. The bylaws currently provide that the CEO shall chair the board by default, allowing the board to avoid serious consideration of optimal board leadership. A policy that the chairman of the board should be an independent director, implemented at the next leadership transition, would allow the new CEO to focus on executing the company’s business plans without the distractions of managing the board. As such, shareholders would benefit from the most robust form of independent oversight of management, in the form of an independent chair.
Egan-Jones Proxy Services agrees: We believe that there is an inherent potential conflict, in having an Inside director serve as the Chairman of the board. Consequently, we prefer that companies separate the roles of the Chairman and CEO and that the Chairman be independent to further ensure board independence and accountability.
5. Report on Alignment Between Company Values and Electioneering Contributions
Filed by Clean Yield Asset Management. This proposal requests an annual report to shareholders presenting a congruency analysis between company values and any political or electioneering contributions made by the company and FedExPAC.
Clean Yield’s letter to shareholders. Shortly after the January 6 insurrection at the Capitol, news outlets reported that FedEx was reviewing its contributions. The company has not disclosed the results of this review or how this review may influence contributions going forward. A lack of transparency regarding the outcomes of this review could call into question the authenticity and rigor of such a review or concern for the issue at hand.
Publicly available data shows that FedEx and FedExPAC contributed at least $210,000 during the 2020 election cycle to the 147 members of Congress who challenged the certification of the 2020 presidential election results on January 6, 2021. Relatedly, FedEx gave $10,000 to the Republic Attorney Generals Association (RAGA); about two-thirds of RAGA’s member attorneys general signed on to a brief urging the Supreme Court to throw out the election results from four states, and its self-described policy branch ran a robo-calling effort urging “patriots” to “march to Congress” and “stop the steal.” A number of companies and organizations have discontinued their affiliations with RAGA.
Contributions to these candidates and organizations are out of step with Fedex’s stated aim of engaging in the political process with the goal of “promoting and protecting the economic future of the company and our stockholders and employees.”
FedEx says it “supports an inclusive workplace culture and is committed to the education, recruitment, development and advancement of diverse team members worldwide, and we are recognized for our commitment to those efforts.” Yet based on public data for the 2016-2020 election cycles, FedEx and FedExPAC made political donations totaling over $4 million to politicians and political organizations working to weaken access to reproductive healthcare. That undermines the ability of employees to manage their fertility. In the 2020 cycle alone, at least $815,450 went to anti-choice candidates, including approximately $605,000 at the federal level and $210,000 at state level.
Egan-Jones Proxy Services and the Board believe existing policies and procedures governing political contributions adequately protect the corporate brand, values, and reputation. I disagree. The evidence fails to support that contention.
6. Lobbying Activity and Expenditure Report
This proposal from the Teamsters asks FedEx to prepare an annual report on direct and indirect lobbying expenditures, including payments to organizations re model legislation. The report would also disclose FedEx’s decision-making process for those expenditures.
Egan-Jones Proxy Services and the Board argue it is in the best interests of the Company and the stockholders to belong to industry associations and coalitions. where the Company benefits from the general business, technical, and industry standard-setting expertise these organizations provide. Of course, this proposal does nothing to prohibit or discourage such memberships. It only requires expenditures to be dislcosed so shareholders can ensure they are in the best interests of the Company.
Another objection is the expenditure required to prepare such a report. If the Company is not already compiling the information and there is no oversight of such expenditures by the Board, that would be untenable. This proposal is like many I filed this year at other companies. The need at FedEx appears greater than at many companies but all should be required to disclose such information.
7. Assessing Inclusion in the Workplace
FedEx has a majority diverse workforce. Yet, with no Black or Hispanic Executive Officers, the Company risks losing diverse talent in the pipeline. UPS’s Executive Leadership Team appears to have at least 33% Black or Hispanic team members while FedEx’s Executive Officers appear to only be 10% people of color.
Proponent NorthStar filed a letter to shareholders. The proposdal requests a report to shareholders assessing opportunities to encourage the inclusion of non-management employee representation on the Board.
Employee engagement and satisfaction are crucial to our Company’s success. Competition in our industry – faster delivery to customers, seven days per week, with fewer errors – has produced greater strain on employees throughout our industry. Allowing and encouraging representation on the board by rank-and-file employees is one way to ensure that employees, our most crucial resource, remain fully engaged in the long-term growth of our company and may help to ensure operational excellence.
Egan-Jones Proxy Services believes a company’s success depends upon its ability to embrace diversity and to draw upon the skills, expertise, and experience of its workforce. As such, we believe that the adoption of this proposal is in the best interests of the Company and its shareholders. Agreed.
8. Ratification of Termination Pay
This good governance proposal comes from John Chevedden. The Board is asked to rquire shareholders to vote by shareholders on any senior manager’s new or renewed pay package that provides for severance or termination payments with an estimated value exceeding 2.99 times the sum of the executive’s base salary plus target short-term bonus. FedEx should not join with companies making outrageous payments to fired managers. Why add insult to injury?
Egan-Jones Proxy Services believes adopting this proposal would put the Company at a competitive advantage in recruiting and retaining executive talent and that it is in the best interests of the Company and its stockholders for the independent Compensation Committee to retain the flexibility to design and administer competitive compensation program. They recommend in favor.
Proxy Insight reported three votes when I last checked. Calvert vote For all items except Nawabi. CBIS voted against the Auditor and Incentive Plan. Pensionskassen Magistre & Psykologer voted against the Compensation.
In looking up a few funds in our Shareowner Action Handbook, I see the NYC Comproller voted as I recommend below. Norges voted For all items except Nawabi. Trillium voted Against all directors and compensation; For all other items.
- Directors: AGAINIST Susan Griffith, Shirley Jackson, Brad Martin, Joshua Cooper Ramo, Susan Schwab, David Steiner, and Paul Walsh
- Compensation: AGAINST
- Auditor: AGAINST
- Independent Board Chair: FOR
- Report Alignment of Values and Election Contributions: FOR
- Lobbying Activity/Expenditure Report: FOR
- Assess Inclusion in Workplace: FOR
- Ratification of Termination Pay: FOR
FedEx 2021: Issues for Future Proposals
Looking at insightia for anti-shareholder provisions:
- No requirement to separate CEO and Chair
- Written consent by shareholders is prohibited, although last year 40% of shares voted For.
FedEx 2022: Mark Your Calendar
Stockholder proposals (other than director nominations) intended to be included in the proxy statement and presented at FedEx’s 2022 annual meeting must be received by FedEx no later than April 18, 2022 and must comply with applicable SEC rules, including Rule 14a-8, to be eligible for inclusion in FedEx’s proxy materials for next year’s meeting. Proposals should be addressed to FedEx Corporation, Attention: Corporate Secretary, 942 South Shady Grove Road, Memphis, Tennessee 38120.
Be sure to vote for each item on the proxy. Any items left blank get automatically 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.” Peer groups are often chosen by aspiration. The “Lake Woebegone effect” may be nice in fictional towns, “where all the children are above average.” However, corporations live in the real world. All CEOs are above average. Ignoring that fact partly explains why their collective pay spiraling out of control. We need to slow the pace of money going to the 1% or our economy will fail to serve the majority. The rationale for peer group benchmarking is a mythological market for CEOs. For more on the subject, see CEO Pay Machine Destroying America.